Retail vs. Ecommerce: What's the Difference and How Can Retailers Expand

Did you know that retail e-commerce sales are estimated to exceed 6.3 trillion U.S. dollars worldwide in 2024? This significant number shows how much ecommerce is growing. While traditional retail stores are also growing and recuperating from a pandemic, this number also shows how much they need to step up. Especially since more and more consumers nowadays are always choosing between physical retail stores and online shopping.

So what is the difference between retail and ecommerce? What can retailers do to expand and keep up with the rise of online shopping?

Ecommerce and retail are both popular methods of selling products to consumers. With both of these, there’s always a seller, a product or service, and a buyer. Still, no matter how similar they can get, they differ significantly in how they primarily operate and deliver goods to consumers.

Here’s a detailed comparison of retail vs. ecommerce:

Ecommerce

Ecommerce, or electronic ecommerce, refers to the buying and selling of goods and services over the internet. Here are some of its key characteristics:

• Online Presence: Ecommerce businesses operate through websites, mobile apps, and online marketplaces. With ecommerce stores, there is usually no need for a physical storefront.
• Accessibility: Customers can shop 24/7 from anywhere with internet access.
• Global Reach: Ecommerce allows businesses to reach customers worldwide with little to no limitations on geographical boundaries.
• Cost Efficiency: There are lower overhead costs with ecommerce since there's no need to maintain a physical store. However, there will be costs associated with website maintenance, digital marketing, and logistics.
• Customer Experience: Personalized shopping experiences can be provided through data analytics, personalized recommendations, and targeted marketing on online platforms.
• Payment Methods: There are multiple online payment methods that can be offered by ecommerce stores, including credit cards, digital wallets, and online banking.

Retail

Retail, of course, refers to the sale of goods and services directly to consumers through physical storefronts. Here are some of the characteristics of retail stores and operations:

• Physical Presence: Retail businesses operate through brick-and-mortar stores or mom-and-pop shops where customers can visit and purchase products.
• Limited Accessibility: Shopping is restricted to the store’s operating hours and location.
• Local Reach: Typically serves local or regional customers, unless part of a larger retail chain with multiple locations across the country or the globe.
• Higher Overhead Costs: Physical retail stores include rent, utilities, in-store staff salaries, and other expenses related to maintaining a physical space.
• Customer Experience: Retail stores offer a tangible shopping experience where customers can see, touch, and try products before purchasing. There is also immediate product availability.
• Inventory Management: Retail stores usually need to manage stock in-store, which often involves immediate replenishment strategies.
• Payment Methods: Traditional payment methods like cash, credit or debit cards, and sometimes mobile payments for some modern stores.

Retail vs. Ecommerce

Here are the key differences between the two:

1. Mode of operation - Ecommerce operates online. Retail primarily operates through physical stores and locations.
2. Customer interaction - Ecommerce functions through virtual interaction on websites and customer service platforms. Retail, on the other hand, works with face-to-face interaction with staff in physical stores.
3. Cost structure - There are lower physical overhead costs but higher investment in technology and logistics with ecommerce. Higher physical overhead costs can be expected in retail businesses, such as rent and utilities, but lower technology costs.
4. Reach and accessibility - Ecommerce stores can reach a global audience and offer 24/7 shopping. Retail businesses might be limited to local customers and store hours.
5. Supply chain and logistics - Ecommerce involves shipping and handling logistics, often with centralized warehouses. Retail businesses involve managing in-store inventory and local suppliers.
6. Customer experience - Ecommerce usually focuses on convenience, personalization, and online customer service. Retail businesses, on the other hand, focus on tactile experience, immediate purchase gratification, and in-person customer service.

Ecommerce encompasses a wide range of online businesses that sell products and services over the internet. Most of the transactions and communications are done online, and involve various types of products, whether they are actual physical products or digital services. 

Here are some examples of different types of ecommerce platforms and businesses:

Online marketplaces

• Amazon - The largest online marketplace, offering a vast array of products, from books and electronics to clothing and groceries.
• eBay - A platform for buying and selling goods, both new and used, through auctions and fixed-price listings.
• Alibaba - A major Chinese online marketplace that connects international buyers with Chinese manufacturers and wholesalers.

