The Disadvantages of Online Businesses

by Scott Cornell

By 2016, Americans will spend more than $327 billion annually online, according to Internet Retailer. That's a projected 45 percent increase from what consumers spent in 2012, and a 62 percent increase from what they spent online in 2011. Online shopping is big business -- it's fast, convenient, easy and affordable for consumers. It's also cheaper to start, compared to a physical store, for entrepreneurs. But while online retail offers many advantages, there's also disadvantages that come with the territory.

No Trying Before Buying

While there's a plethora of items that can be purchased online without any hesitation, there are other items, such as clothes, shoes, furniture and electronic gadgets, that consumers like to see in person or try on before making a purchasing decision. In the world of online retail "trying before buying" is not possible. Online retailers have attempted to offset this by allowing users to review products and by posting photos and videos of the product in action, but there are still some things that are better bought or browsed in person.

Competition

Being that online retail is a multi-billion dollar operation with relatively low start-up costs -- it can cost as little as $25 a month to operate a website -- some people are starting online businesses with the goal of getting rich quick. More online retailers translates to more competition in the Internet retail world. While there's something to be said about an online company that's credible, many consumers search by product and not so much by retailer. This means that retailers with an unproven track record might be taking away some of your business in the competitive Internet retail world.

Productivity

If you're operating a physical store, you have hours of operation. You know your business' schedule and know when you have to work. However, the Internet is a 24/7 operation, meaning your business is open all the time. And online businesses aren't run out of a physical store location, but out of your home. This can lead to distractions and a drop in productivity if you're not careful how you manage the time spent on your business.

Credibility

Because there's so much competition in online retail, there are concerns of credibility among many of the businesses in operation. That's one advantage of having a physical location -- it builds a sense of trust and authority among customers, and it portrays your business in a more professional light than if you were just a Web-only company. That's not to say that all online-only businesses lack credibility, but knowing that a company also has physical locations lowers any red flags from a credibility standpoint.

Customer Service

Many online businesses have instituted Web chatting features to help customers out with questions as they shop, but customer service is still largely accomplished via email, by phone or by snail mail. While this can be effective for some items and customer inquiries, it's no match for the face-to-face communication that you receive from speaking with an in-store associate. Businesses with physical stores are able to be more personable with their clientele. They can demonstrate how a product works, and they can troubleshoot issues with products while explaining their actions.

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