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    27 December 2007

    Online vs. Offline Business

    There are many types of businesses and different channels to reach your customers. One of the first steps you need to take when starting your business is what type of operations structure you want to use.

    There are three main types of operation structures: Brick and Mortar, E-Commerce and Brick and Click. In this post I’ll discuss these types of operation structures and some of their pros and cons.

    Brick and Mortar

    The traditional approach to starting a business is by opening up a physical location where customers come and purchase your product or service.

    Pros: Depending on your product or service, a physical location can offer a lot of advantages.

    • 1. Develops a sense of trust or authority with customers by showing that you are financially stable enough to have a store or office. Even though consumers are familiar with websites they can still be cautious of web only companies. With service companies it adds an element of professionalism.
    • 2. Customers still like to shop before they buy. Having a product on display that they can touch and examine helps the customer to commit to a purchase.
    • 3. Walk ins – As much as many of us web savvy businessmen would like to believe there is a large % of people who simply find products and services the old fashioned way. Instead of Googling what they need they’ll see it while driving or have a friend tell them about a store they visited. If you are in a high traffic area you can get a large number of walk ins. It’s the equivalent of getting to another person’s site by following a link or using Stumbleupon.

    Cons: Although there aren’t many cons to having a store there is one major one.

    • 1. Cost – The biggest problem with renting or owning a brick and mortar business is the cost. Commercial space ranges from $12 – $40 per square foot and maybe more in malls. Along with the high cost is the 2-5 year contract that most locations want you to sign. If you business does not go as planned you may be stuck regardless.

    E-Commerce

    There are a lot of different ways to make money online but I’ll simply list some of the ways to make money and discuss the pros and cons.
    Ways to make money online – Content based websites, Products, sell someone else’s product and Affiliate marketing.

    Pros: The main benefits of E-Commerce are the ease of entry. Don’t be fooled by how easy it is to start a business online because it’s easy to start but just as difficult to succeed in as any other business model.

    • 1. Relatively inexpensive – For someone who knows how to make websites or is willing to take the time to learn the cost of starting an online business are rather cheap. Your monthly costs are less than $25 per month when just starting out plus whatever marketing budget you set. This could be as low as $25 up to $100,000 per month. A lot of e-commerce businesses spend millions a year marketing their services.
    • 2. Customers – it is also less expensive and easier to get visitors to your store or in this case website. If you do some basic SEO you can start getting visitors to your website rather quickly. However, converting visitors to customers is another issue.
    • 3. Options – There are endless options when choosing your business online. You can sell scrap booking materials, have a service based business, sell affiliate products or create content based websites that are monetize through the hundreds of different monetization options.

    Cons: Although starting a business online is easy it is difficult to become successful and it is work just like any other profession.

    • 1. Too many people are lured to online business by the dreams of getting rich quick. Although there are millions to be made and lots of people are getting rich and sometimes quickly, it is naïve to think that you will do so without hard work. If you look at any of the successful internet entrepreneurs they all share two common characteristics.
      A. They are analytical and are strategic in their efforts. B. They work very hard or did. They may not be working hard now but when they first started I guarantee you they worked their asses off.
    • 2. Distractions – It is easy to get distracted or lost in all of the options available to internet entrepreneurs. Find something that is profitable and scale / duplicate it. Don’t hop endlessly from one hot new thing to the next. Find your niche and mine it for all it’s worth.

    Brick and Click

    This is basically a hybrid of Brick and Mortar and E-Commerce. This is a wonderful business model and allows you to take a successful online business offline or vice versa.

    Pros: There are too many Pros to list but I’ll try.

    • 1. Allows you to solidify your brand. If you were smart when you started your business, you created a brand. Creating another channel for your brand only expands your market share.
    • 2. Second Chances – If you don’t sell something offline you get a second chance online when a customer sees it again. Or maybe your customer finds it online but isn’t sure until they come in and takes a look at the product.
    • 3. New Customers – If you were successful online and you think that your product will convert well to offline then you are expanding your already successful business. You will reach a whole new consumer base that may not have known about your product. You were able to test it online first with less risk and are now taking it mainstream.

    Cons: I can think of just one.

    • 1. If you are offering a crappy e-book that you sell on business or webmaster forums to noobs this probably won’t convert well at the mall.

    Examples of each model

    I’ll use the movie rental business as an example.