Online retailers

• Zappos - Specializes in shoes and clothing, with a strong focus on customer service and free shipping/returns.
• Wayfair - An online retailer that offers a wide selection of furniture, home decor, and other household goods.
• ASOS - An online fashion retailer known for its extensive range of clothing, accessories, and beauty products.
• Small entrepreneurs or business owners - These refer to other smaller businesses that function primarily online. This might include artists, crafts shops, clothing stores, and more.

Niche marketplaces

• Etsy - Focuses on handmade, vintage, and unique factory-manufactured items, connecting small business owners and artisans with buyers.
• Reverb - An online marketplace dedicated to musical instruments and equipment, catering to musicians and collectors.
• Redbubble - Allows artists to sell their designs on a variety of products, such as t-shirts, stickers, and phone cases.

Food and grocery delivery

• Instacart - Provides grocery delivery services from local stores directly to consumers.
• DoorDash - Delivers food from restaurants to customers' doors, partnering with local eateries and chains.
• Blue Apron - A meal kit delivery service that sends pre-portioned ingredients and recipes to customers for home cooking.

Digital products and services

• Udemy - An online learning platform offering courses on a wide range of subjects, from programming to personal development.
• Humble Bundle - Sells bundles of digital products like video games, ebooks, and software, often at a discounted price, with a portion of the proceeds going to charity.
• Adobe Creative Cloud - Offers subscription-based access to a suite of creative software applications, such as Photoshop and Illustrator.

Subscription services

• Netflix - Provides streaming video content, including movies, TV shows, and original programming, on a subscription basis.
• Spotify - Offers streaming music services with both free and premium subscription options.
• Birchbox - A subscription service that delivers personalized beauty and grooming products to customers' doors monthly.

Travel and accommodation

• Expedia - An online travel agency offering booking services for flights, hotels, car rentals, and vacation packages.
• Airbnb - A platform where people can list, discover, and book accommodations around the world, from single rooms to entire homes.
• Booking.com - Provides booking services for a wide range of accommodations, including hotels, apartments, and unique stays.

Social commerce

• Facebook Marketplace - Allows users to buy and sell items within their local community through the Facebook platform.
• Instagram Shopping - Enables businesses to sell products directly through their Instagram profiles and posts.
• Pinterest Shop - Integrates shopping features into Pinterest, allowing users to discover and buy products directly from pins.

Retail stores come in various types, each catering to different customer needs and product categories. They can vary from small convenience stores to mom-and-pop shops being run by families to bigger retail chains in big cities or to retail businesses inside malls.

Here are some examples of different types of retail stores:

Department stores

• Macy's - Offers a wide range of products, including clothing, accessories, home goods, and cosmetics.
• Nordstrom - Known for high-end fashion, shoes, and accessories.

Supermarkets

• Kroger - One of the largest grocery chains in the U.S.
• Safeway - Provides groceries, fresh produce, and household items.
• Publix - A popular grocery chain in the southeastern U.S.

Convenience stores

• 7-Eleven - Known for snacks, drinks, and everyday essentials available 24/7.
• Circle K - Similar to 7-Eleven, offering convenience items and fuel.
• Wawa - Popular in the eastern U.S., offering prepared foods, coffee, and groceries.

Specialty stores

• Best Buy - Focuses on electronics, computers, and home appliances.
• The Home Depot - Specializes in home improvement and construction products.
• PetSmart - Offers pet supplies, food, and services like grooming and training.

Drugstores or pharmacies

• CVS - Provides prescription medications, health products, and general convenience items.
• Walgreens - Offers similar products and services to CVS.
• Rite Aid - Another chain providing pharmacy services and retail items.

Discount stores

• Walmart - A large variety of products at low prices, including groceries, clothing, and electronics.
• Target - Offers affordable fashion, home goods, and groceries.
• Dollar General - Provides low-cost household items, groceries, and seasonal products.

Furniture stores

• IKEA - Known for affordable and modern furniture and home goods.
• Ashley Furniture - Offers a wide range of furniture for different rooms.
• Rooms To Go - Specializes in affordable and stylish furniture sets.

