eCommerce vs. Retail: How Are They Different?

eCommerce vs. Retail: How Are They Different?

eCommerce vs. Retail How Are They Different? blog image

eCommerce is the business of buying and selling products and services online. Retail is when a shop sells things to consumers, typically in a retail store, otherwise called a brick-and-mortar location. And for many, when they hear “retail,” they simply think of stores, whether online or at a physical site. So, what’s the correct definition?

This article breaks down the key differences between eCommerce and retail. Let’s dive in!

Takeaways
  • Retail stores require physical space, often limiting their geographical reach. eCommerce businesses have a global presence, reaching customers worldwide with ease
  • Retail businesses must manage physical stock, facing challenges of storage costs and product shelf life
  • Retail stores, especially large retail chains, require efficient supply chains to stock goods, manage inventory, and meet consumer demands
  • In the eCommerce model, streamlined supply chain processes are an essential part of business operations for efficient order fulfillment
  • eCommerce customers expect a seamless online experience, while retail shoppers desire immediate product access and in-person service
  • Retail stores incur costs like rent, utilities, and in-store staff, while eCommerce businesses face expenses for web hosting, maintenance, and payment gateway fees

What’s the Difference between Retail and eCommerce?

Both the retail and eCommerce business model gives folks a chance to shop for things they want. But, they’re like two different flavors of ice cream – they might look similar, but they’re not the same. These two ways of doing business have their own ingredients and methods. Let’s explore what sets them apart.

  1. Location

The retail business-to-consumer model relies on physical stores situated in shopping malls, on streets, or as standalone outlets. eCommerce, on the other hand, establishes a presence in the digital world.

eCommerce businesses operate through online platforms, accessible from anywhere with an internet connection. This fundamental difference in location is pivotal to understanding how each model functions.

  1. Customer Experience

Retail offers the advantage of tangible product interaction – you can see, touch, and buy immediately with the help of in-person customer service.

In contrast, eCommerce business models provide virtual product views and demand a bit of patience, as you wait for your delivery. However, it compensates with online support systems that cater to your needs during and after the purchase.

  1. Operational Costs

Retail stores bear the weight of operational costs such as rent, utilities, in-store displays, and a physical sales staff.

In contrast, eCommerce businesses, also called online stores, shoulder expenses like web hosting, website maintenance, and payment gateway fees.

Notably, online stores allow individuals to run businesses without the burdens of renting physical space and managing the associated overhead, making it a more cost-effective choice for many entrepreneurs.

  1. Inventory Management

Retailers typically manage inventory with physical stock storage, either on-site or in nearby warehouses. The cost of storage space significantly impacts the inventory capacity, which can be a concern when dealing with products having a limited shelf life.

eCommerce, on the other hand, offers more flexibility. It can operate using drop-shipping models, centralized warehouses, or even without maintaining physical inventory, making it a cost-effective choice for those looking to minimize storage-related concerns.

  1. Hours of Operation

In retail, businesses adhere to fixed opening and closing times, demanding well-trained staff, particularly during peak hours to ensure efficient operations.

On the other hand, eCommerce operates with the flexibility of being available 24/7.

This round-the-clock accessibility is a notable advantage, allowing customers to browse and shop at their convenience, eliminating the limitations posed by traditional retail hours.

  1. Sales Tactics

In retail, in-store displays and face-to-face upselling are essential, but even traditional stores increasingly rely on digital marketing strategies to drive customers through their doors.

However, in an online store, success hinges on engaging content, mobile-friendly design, and optimization for a stellar user experience. These elements ensure customers have a seamless and satisfying journey while shopping without the need for physical presence.

  1. Expansion

For retail expansion, businesses typically need to construct or rent more physical space to accommodate their growth. This process involves additional investments in infrastructure and location.

E-commerce, in contrast, focuses on scaling website server capacity and enhancing logistics, as it does not depend on physical spaces. This flexible approach enables online businesses to expand their operations and serve a broader customer base without the constraints of physical space acquisition.