    1. Brick and Mortar: Hollywood Video only has store locations.
    2. E-Commerce: Netflix offers to mail you movies you’ve selected to add to your library from their website. Although they have warehouses and such they don’t have a physical location where a customer can come and rent a movie.
    3. Brick and Click: Blockbuster Video offers you store locations and a video rental service, like Netflix’s, that sends you rentals in the mail from their website. They’ve even tied the two channels wonderfully by allowing you to return the online rentals to the store location in exchange for free rentals.

    29 Responses to Online Business vs. Offline Business: Pros and Cons

    1. TheBlogEntrepreneur December 28, 2007 at 2:23 am #

      Adnan…good to see you posting again. Does this mean the sale is off?

      I really like the picture that you used in this article…that is a neat style, I’ve seen Nate doing it on his blog…..it adds a sense of professionalism for sure.

    2. John D December 28, 2007 at 2:41 am #

      Great posting especially the pros and cons, I think you hit them well. All I would add is that in this day in age the two primary options is Brick N Click an E-Commerce. For any retail business that wants to be competitive needs to have an E-Commerce element. Not only does it give them additional marketing it is also another outlet to sell product.

    3. adnan December 28, 2007 at 6:43 pm #

      @ Bill: For now, I’m holding on to Blogtrepreneur and will hope to boost traffic. I’m also thinking up plans to turn this into a much bigger resource for bloggers and entrepreneurs and I’ll be able to hold on to it. Watch this space! – and thanks for the kind words.
      Yeah I learnt how to do the image thing off Nate – it’s pretty easy to do in Photoshop even for a n00b like me!

      @ John D – Thanks for the kind words too. Yeah you’re right – I think that whilst a Brick n click can be a lot more work in setting up a real-life store front – it could be more tangible – although we see affiliates raking in the dough!

    4. Alan Johnson December 28, 2007 at 11:24 pm #

      The interesting thing about the Web nowadays is the fact that not only are brick&mortar businesses reaching out to a wider audience by establishing an online presence, but we also see originally web-based businesses which have started out with practically the pocket change it took to register a domain expanding (offline) in a way which puts a lot of brick&mortar businesses to shame.

      Alan Johnson

    5. Bob December 29, 2007 at 9:18 pm #

      ,As you mention there are cons to all models, but smaller entrepreneurs are certainly more interested in a web presence over a click and mortar one, at least when talking about costs and risk. One additional con to the web world is the fact that it is incredibly difficult to get visibility as a new comer. Sure you can but Adwords and yahoo search terms, but even then, you’ll need to compete with more established, more cash strong, organizations.

      Bob
      http://www.entrepreneurideaguide.com

    6. Alan Johnson December 30, 2007 at 2:06 am #

      Getting exposure is not that difficult if you have value to offer. If your project is actually worth it then an initial advertising campaign to jumpstart everything will be enough, you can let word-of-mouth take over afterwards.

      Obviously, if you do not offer anything new or if you don’t even improve on an existing business model, then all of the advertising the Web has to offer will do no good :)

      Alan Johnson

    7. adnan December 31, 2007 at 6:52 pm #

      Good discussion guys.

      @ Alan: I would agree with both of your statements – that Brick and Mortar businesses and online E-Commercers are becoming more interchangeable – and its becoming easier to do thanks to the amount of technological processes we’ve seen over the past years. Examples of internet businesses taking to the streets are TextLinkAds and Facebook.

      @ Bob: When I first started out as an “entrepreneur”, one thing which immediately attracted me to the web, was the age anonymity which came with it. I found that I wasn’t disadvantaged by being young, and could compete on a fairer playing field with those “over 18″. However as Alan said – I don’t think that getting visibility is still that hard, if you have a good product and something to talk about.

      Strategies such as commenting on other blogs, and producing bucketloads of content have helped this site to climb SERPS and get recognised, without spending any money on PPC.

    8. Alan Johnson January 1, 2008 at 4:54 am #

      That is definitely true: if you provide value, people are always glad to link to you and, as such, there will be no need to pay for traffic.

      If you are not able to publish content worth linking to, then you will just have to compensate with a large advertising budget :)

      Alan Johnson

    9. Sam MacDonald January 1, 2008 at 4:31 pm #

      This was a great post on the different facets of the online world and the brick and mortar world. Having been involved with both worlds at some point in my career. With the most attention to the online world. It was great.

      It was especially nice to see the comparison at the bottom of the post between Hollywood Video, Netflix and Blockbuster.

      Happy New Year
      Sam

    10. Alan Johnson January 1, 2008 at 8:19 pm #

      Personally, I am still involved in the brick&mortar world until my children finish college and I can gradually let them take over. As far as I’m concerned, at this point, starting such a business and not backing it up with an online presence is definitely a huge mistake.