Apparel stores

• Gap - Known for casual and affordable clothing for men, women, and children.
• H&M - Offers trendy and affordable fashion for all ages.
• Zara - Known for fast fashion, offering the latest trends at moderate prices.

Warehouse clubs or wholesalers

• Costco - Requires membership and offers bulk products, groceries, electronics, and more at discounted prices.
• Sam's Club - Similar to Costco, with bulk products and membership requirements.
• BJ's Wholesale Club - Another membership-based warehouse club with a wide range of products.

For retailers to grow and keep up with online retailers or ecommerce stores, they need to adjust and expand their operations. They need to be able to cater to modern consumers who find multiple benefits from the modernization of ecommerce. This makes omnichannel retailing crucial for retailers.

Omnichannel retailing aims to provide a seamless shopping experience by integrating physical and online channels and ensuring that customers have physical and online touchpoints to complete their shopping experience.

Here’s how it can bridge the gap between traditional retail businesses and ecommerce:

Unified customer experience

Omnichannel strategies ensure that customers experience the same brand messaging, promotions, and customer service whether they shop online or in-store.

It also creates personalized experiences for customers. By using data from both online and in-store interactions, retailers can offer personalized recommendations and promotions that cater to individual customer preferences.

Enhanced customer convenience

Omnichannel retailing allows for multiple fulfillment options. Offering various delivery and pickup options, such as same-day delivery, curbside pickup, and in-store pickup, caters to different customer needs and preferences.

Customers can also easily return online purchases to physical stores, simplifying the return process and enhancing overall customer satisfaction.

Access to retail technology such as digital labels

Omnichannel retailing means leveraging multiple retail technologies and innovations that modernize retail operations. 

For example, mobile apps are becoming popular among big retail chains. These mobile apps can integrate online and in-store experiences. Features like store locators, mobile payments, and personalized offers enhance the shopping experience for customers.

Technologies like QR codes, augmented reality (AR), and self-service kiosks can also bridge the gap between digital and physical shopping experiences. They provide customers with additional product information and interactive features that enhance engagement and wise shopping decisions.

Digital labels for omnichannel retailing are also a good way to combine online and physical channels. Digital labels, such as SOLUM Newton ESL, replace traditional paper labels. And because it’s equipped with robust features and the AIMS label management system, it can digitize retail workflows as well. This includes product price updates, inventory management, product promotions, information dissemination, mobile payments, self-checkouts, and more. A digital label solution like this can be a significant contribution to retailers who want to cater to modern consumers.

Data integration and insights

By integrating data from online and offline channels, retailers can create detailed customer profiles. This helps in understanding customer behavior, preferences, and shopping patterns.

This can also be used in targeted marketing. Using integrated data, retailers can execute more effective marketing campaigns by targeting customers with relevant offers and messages based on their comprehensive purchase history and interactions across all channels.

Integrated inventory management

Omnichannel retailing also allows real-time inventory tracking for retailers. Integrating inventory management systems across channels allows retailers to have real-time visibility of stock levels. This ensures that customers can see what’s available both online and in physical stores.

Retailers can also fulfill online orders using inventory from physical stores, which reduces shipping times and costs. On the other hand, customers can order products online and pick them up at a nearby store. This BOPIS approach combines the convenience of online shopping with the immediacy of physical retail.

Improved customer engagement

Omnichannel retailing allows for seamless communication. This is because customers can interact with the brand through multiple touchpoints, including social media, email, customer service chatbots, and in-store assistance, creating a cohesive engagement strategy.

Unified loyalty programs that reward customers for both online and in-store purchases also encourage repeat business and enhance customer loyalty.

Flexibility and adaptability

An omnichannel approach allows retailers to be more flexible and responsive to changing customer demands, providing a competitive edge in both the digital and physical retail landscapes.

Additionally, by leveraging data and trends from both channels, retailers can quickly adapt to new market demands and innovate their offerings to stay relevant.

As modernization transforms the retail landscape, it can become more competitive. Retailers need to keep up and leverage omnichannel retailing if they want to expand and grow as the industry moves forward.

Start branching out to digital channels with a digital label solution. Talk to SOLUM experts today to find out how digital labels can elevate your retail operations and help you compete in the digital world.