  1. Geographical Reach

Retail businesses are confined to the immediate vicinity of their physical store (unless they offer shipping).

This limitation is influenced by consumer behavior, with 92% of urban consumers typically traveling just 15 minutes or less for everyday purchases, while 70% of rural consumers extend their travel to 20 minutes or more. The frequency of purchase often dictates how far people are willing to travel.

On the other hand, online stores enjoy a vast potential reach, transcending geographical boundaries, as long as shipping capabilities are in place. This allows eCommerce businesses to tap into a global market, irrespective of their own physical location.

  1. Returns and Exchanges

In retail, returns and exchanges are straightforward, with the convenience of instant in-store transactions.

eCommerce, however, introduces a more intricate process that may include return shipping, waiting periods, and restocking procedures.

While online shopping offers convenience, it necessitates a bit more patience when it comes to resolving issues with purchases, as it involves logistics and coordination beyond the immediate physical access available in retail.

  1. Customer Data Collection

In retail, customer data collection primarily relies on loyalty programs or manual methods, like jotting down info or entering it into point-of-sale (POS) systems for email or direct mail campaigns.

eCommerce, on the other hand, employs automated processes for gathering data, tracking user behavior, and using cookies.

Additionally, online shopping often involves shipping, which necessitates sharing more personal information, such as your address and phone number, expanding the scope of data collected compared to retail.

  1. Security

When it comes to security, the approaches differ for the business models of a retail store and an eCommerce platform. Retail stores prioritize physical security measures to safeguard their premises.

In contrast, eCommerce platforms rely on cybersecurity measures, stringent data protection, and the use of SSL certificates. These digital strategies are essential for protecting customer information and ensuring secure online transactions, a critical aspect of the eCommerce business model.

  1. Payment Methods

Retail, such as department stores, convenience stores, grocery stores, etc., traditionally accept cash and credit/debit cards, with the occasional integration of mobile payment options.

eCommerce, on the other hand, broadens the horizon by facilitating credit/debit card transactions alongside online wallets, cryptocurrency, and various digital payment methods like Venmo, PayPal, and Google Pay.

The versatility of online payment options offers customers a broader spectrum of choices compared to the relatively traditional payment methods available in retail.

  1. Flexibility

When considering flexibility, retail businesses encounter constraints regarding space and adjustments to their physical inventory. The physical nature of retail stores can limit their adaptability.

In contrast, eCommerce is far more nimble, allowing for easier alignment with emerging trends, accommodating platform changes, or shifting business models.

This inherent flexibility is one of the distinct advantages of eCommerce over traditional retail when it comes to staying in tune with the dynamic digital landscape.

  1. Barriers to Entry

The barriers to entry differ between retail and eCommerce. Retail typically presents higher hurdles, mainly due to the substantial initial capital needed for physical space, infrastructure, and inventory.

eCommerce offers a lower entry threshold, thanks to options like drop-shipping and third-party platforms. However, ecommerce entrepreneurs often take on multiple roles, managing various aspects of the business themselves, in exchange for the lower initial costs.

  1. Environmental Impact

Environmental impact stems from the movement of goods in both retail and eCommerce.

Online and in-store shopping entail transportation, which can generate climate-warming emissions. Retail’s physical stores have a relatively static environmental footprint, typically involving moving clothes from warehouses to stores.

By comparison, eCommerce businesses sell products online and tend to have a more variable environmental footprint due to factors like packaging, shipping, and return logistics. Both models need to consider sustainability and emission reduction in their operations.

  1. Marketing

In the domain of marketing, retail focuses on localized strategies, leveraging billboards, in-store promotions, and increasingly digital marketing to lure consumers to their physical stores. eCommerce, on the other hand, harnesses a digital-first approach.

It relies on Search Engine Optimization (SEO) and Search Engine Marketing (SEM) to optimize online visibility, along with social media ads and influencer partnerships to reach and engage their digital audience. The distinctions lie in the methods chosen to attract and retain customers for each model.

  1. Customer Interaction

Customer interaction varies between retail and eCommerce. Retail thrives on face-to-face communication, with customers engaging directly with store staff.

eCommerce, on the other hand, employs digital channels for interaction.