      Alan Johnson

    11. TheBlogEntrepreneur January 1, 2008 at 9:20 pm #

      At first glance it’s easy to agree, however an online presence is only a good investment if it yields an ROI.

      To do it just because you like the idea of having a dot com address is silly but if your business can actually benefit from it then of course it’s another avenue to try and grow the YOY comps.

      I think too many brick and mortar businesses invest too much money into a dotcom because they think they are supposed to, its the latest trend….if you have the cash flow then fine, if not then I’d save it for a higher priority.

    12. Alan Johnson January 1, 2008 at 9:58 pm #

      Establishing an online presence through a professional website, designed in good taste is not that much of a financial challenge (of course, as long as you don’t go over-board) when you consider the benefits as far as branding is concerned.

      Nowadays, there are a lot of talented designers and coders out there working for more than competitive rates so that establishing an online presence is not what one would call a luxury.

      Alan Johnson

    13. TheBlogEntrepreneur January 1, 2008 at 11:08 pm #

      I didn’t say it was a luxury….I said doing it just to do it is silly. It should have an ROI if you are going to invest money.

      If you meant a MySpace page or a cheapo template site then by all means establish the DOTCOM presence.

      It ALWAYS…costs more than you think and you get what you pay for.

      My experience anyways.

    14. Alan Johnson January 1, 2008 at 11:30 pm #

      As far as my brick&mortar business is concerned, I have had one of the designers I work with on my online project create an excellent presentation website for under $1k

      Why did I do it?

      Because I think that not having an online presence for a serious business is a huge mistake (and I am talking about a professional website here, not something which looks like it was created by an amateur – such a website will do more harm than good as far as branding is concerned and you are better off abandoning the idea altogether rather than having such an approach).

      ROI? A lot of my current clients have told me that they have appreciated the presentation website featured on my business card. If the website has been at least a minor factor which has helped at least one of them choose to do business with me, then the design has more than paid for itself.

      Conclusions:

      #1 Establishing on online presence through a professional website is more than affordable nowadays

      #2 There are important aspects such as branding which are not as easy to quantify as a PPC campaign, yet play an important role in the equation

      Alan Johnson

    15. TheBlogEntrepreneur January 1, 2008 at 11:47 pm #

      Alan….you keep acting like I am arguing with you or questioning your decision on a website.

      I’m not.

      If you get value out of it then great….

      My point is simply this…..it has to bring value to the business in order to do it.

      It isn’t #5 on the checklist of how to start a business for dummies.

      It isn’t right for every business and in many cases it is an absolute complete waste of money on an item that they don’t need and should be spending elsewhere.

      Most new businesses fail due to cash flow issues, they might have a cool website, but when they can’t pay the employees then that site doesn’t matter a whole lot.

      That’s my argument…nothing more, nothing less….so please stop defending your website.

      :-)

      And how about a URL to this 1000 dollar creation so we can see for ourselves?

    16. Alan Johnson January 2, 2008 at 12:30 am #

      There’s nothing wrong with people having different opinions and I have no reason to defend the website in question since I am not interested in advertising it (it is a presentation website for potential business partners, I am not interested in having people bookmark it or come back :) ).

      “My point is simply this…..it has to bring value to the business in order to do it.”

      Well, obviously, why would you start a website in order to hurt your business? :)

      You have your take on things, I have mine and, as far as I’m concerned, spending money on establishing an online presence (and I can’t stress this enough: finding a good designer to create a professional website at affordable rates is extremely easy these days) is never a bad decision.

      A couple of hundred dollars is enough to create a great website, it all boils down to how important branding is to you.

      Alan Johnson

    17. Website Translation January 4, 2008 at 2:20 am #

      I’m glad this post has sparked so much conversation.

      Everyone has made some good points. I agree that a website is always beneficial for a company regardless of their field if done properly. The problem is however, as theblogentrepreneur, pointed out that for a small business who doesn’t have a budget of 1k or more do get a website done properly and the know how to build their seo it could be a waste of time until they can afford to do it properly.

      However, they should as least buy a domain name and put a landing page with at least title tags, service or product summary and contact info.

      There are so many old schoolers that barely know what the internet is that they may not be ready to get a website and just focus on their product and selling it the way its working for them. 80/20 rule. Then when they’ve got things under control and are ready to move forward can expand into the web world.

      I see the benefit to both sides.

