In this day and age, it makes a lot of sense to start your business online. The costs associated with brick and mortar stores are exorbitant to the point of prohibitively expensive for most individuals without a flow of investment capital. Besides cost, many people are simply doing their shopping online now.
Millennials make 54% of their purchases online, while all other demographics buy 49% of their goods online. This emergent trend tells just a small part of the story. Here are the major incentives for starting your business online as opposed to renting a storefront.
First, you have the literal cost of operating the building.
Peruse local commercial rental listings. In Los Angeles, you would pay $4 per square foot on the low end for retail space. Assume you only rent a 500 square foot space (which in all honesty is much too small for most businesses), you would be paying $2,000 per month on rent alone. Then you add in gas and electric, insurance, WiFi, and any other luxuries you need to run a successful business, you’ll already have a mind-boggling price tag. It’s little wonder that a web store with comparable sales will earn $100,000 more than a brick and mortar store selling the same goods.
Second, you need to think of the start-up costs.
Besides the fact that the American Moving and Storage Association claim that moving to a new location within your own state costs an average of $1,170, you will have to put a security deposit down, alongside first and last month’s rent. Then you have to build inventory, brand your storefront, and start a grand opening marketing campaign.
Third, don’t forget about time costs.
Renting or buying real estate is an immense undertaking that can last months. To prevent fraud and disputes, of course, the Statute of Frauds in California mandates leases over a year, contracts for the sale of real estate, and commissions between real estate licensees and principles to be in writing. If you aren’t well versed in reading legal documents, you will probably also need to hire a lawyer to help you decipher tricky legal language.
The fourth cost of brick and mortar retail is, rather ironically, a website.
In today’s world, if your store doesn’t have a website, a Facebook, Instagram, Twitter, and every other social media page in the world, you will suffer from a lack of marketing.
“72% of millennials will research you via your online presence before they step foot in your store,” Top Dog Social Media Reports. On top of this, you can better build customer relationships with online interactive content. In fact, 83% of customers “love” or “like” when a business interacts with them online, according to a SalesForce Marketing Cloud report. This puts in perspective just how important it is to at least have a website.
Finally, a brick and mortar store can severely limit your potential customer base.
You will pay for a brick and mortar store with a lack of international, or even national customers. If you are confined to one area, nevermind that roughly half of customers shop online. Only half of the customers in your area will ever know you exist. At least having an e-commerce business affords you overseas opportunities.
Is brick and mortar retail dying? Probably not, although it is certainly losing ground to the ecommerce realm.