Chatbots provide immediate assistance, emails facilitate inquiries and support, and online reviews serve as valuable feedback mechanisms. The shift from physical presence to digital interfaces enhances the reach and convenience of customer interaction in the eCommerce realm.

What Do Retail and eCommerce Have in Common?

Retail and eCommerce, despite their differences, share common ground in the core objective of facilitating the exchange of goods and services.

Both models offer consumers the opportunity to acquire products, whether it’s in a physical store or through online platforms.

Additionally, they aim to meet customer needs, employ marketing techniques, and rely on secure payment methods to make transactions as seamless and efficient as possible.

How Has eCommerce Impacted Traditional Retail?

eCommerce has significantly impacted traditional retail by introducing an unmatched level of convenience and accessibility. Online shopping offers a level of ease that physical stores find challenging to replicate.

Consumers now have the ability to effortlessly compare prices and products, intensifying competition among retailers and compelling them to enhance the value they offer to stay competitive.

This digital transformation has reshaped consumer expectations and encouraged innovation in the traditional retail sector.

Which Is More Profitable: eCommerce or Brick-and-Mortar Stores?

Comparing eCommerce to brick-and-mortar stores shows a pretty healthy balance. Physical stores often generate more revenue but come with higher operational costs. Online retailers are more popular, yet traditional stores enjoy higher levels of consumer trust.

It’s a juxtaposition, where profitability and consumer trust weigh differently for both, making it challenging to declare one more profitable than the other definitively. The choice depends on a variety of factors and business strategies.

Which Is Growing Faster: eCommerce or Brick-And-Mortar Retail?

eCommerce and brick-and-mortar retail growth are converging, with total worldwide retail sales growth predicted to hover around 4% in 2023. This marks a narrowing gap between eCommerce and retail sales growth.

Notably, from 2021 to 2022, eCommerce’s share of total retail showed unusual stability, suggesting a maturing of the digital market and a slower growth rate compared to earlier years.

What Are the Advantages of eCommerce vs. Retail?

eCommerce boasts several advantages over retail.

  • It offers unmatched convenience with 24/7 access, making shopping flexible.
  • Customers can easily compare products and prices, enhancing transparency.
  • Online stores often have lower overhead costs and, consequently, may provide better value for money.
  • eCommerce enables a global reach, while traditional retail is geographically limited.
  • The digital space is highly adaptable, making it easier to pivot business models and cater to changing consumer preferences.

Why Do Some Consumers Prefer Shopping In-Store Over Online?

Some consumers prefer shopping in-store due to the tangible experience it offers. Being able to see, touch, and test products in person before purchase holds great appeal.

According to KPMG, this hands-on interaction is a primary reason behind consumers’ inclination towards physical stores, as it provides a level of assurance and confidence in the products that online shopping may not always offer.

Are There Products Better Suited for Retail vs. Online Sales?

Indeed, some products align more naturally with online or in-store sales. Online shopping excels for items like electronics, apparel, and books, where convenience and vast options matter.

In-store shopping is preferable for products like furniture, jewelry, and cosmetics, where the tactile experience and in-person advice hold significance. Essentially, the choice hinges on the customer’s need for physical interaction, product complexity, and convenience.

How Have Retail Stores Adapted to the Rise of eCommerce?

The surge in online shopping prompted retailers to adapt by enhancing in-store experiences and embracing omni-channel strategies. Simultaneously, property owners have focused on securing internet-resistant tenants and allocating space for communal areas.

This dynamic adaptation has led to a more seamless integration of traditional retail and eCommerce, creating a shopping landscape where both can coexist and thrive.

How Does the Future Look for Traditional Retail in the Face of eCommerce Growth?

The future of traditional retail in the context of eCommerce’s expansion is marked by ongoing growth in social commerce, personalization, AR/VR integration, subscription services, and an emphasis on sustainable and ethical shopping practices.

Retailers who remain at the forefront of these trends and prioritize superior customer experiences will thrive.

