With a global audience and billions of people spending more and more time online these days, you may want to consider launching an online business. Let’s discuss some of the pros and cons of online business and taking to the internet for your next venture.
Pros of Online Businesses:
1. Open 24/7
Ever browsed the internet at 3am and ended up purchasing something? Millions do it every day, and having an online store catering to the convenience-crowd can be a winning formula.
2. Inexpensive to get started
Own a laptop and a credit card? Great, you can start a WordPress business in a day and begin marketing your products/services for the cost of a cheap web hosting package (US$5/month or less). Sites like Amazon and Lazada allow you to sell on their marketplaces, collect money via paypal, and be up and running in very short periods of time with next to no startup capital.
3. Transparency & data availability
Yes privacy is dead. Online marketers now know so much about their customers it can be scary; some businesses literally scale back their systems around customer analysis so they don’t freak-out their customers with the incredible detail they know about them. On the positive side, you can really know your customers better and provide a stronger, more relevant offer to them, meaning the business serves them better and achieves excellent results for you.
Want to start from your bedroom with a laptop (or an iPad)? Sure. An online business may work from this size and be able to be scaled up when necessary.
5. Start small, look large
If you invest the time/money into a professional looking site, who will know if you’re a one-man-show, or a team of thousands? Add a couple of different phone numbers and email addresses to your site (they can all be forwarded to one central place), and you’ll have the impression of being a large company, and the confidence of your new customers.
Cons of Online Businesses:
While it’s true that it’s easy and inexpensive to get started, that also makes it true for your competition. It only took you a day to start your Shopify store? Great, but that means you may have new competition popping up overnight if your idea is imitatable. Try to sell an exclusive product or service, and something that isn’t easily commoditised.
The internet has created a level playing field for a lot of industries that used to thrive under less transparent market conditions. Why buy in-store if you can order online and get it 40% cheaper? Price transparency can make it tough to compete and keep a healthy margin on what you’re selling. Access to information also makes the customer a lot more informed about their choices, meaning you’ll have to find a niche in which you can win.
3. True Costs – Marketing & People
While setting up might be cheap enough, the true cost of most online businesses is in marketing and driving large amounts of quality traffic to your site. Traffic is the lifeblood of any online business, and acquiring this traffic takes a combination of time and money through Cost Per Click (CPC) advertising, Search Engine Optimisation (SEO), Search Engine Marketing (SEM), Social Media Marketing building an email subscriber list, and various offline marketing initiatives. While there are many ways to drive organic (free) traffic to your site, having a solid Customer Acquisition Cost (CAC) plan is vital to knowing what you’re in for with regard to marketing costs and the subsequent growth of your online business.
Once your online business gets to a certain size of traffic and sales, you may find you have to hire specialised people to handle the volume of work. Yes many tasks and functions can be automated or outsourced, but there are also a number of ‘moving-parts’ that require dedicated human interaction on a daily basis; SEO managers, digital marketing professionals, logistics and operations, IT, and other functions that your business may need to keep the business up and customers happy.
So, Do The Pros or Cons Win?
Hopefully we’ve made it clear; setting up an online business isn’t just about sitting around at home in your underwear with your laptop and watching the PayPal payments come in. While it’s easy enough to get started in online business, it’s vital to think about how you will win and create a defensible business strategy for the long term. Knowing what’s coming will help you plan for and outmanoeuvre the inevitable competition to your brilliant new business idea.