    18. Alan Johnson January 4, 2008 at 1:40 pm #

      Registering the domain name of your company right from the beginning is definitely a must. And, if you just want a site which looks professional and don’t need to hire a programmer as well, you can easily find a great designer who works for far less than $1k, so that having a website made in good taste is affordable even if you have a low startup budget.

      Alan Johnson

    19. adnan January 4, 2008 at 3:42 pm #

      Again, great discussion between Bill and Alan – and thanks for the input too Aaron.

      From what I see, both you guys are sort of making the same point. There has to be a reason why you would get in the online world anyway; whether it be to improve your branding (like Alan said), or to simply try and make a return on investment (like Bill).

      But ultimately, (and I would agree with Aaron here), as an internet entrepreneur who knows now how easy it is to establish an online presence – $8 for a domain and a few $’s for the hosting is really nothing in the grand scheme of things. Read a few basica HTML tutorials on how to make a simple site – heck use WordPress. In that way, you can start ranking for your site name – something that people will start searching for on Google.

    20. Sam MacDonald January 4, 2008 at 3:50 pm #

      As someone who uses the internet to generate income as a developer. I would agree with adnan on the cost of maintaining a presence for a company on the internet. I find it frustrating when I go to check out a business in the local area and what they do only to find that they do not have a web site.
      This I find very frustrating and detracts from wanting to do business with them in the future.

    21. Website Translation January 4, 2008 at 4:43 pm #

      I completely agree that you should at least get something up so that you have basic info but you are looking at things from your eyes. You grew up with the internet, it’s your lively hood and you probably use it everyday.

      There are so many people who don’t even know what a browser is and struggle just to use MS Word. That’s why I say in those situations if they are making their business work without it then they should wait until they are ready and able to expend the efforts. Regardless they should get the domain name and pay someone 1-200 to put up a basic site with contact info.

      However, contrary to popular belief there is a world outside of the internet and there are more businesses that don’t have a website that are still very successful than not. You have to understand our frame of reference is skewed.

      I see both sides and recommend a website for every business but sometimes they are just not ready for that step. 80/20 rule.

    22. Alan Johnson January 4, 2008 at 8:24 pm #

      Adnan, you are definitely correct: the pocket change it takes to register a domain and host your website definitely makes establishing an online presence worth it (a great risk/reward ratio, given the fact that there is little financial risk involved).

      Sure, as a brick&mortar business owner, you might not have the time it takes to learn how to design a website yourself so that paying a designer to do the job is in most cases the best approach, especially given the fact that, again, it is extremely easy to find talented people who work at affordable rates these days.

      Alan Johnson

    23. adnan January 4, 2008 at 9:55 pm #

      @ Sam: thanks for your comment mate – and yeah it can be very frustrating when trying to find a local business.

      @ Aaron: sure you can think of it like that, but then most people don’t even know what a domain name is, and how they work in the first place. Of course, we’re biased towards conducting business on the web because we do it ourselves – but everyone started learning somewhere. And in the same way – people may not know the legalities, accounting, etc etc that goes on behind opening up an offline brick and mortar business. So I guess, what we can conclude is that people should take the time to research which form of business will work well for them, given their budget (and ideas) and their current knowledge.

      @ Alan: Of course, outsourcing is a very good way to do things as well – depending upon how you want to spend your time.

      Again awesome discussion guys – starting to make me realise the wonders of discussion within blog posts when the majority of comments are “Really great post, Adnan” or something similar.

    24. Alan Johnson January 5, 2008 at 2:18 am #

      Adnan – of course, some more than interesting debates can come from the “comments” section, the community one can build around a blog is certainly not something which should be neglected.

      Alan Johnson

    25. Online Business Networking April 17, 2008 at 9:56 pm #

      The internet definitely gives businesses the chance to spread their products/services globally and thats what makes it great… there are advantages to offline business as well… but the internet is the future of everything.

    26. Internet Business Broker May 6, 2008 at 6:25 am #

      As a website business broker specialist I deal with internet entrepreneurs all day long and with buyers looking to get into this market and away from bricks and mortar. Most like the compelling nature of business 24/7, lower overhead, relocatable, global presence, and ability to start from hoime and buil quickly. Certaintly companies like the Gap, Eddie Bauer, Lands End have acheived explosive sales with their advent into clicks and bricks – don’t know too many e- businesses that expand into B&M after they succeed and scale online!!!

    27. wanz January 19, 2013 at 6:20 am #

      good stuff

    28. john hebel February 11, 2013 at 9:41 am #

      Superb, what a webpage it is! This blog provides helpful facts to us, keep it up.

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