Offline vs Online Business: Which is Best for You?

The decision of whether to get into a traditional offline business, a modern online business, or some combination of the two, is one of the most important decisions you can make.  Each has pros and cons that should be considered. 

Whatever kind of business you get into, however, there are three factors which should always be a priority:

1. It should be personally satisfying
2. It should be profitable
3. Ideally, it should not put you at risk of being imprisoned

If you can only meet one of the three criteria above, there's a good chance you are making a wrong decision.  People who make poor decisions do not typically do well in business.  If you can satisfy all of the criteria, this means you have an actual chance of succeeding.  Off the three criteria, the first is the most important, because if you don't sincerely love what you do, that will be reflected in your results.

Now it's time to take a look at some of the differences and similarities between online and offline business, so you can decide if running an online business is the best option for you.

The Difference Between Offline and Online Businesses

You might assume the difference between offline and online businesses is obvious. An online business is a company that’s managed, run, and maintained primarily in the “online world”. An offline business, or “brick and mortar” company, exists in the physical realm. 

Running an offline business doesn’t necessarily mean operating your entire organization without any technology. A physical store will still often use online tools for promotion, managing payments, and even tracking inventory and orders. Similarly, it’s possible for online businesses to occasionally branch into the “offline landscape”. You may have seen examples of e-commerce business owners running pop-up stores for a limited time, for example.

To help clarify things, let’s define both offline and online businesses.

What is an Online Business?

An online business is essentially any company that runs primarily online, without a consistent “physical presence” in the real world. A consulting company that delivers services over the web through video conferencing and VoIP calls might be one example. A marketing company that handles social media advertising and SEO remotely could be another instance of an online business. 

Perhaps the most common examples of an online business in today’s world is the evolving “ecommerce store”. An ecommerce website allows companies to sell products all over the world, without having a physical retail location. As online shopping becomes more popular, ecommerce is becoming an increasingly appealing option for entrepreneurs. 

With the right e-commerce platform, companies can sell products and solutions both through their own website, and marketplaces like Etsy, Amazon, or Ebay. Depending on your business model, you can even reduce the need to handle inventory and fulfilment yourself. There are various POD and dropshipping platforms that assist online retail companies in launching their own brand with barely any upfront investment. 

What is an Offline Business?

An offline business, on the other hand, is a company that operates in the physical world. Most people look at this as the “traditional business model”. Offline businesses can come in a variety of shapes and sizes, from service-based companies with traditional offices, to the standard brick and mortar store. 

Companies can launch a new business in a specific environment, such as a local grocery or fashion shop. They can also build vast enterprises with multiple store locations. For instance, Walmart and Target both have plenty of offline stores located throughout the US. 

Increasingly, the rise of digitization is prompting more offline businesses to take an omnichannel approach. Even small business owners can now combine their offline sales with e-commerce stores, to increase their reach to new customers, and expand revenue potential. 

The Benefits of Online Businesses

Both offline and online business models have their own pros and cons to consider. In the ecommerce world, running an online business can be more cost-effective, and improve your chances of accessing a wider range of customers. The biggest benefits of online businesses include:

• Lower operational costs: The cost of running an online business is often lower, because you don’t need to pay for real-estate, as well as staff members in various locations. You can even automate many aspects of store management, to keep costs extremely low. 
• Global reach: Provided you can work with the right fulfillment and logistics partners, there’s no limit to the consumer base you can reach as an online store. While you might need to invest in regularly advertising your business, your potential for revenue is huge.
• Simplicity: A brick and mortar business requires personnel to be present in a specific location to manage operations. With an online store, you can run your company from anywhere with an internet connection. This makes it ideal for beginners in the business world. 
• Versatility: In today’s digital world, online retailers can sell virtually everything, from courses and classes to downloadable digital products and physical items. All you need is the right ecommerce platform, like Shopify, and the right payment processing tools. 

However, it’s worth noting that an online business can take a while to grow, even if it offers excellent scalability. It can take time to master digital marketing strategies like search engine optimization, build a reputable brand, and optimize profit margins. 

The Benefits of Offline Businesses

While offline businesses can be more expensive and complex to run, they still have benefits to offer some entrepreneurs. Just like with an online company, you can run virtually any type of business you like with a brick-and-mortar organization. Other benefits include:

• Improved customer relationships: Sometimes, being able to interact with buyers face-to-face makes it easier to build long-term relationships. Some organizations can benefit from more loyal customers and better in-person word of mouth marketing. Plus, you can invest in a unique customer experience with an offline store, tailored to your customer base. 
• Fewer returns: Though offline businesses can have more initial costs; they can encounter fewer long-term costs associated with things like returns. When customers can see items in person, and try products themselves, they’re less likely to regret their purchases. 
• Enhanced reputation: Sometimes, simply having your own offline store or business location can improve your credibility in the eyes of customers. Having a physical location, or multiple storefronts adds to the trustworthiness of your organization, and your brand equity. 

