How to Decide if a Physical Location or Online Store is Best For Your Business

Physical store or online store? If this debate is raging inside your head, you might need some help making a final decision. While both have advantages and disadvantages, it really boils down to what you’re selling and who you plan to sell to. The product will have a significant impact on your decision, and your audience even more so. Here’s how to decide if a physical location or online store is best for your business. 

Figure out Startup Costs of Both 

The startup costs for a physical location will almost always be higher than an online store. Everything from insurance, to deposit on rental space (or purchasing a space), to remodeling the inside of the store makes the startup costs of a physical location quite high. 

As for an online store, the startup costs will be much lower. You’ll need to hire a web designer, which can cost anywhere from a few hundred to a few thousand dollars; depending on your site’s specifics and the hourly rate of your designer. You’ll also need to have certain paperwork in order, purchase a domain name, and find a POS system to process payments with. 

Overall, if you’re looking to mitigate startup costs, you’ll want to choose an online store. Physical locations require insurance, which can end up being quite costly depending on what insurance you need and how much coverage is required. Not to mention, renting a space is expensive, and purchasing one means any maintenance or damages are coming out of your pocket. 

If you’re not great at managing or planning out finances, you can hire a financial advisor to lend a hand. You can compare financial advisors in Los Angeles on

Figure out Potential Overhead of Both 

Overhead refers how much it costs to run the business; things like utility bills, rental costs, domain name costs, etc. Once you’ve figured out the overall startup costs of the business, you’ll want to look to your overhead to get a better idea of what future costs will be. 

Physical locations again take the cake for being the most expensive here. Overhead costs can be incredibly high with physical locations. You’re paying to keep a building or part of a building running; complete with bathrooms (running water), lights, (electricity) and temperature control (either gas or electric). All of these expenses can add up quickly and are recurring costs; so every month, you’ll get to shell out more of your profits to cover them. 

Online stores usually have much less overhead; considering you’re not running a physical storefront complete with liability insurance and a bathroom. 

What are You Selling?

What you’re selling can also be a deciding factor in whether or not to utilize a physical location or online store. Certain items simply don’t perform well online, and others perform much better when sold in e-commerce stores. Depending on the products or services you offer, you may even want to opt for both an online store and physical location. 

Items like clothes are usually purchased in a physical store, simply because consumers will want to try on their clothing before deciding to buy it. Ensuring a good fit means they won’t need to return the clothing, making another trip all the way back to the store. 

Online food delivery, subscription boxes, and e-cigarettes/vapes are just a few products that you can sell online that are actually experiencing growth in e-commerce stores. Do your research on the products you’re selling to determine whether a physical store or website is the better avenue. 

Will Shipping Dramatically Increase Your Costs?

One of the drawbacks of running an e-commerce store is the shipping cost associated with mailing items across the country (or the world). You’ll need to factor in shipping costs as part of your overhead for an online store. Will you offer free shipping? If so, is there a threshold a customer much reach in their purchase amount before it’s free? Will your customers need to cover shipping costs? 

With a physical store, the only thing you may have to ship is your inventory or your ingredients for your products. This in itself is an expense to consider, even when choosing a location to work from.

Do You Want to Stay Open 24/7, 365?

An online store never closes; meaning no matter what time of day or which holiday it currently is, customers can still order their favorite products. This is one of the advantages that online stores have over their brick and mortar counterparts. By remaining open 365 days a year, online stores never miss a sale. 

A physical location will have hours of operation and will be closed on certain holidays; possibly causing missed opportunities for sales. This is something you want to seriously consider during your decision making process. Do you want your store to be open 24 hours per day, seven days per week?

Customer Loyalty 

Customer loyalty is possible to generate with both store options. It’s safe to say that customers will pay more attention to your customer service and the quality of your products than whether or not you’re a brick and mortar store. Both avenues provide ample opportunity to make a good first impression on new customers and generate that coveted customer loyalty among returning patrons. 

Which One Suits Your Personal Preferences?

At the end of the day, you also have to take into consideration your own preferences. Maybe you don’t want to run a physical storefront, because you prefer the flexibility of an online store or vice versa. Whatever you want to do, be sure to research the costs associated with your chosen avenue to avoid any surprises down the road. You wouldn’t want your business to fail before it takes off!