Advantages and Disadvantages of Selling Online
I have always disliked working for someone else, so no matter what the disadvantages are I still prefer being my own boss and working for myself. Over the last twenty years I have ran my own business and have never regretted it. Over the last five years I have also been involved in running an online business as well. I have sold physical goods, digital goods and have also provided an online service designing websites and providing web hosting. In all areas I have been reasonably successful. Most of the time I work from home, which is how I like it.
If youíre considering starting an online business I would certainly recommend it. However, itís worth looking at the pros and cons first before you make a decision. There are certainly advantages to having a website to promote your business or sell goods online. But what are the disadvantages?
Below Iíve outlined some of the advantages and disadvantages of running an online business. These are mainly related to an ecommerce based business, selling physical goods through an online store. (If youíre more interested in selling digital goods please read the article: Why sell digital products?)
I personally prefer to sell digital goods (there are far fewer costs involved) but letís first consider the advantages and disadvantages of setting up and running an online store selling consumer goods.
If the choice is between opening a bricks and mortar store or setting up a website, the start up cost can be much lower if you decide to sell online. You can do both of course. If you have an existing business, then you could easily expand to the online marketplace and fund and your website from your business profits.
Creating a business from scratch and testing the market can be quicker and easier to do online, and certainly more affordable.
A good testing ground for selling goods online for the first time is ebay. You can test the market and even set up an ebay store until you're ready to build your own full blown ecommerce website.
With an online store you can offer an even wider choice of goods, and provide more information to the customer.
There are fewer overheads involved in running an online store. Unless you need a storage facility for stock, there are no high rents to pay, less staff (if any), and therefore less wages to pay. And in some cases you may be able to run your business by having items dropshipped to your customers, thus eliminating shipping costs.
Your customer can shop directly from home without further cost to them. No matter where they live, your store is open to the customer in their own home, where they can shop at their own convenience, in their own time.
i.e. no travelling cost involved to your customer (or yourself if working from home)
Your store is always open 24 hours a day, 7 days a week, all year round.
Running an online business has few disadvantages, but one of the negative aspects (if you consider it so) is that you have more responsibility in the running of your business. This is particularly relevant if youíre operating a small business by yourself. You have to hold yourself accountable and be very disciplined to run the business efficiently.
Ideally, itís better to have a helping hand. Someone you can trust and rely on to run the business for you, so that when you need to take a break, or take a holiday, youíre not constrained by the responsibility of running your business 24/7. Everyone needs some free time to relax and get away from the pressures of work, otherwise your business will become a burdon and you will soon begin to resent and lose interest in it.
From the customerís point of view, the main disadvantage of buying online is that they donít get to see and feel the goods before they buy. So thereís a far greater amount of trust required on the part of the customer before they decide to part with their money.
On a similar note, the customer also does not get the same kind of personalised service that they might recieve when they walk into their favourite local stores. In some cases this may be just a minor issue, but in others it is vitally important.
(particularly in the case of buying certain types of clothes for example, i.e. a Ďmade to measureí suit)
One final consideration is the problem of fraudulent transactions. This can be a major problem for ecommerce website.
Thereís a few things you can do to reduce the amount of fraudulent transactions you receive (i.e. the use of stolen credit cards being used to purchase from your site, chargebacks etc.) but you may never be able to eradicate the problem altogether.
You can find a lot of information online on how to combat this problem. For example, avoid sending goods to a different address from the cardholder. Phone the customer first to verify the order if you suspect anything, such as multiple orders of high value goods.
During the ordering process make sure the order form collects details of the buyerís home phone number, and full address including postcode. If you have their name, phone number and postal address, you can usually check online to see if the phone number is valid. If the phone number you find matches the number associated with the order, all well and good. If not, call the number to confirm the order with the customer.
One of the best ways to reduce fraud is to state clearly on your website that you DO NOT deliver to an address that is different from the cardholder. It may put off the customer if they want their order sent as a gift to someone in a distant location, but itís more secure and will disuade fruadsters from placing an order in the first place.
If your business relies heavily on selling gift items then you may have no other choice than to accept third party addresses, in which case it will be essential to set up a manual verification system. The simplest way to do this is to always verify the credit card number by phone. Ask for the card owner by name and ask them "did you place this order and can you verify the item you purchased?" Also ask them to verify the card number used and the name of the person and the address to be delivered to. A genuine card holder should not have much difficulty in answering these questions, and if the number matches the card then the risk will be relatively low.
An increasing number of ecommerce websites now require the customer to register all their details first before placing an order. This provides further security, and a newly registered customer can be verified first before sending any goods ordered.
For more information about protecting your website from fraudulent transactions click here