The evolving landscape will see increased online penetration, with leading suppliers forging direct-to-consumer relationships, rendering the traditional retailer role as the intermediary to customers obsolete.

How Important Is Omni-Channel Retailing in Today’s Market?

Omni-channel retailing is paramount in the contemporary market. A successful omni-channel approach cultivates trust, as customers anticipate a consistently high level of quality from a brand.

This trust fosters customer loyalty, encouraging return visits and positive word-of-mouth, ultimately enhancing the brand’s reputation.

Establishing a seamless presence across various channels is a strategic imperative in today’s retail landscape to maintain a strong and trustworthy brand image.

Conclusion

The lines between traditional retail stores and running a store online continue to blur. The business model of successful retailers now demands a seamless integration of both channels.

As we move forward, the key lies in adaptation, embracing new technology, and aligning with changing consumer preferences.

For those venturing into the world of eCommerce, exploring the best eCommerce platforms and eCommerce hosting can be a vital step towards a prosperous future.

Next Steps: What Now?

Learn More About E-Commerce

Frequently Asked Questions

Is Amazon a retail store or is it eCommerce?

Amazon is both an eCommerce business and a significant player in the retail industry. It began as an online marketplace but has since expanded into traditional retail with the acquisition of Whole Foods and the establishment of Amazon Go stores. This dual role showcases its influence across both eCommerce and the retail sector, blurring the lines between the two.

Is eCommerce bigger than retail?

eCommerce is progressively gaining prominence within the retail landscape. In 2022, it comprised nearly 19% of global retail sales, signifying its substantial impact on the retail store business model. Forecasts suggest that by 2027, eCommerce may encompass almost a quarter of total global retail sales, underscoring its growing significance within the broader retail industry.

What is an example of retail and eCommerce?

An example of retail is a physical clothing store where customers visit in person to shop for apparel. In contrast, an example of eCommerce is an online fashion retailer where customers browse and purchase clothing through a website.

Both models serve the same purpose of selling clothing, but one operates from a brick-and-mortar location, while the other exclusively conducts business through digital platforms.

Is Walmart a retail store or eCommerce?

Walmart encompasses both traditional retail and eCommerce. While it’s renowned for its extensive network of physical stores, it has also made substantial inroads into the digital sphere. Walmart’s eCommerce segment now surpasses $80 billion in sales, contributing over 13% of its total sales. This dual presence solidifies its standing as a major player in both retail and ecommerce.

What is the eCommerce growth rate?

The eCommerce market is on a robust growth trajectory, with a projected revenue of US$925.40 billion in 2023. Anticipated annual growth at a rate of 11.22% (CAGR 2023-2027) is set to drive the market to an estimated volume of US$1,416.00 billion by 2027. This signifies a significant and consistent expansion in the eCommerce sector.

What are some of the most successful eCommerce stores?

Several eCommerce stores have achieved remarkable success, including Amazon, the global eCommerce giant. Other notable examples are Alibaba, renowned for its expansive online marketplace, and Shopify, a leading platform empowering numerous online businesses.

Additionally, companies like eBay, Walmart, and Etsy have made significant strides in the eCommerce realm, demonstrating the diverse avenues for online retail success.

How can a retail business be successful?

A successful retail business hinges on a combination of factors. It involves optimizing retail sales strategies, from offering a diverse product range to providing exceptional in-store experiences.

Ensuring efficient supply chain management and tailoring marketing efforts to consumer preferences can boost success. Ultimately, a thriving physical retail store selling goods hinges on understanding and meeting customer demands effectively.

How does business-to-business work in eCommerce?

Business-to-business (B2B) eCommerce involves transactions between companies, supplying products or services to other businesses. Unlike business-to-consumer (B2C) or consumer-to-consumer (C2C) eCommerce, B2B caters to the unique needs and scale of businesses.

To generate eCommerce sales, it typically includes bulk orders, specialized pricing, and tailored solutions, fostering efficient trade between enterprises in the digital marketplace.

Sonja Vitas
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Sonja Vitas
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