How to think about Online vs Physical Stores?

  • 5 min read

Deciding whether your business will have a physical store or an online store is an important step for many businesses. It reflects your business plan making it easier to develop your business for the future.

Many enterprises may have both a physical and online store. This blog aims to help small business owners decide which location they should focus on most.

1. Costs

The first hurdle you have to jump when setting up a physical store is whether you can pay the downpayment, mortgage and the rent. If you can pay the starting costs, although quite a large expense, there can be multiple benefits from operating a physical store. Such as capitalising on the local market.

As you can expect, often a lack of funding can deter business owners from even thinking about setting up a physical store even if it is the best option for their business long term. Looking at our blog on Sources of Funding: 9 Types with Examples will help you get the best possible funding for your business. Understanding how you will acquire funding is crucial throughout your business’ lifetime.

Online stores are much cheaper to set up and can often test whether there is a market for your products – this makes the stakes of setting up a business lower. However, as an entrepreneur, you should have already ascertained how many customers you will likely have and which demographics the customers will likely fall into. This should have been done in your business plan.

2. Demographics

The decision on whether to open a physical store or an online store rests upon your target market and the product/service you’re selling. Often a product can have strong ties to a local community. For example, local gin distilleries pop up in towns throughout the UK. Their main market is usually the surrounding neighborhood and this business would certainly set up a local store.

However, if your company appeals to various and far broader demographics then it is usually better to set up an online store. Although it can be harder to establish frequent and returning customers, online stores usually have a far broader audience and more individual customers.

3. Planning your business vision

Visualise how you want your business to look like in 10 years time. Where do you want it to be? This is a key part of your one-page plan as it helps you decide your business’ direction. In this case, it will help you establish whether you want a physical or online presence. Ask yourself questions like how will owning/not owning a physical store impact my long term business plans both financially and abstractly.

Furthermore, most physical stores have a website. Often it is not about choosing one or the other, but prioritising your physical sales over your internet sales, for example.

4. Gauging the benefits of each

If you are unsure whether you want to have a physical or online premise then, to solidify your decision, try weighing up the pros and cons of each. For example, a physical store may give your business credibility and the option to capitalise on the local market. However, an online store may give your business a global scope and access to far more customers.

In many cases, your business may want both a physical store and an online store. A simple weighing up of pros and cons may help you decide which premises you will be focusing on most.

Here are some pros of both online and physical stores to help get you started.

Pros of launching an online store

  • The customer is able to shop 24/7
  • Free shipping is sometimes available from online vendors. For example, for a small yearly fee the Amazon Prime service includes free shipping on most items ordered through Amazon
  • Customers can compare brands and websites to get the best possible deals
  • There is no travel. Any customers not in the immediate vicinity of your shop will need to travel, find a parking space, buy train tickets etc. etc.
  • Shopping online saves the customer time. Whether it is merely switching tabs, rather than walking between stores, or having to fill out your credit card details, rather than waiting in queues, the online shopping process is faster and more streamlined.
  • Shopping online makes finding rare items far easier  for the customer.

Pros of launching a physical store

  • The customer is able to interact with the item before buying it. This is particularly useful for personal items such as clothes which, ideally, need to fit well and look good. Knowing what you are getting can sometimes be difficult online.
  • Although much of the online process is very fast, shopping at a store ensures you get the product the day you buy it. There is no shipping or delay.
  • The customer service is usually better as your customers are able to speak directly to sales representatives to get further information about products or services
  • Returning unwanted items through a store is usually less complex and causes far less hassle.
  • Many customers enjoy the experience of shopping in physical stores. Especially with friends and spouses, where it becomes more of an outing.
  • One of the annoyances of online shopping is the multiple accounts you have to make with various retailers. The many passwords needed to sign into various websites can often frustrate customers.

Weighing up the pros and cons of your business location is probably the most critical way of analysing which location is right for you. Putting enough effort into the research and seeing the attributes of each location clearly laid out will easily give you the confidence to make your decision.


Did you find this blog helpful? If so, check out our other blogs designed to help small business owners develop their business.

If you are thinking of starting a UK business, head over to our MachFast App which allows you to quickly set up an Ltd UK company and current account.