Of course, running an offline business also means investing in more employees to handle each face-to-face interaction and transaction. You’ll also still need to invest in the right marketing strategy to boost your chances of reaching the right customers. 

Points to Consider When Making Your Choice

Since both online and offline businesses have pros and cons to consider, making the right choice between online business vs offline business for your company can be complex. The right strategy for you will depend on your specific business needs and goals. 

Here are some points to keep in mind when making your choice: 

Some businesses simply don't work as online businesses

All businesses should advertise online and have an online presence, but only some can actually work as online businesses.  Any kind of business that requires you to be physically present in a particular geographic location at particular times on a regular basis is not suitable to be operated as a purely online business.

On the other hand, there is almost nothing that can be done as an online business that could not just as easily be done offline.  The advantage of being online is that you can greatly extend your market, reaching a global audience of billions.

Some businesses work a lot better as online businesses

If your business sells really big ticket items like airplanes, boats, or industrial machinery, you can expect to make a lot more sales online than you ever could if you simply relied on people walking through the door of your offline sales office.  The available market of people wanting to buy such things is comparatively small and widely dispersed.  Advertising your products online means you can reach this market more easily and effectively.

Offline business usually operate on fixed hours

With a few exceptions like 7-eleven, the offline business world tends to trade only on certain days at specific times.  Potential customers who want anything from your business outside of those times have to be patient and wait for your business to open, or they have to make the choice to shop online instead.

Online business are always open

When you run an online business, everything is always available 24 hours per day and up to 366 days per year.  The upside of this is you have a lot more opportunity to make sales.  The downside is your customers expect you to be always available to help with their problems, so you don't get to have time off unless you hire somebody to handle all that stuff for you.  This requires considerable resources, so the smaller your business is, the less likely it is that you're going to get to enjoy lengthy and relaxing vacations.

People have far more trust with offline businesses

When customers buy from offline businesses, they usually don't need to worry about being scammed, and they have a really good opportunity to thoroughly inspect merchandise before paying for it.  In the world of offline business, you don't normally have to worry about losing sales because customers don't trust you, and you don't normally have to do anything to convince them they should trust you.

Trust is a major factor in online business

Customers at purely online businesses are largely in the dark about who they're dealing with, and consequently they are often more reluctant to be a first time customer with an unfamiliar business.  To be fair, there are thousands of scam sites out there, and people do get cheated every day by dodgy online merchants.

Serious online businesses do need to invest something into establishing trust with customers in a way that offline businesses don't normally need to worry about.

The things customers are concerned about are mainly:

• They can't normally see and inspect physical merchandise before purchasing
• They can't be sure that your business really exists
• They can't be certain that their transaction will be processed accurately
• They can't be certain that you won't charge additional items to them
• They don't know if you will honor a money back guarantee
• They can't be totally sure that what you are offering will suit their needs

These are not things they usually need to worry about when buying offline.  You can help gain their trust by:

• Displaying your company registration information
• Providing full contact details, including an actual street address
• Displaying any endorsements you may have from government or industrial authorities
• Displaying photos and information about the business owner and key personnel
• Hosting an open forum or at least a FaceBook page where customers can interact with you
• Providing the opportunity to use third-party payment processing such as PayPal and Skrill.

Offline businesses require substantial initial investment

Operating from fixed physical locations (or mobile, in the case of ice cream truck drivers), most offline businesses must pay high costs for premises, utilities, and even parking.  The offline business, if it sells goods, will have to maintain a physical inventory, and keep it stocked.

Online businesses are less expensive to establish and operate

Because purely online businesses are location independent, there is no expense for premises, utilities, or parking.  They don't necessarily need to maintain physical inventory.  In general, an online business is a lot less expensive in terms of input costs, which means there is potential for higher ROI in the long term.

Offline businesses need to constantly worry about crime

Everything from shoplifting to after hours vandalism are threats to offline businesses, and they also need to have expensive insurance to cover the costs of property damage, burglary, public liability, etc.

Online businesses usually only need to worry about being maliciously targeted

Security is a really important aspect of running an online business, but physical harm to your business is not possible without a physical location.  Your main threat is being hacked, and there are plenty of ways you can help to protect yourself from that (which is the topic for another article), and you certainly don't need to insure for as many things as an offline business does.

Conclusions

Offline businesses are solid and dependable, but have limited reach.  Online businesses have potentially massive reach, but they involve a typically higher level of risk due to the greater competition.  The comparatively low cost of online business makes it an attractive option for start-ups.  Overall, online business is much simpler and less expensive, and you'll have a lot less to lose with an online business that fails compared with running the same business as an offline venture.