Statistics show that 4 out of 5 businesses fail. This means that if you’re going to succeed in business, you need to understand what your customers want by measuring how they respond to your products. It isn’t enough to maintain a blind faith in the value of your products, you need to be quick to act when something isn’t working. The unsettling fact is that many great products simply don’t sell in the marketplace, but if you’re willing to try and fail a few times you’ll eventually stumble upon a winning formula.

The beauty of starting an online e-commerce business is that you can easily change your products and marketing strategy because you aren’t weighed down by the high cost of expensive stock and the maintenance costs of a traditional retail store. Using inexpensive online marketing, social media and analytic tools you can engage your customers, test different marketing approaches and monitor how they respond to your products without spending tens of thousands of dollars on an idea that may not sell.

Let’s take a look at the differences in startup cost and marketing for offline and online businesses with a brief cost analysis of both options.

Costs of An Offline Retail Store:

Much more money up front.

In addition to your monthly lease payment and the obligation to rent a storefront for a minimum of 6 months to a year, you will have to pay to properly renovate your storefront, create a sign and buy equipment, which can run into the thousands of dollars. Let’s go with a moderate figure of $10,000 for renovation, sign creation, lease closing costs and equipment costs.

Cost of you monthly lease.

Here in Vancouver, a streetfront store in one of the cities’ neighbourhoods costs between $50-75 per square foot. The average storefront retail shop is around 1000 square feet so your monthly rentals costs on the lower end of the commercial real estate market ($50/sq. foot) will be $4166 in leasing cost per month.

Cost for reliable sales staff.

For a retail store you’re going to likely need at least 2 staff members working 9:00 am to 7:00 pm each day of the week. Let’s say you pay your sales staff $12/hour, that will be $240 in labour costs each day, $1680 per week and $6720.

Total Cost:

$10,000 initial investment and then $10,886 per month in costs.

Costs of An Online E-Commerce Store:

Cost of web development for your website.

To get a custom e-commerce website created it will start around $6,000. This would include your entire shopping cart platform, a company blog, social media integration, user reviews and ratings, and full e-commerce analytics tracking of visitors and sales.

No cost for sales staff.

Instead of paying over $6,000 dollars a month in sales staff, you can spend that money driving traffic to your website using highly-targeted PPC advertising. If you don’t want to handle the orders and shipping of stock yourself then you can easily hire someone to do this for you at a fraction of the cost of having sales people working in your store 10 hours a day.

Online marketing is more effective.

Compared to traditional marketing, which is difficult to track, there are many advantages of online marketing.The biggest advantages of marketing an online e-commerce website is that you can track your ROI (return on investment) from every marketing dollar you spend.

Monthly web hosting costs.

To host a e-commerce website on high-speed servers it will cost you around $30/month. You will then want to hire someone to do online marketing for your website and provide technical assistance if you ever have problems with your website which will cost around $2,000/month.

Total Cost:

$6,000 initial investment and $2030/month in costs.

Minimizing The Risk

As you can see the startup costs are significantly lower for an E-commerce website (plus you don’t have to get locked into an expensive long-term lease) than a traditional retail storefront. On top of the expenses for both an offline and online business, you will need to spend money marketing and promoting your new business.

For some entrepreneurs, depending on the products they want to sell, either one of these options could be superior. However, the lower costs and better tracking of marketing for an e-commerce website provides a less risky and easier testing ground to fine-tune your new business model. For retail business owners that want to expand their operations across Canada, the United States and globally, an E-commerce website can help them dramatically expand their overall sales.

Most importantly, for new businesses an e-commerce website allows provides a relatively inexpensive way to test out your products and then easily expand into retail locations and a larger e-commerce system as your customer base increases.

A lot of small business people that I speak with are very curious about online marketing, but don’t understand how it can directly increase their business. Many of them are seeing less return from their advertisements in traditional media like The Yellow Pages, newspapers and direct mailing campaigns, and are looking to explore new ways of expanding their market share. When the advantages of online marketing are laid out, it is easy to see how it is oftentimes a more cost-effective marketing solution for small businesses.

These are some of the many advantages that online marketing offers over traditional media outlets:

1. Reduced Cost

The starting cost of online marketing is only a fraction of the thousands of dollars that Yellow Pages, television and radio ads cost. For example, you can get a free listing on Google Local that will be just as effective as a costly online Yellow Pages ad. In addition, while traditional ads may only run for a short time, a search engine optimization campaign can deliver long-term results. You can also save money with online Pay-Per-Click advertising where it is easy to experiment with small ad volumes until you perfect your strategy and then expand your marketing budget when you are assured of a positive sales return.

2. Everything Is Measurable

When you place an ad in the newspaper or a magazine, it can be difficult to assess the direct sales impact for your business. With online marketing, everything can be tracked and illustrated in detailed graphs that illustrate traffic growth, leads and sales conversions from your specific search marketing campaigns. Using a free traffic analysis tool like Google Analytics, it is easy to calculate your return on investment (ROI) so you can appreciate the excellent value generated from your online marketing budget.

3. Brand Engagement

In the crowded market, you need to establish and maintain positive brand awareness and client loyalty. Apart from word-of-mouth and leveraging your personal relationships with your established clients, a website is the most important marketing tool a business can have. A regularly updated website with well-written content that maintains people’s interest is essential to showing people exactly how your business is distinctive – and how you offer the best value to your clients.

4. Demographic Targeting

The degree to which an online marketing campaign can target and measure the response from specific demographics and regions is often astonishing to business owners who normally use traditional media. New demographic prediction and online advertising platforms allow you to specifically target the specific consumer demographics most likely to buy your products. In particular, if you want to target young people between the ages of 16-30, you’ll need an online marketing strategy to reach them where they spend the bulk of their time: On the Internet and on social media sites.

5. Real-Time Results

With online marketing you don’t have to wait weeks to see a significant boost in your business. With a paid search marketing campaign you can experience real-time results that enable you to fine-tune your marketing message to achieve your desired effect. If your marketing strategy isn’t working effectively, real-time monitoring tools allow you to easily pin-point exactly where you are going wrong.

6. Easily Refine Your Strategy

Using online marketing analytics and tracking tools you can test conversion rates at a fraction of the cost of a traditional media campaign. Online marketing levels the playing field and allows savvy small businesses to compete in competitive niches that previously would only be open to large corporations and their massive marketing budgets. If your marketing strategy is not bringing in the return on investment (ROI) that you desire, you can work to perfect it without having to launch an expensive new campaign as would be required with most traditional media outlets.

7. Long-Term Exposure

The benefit of an organic search marketing campaign that optimizes a website for specific keywords is that you will achieve a long-term return on your investment. Once your website’s visibility is well-established with search engines, it is easy to do regular low-cost maintenance of your strategy. The early adopters of new online marketing platforms like social media marketing will have a significant head start over their competition.

8. Product Information

Today’s savvy consumers want to compare reviews and opinions of friends, trusted bloggers and industry experts before they make a decision. If you can provide quality, linkable information that is what people are looking for, then the next step of converting users into paying clients can be very easy. With social media networks like Facebook and Twitter re-enforcing the value of positive word-of-mouth exposure, trust is more important than ever in the marketing field.

9. Less Intrusive

Most savvy consumers dislike intrusive traditional marketing methods like direct mailing, print ads and television advertisements. When someone buys a newspaper or magazine, they want to read interesting articles not be bombarded with irrelevant ads. While mediums like television can still be useful for maintaining awareness of large corporate brands, it is not an effective medium for most small and medium-size businesses. With online marketing, you can target consumers precisely when they are searching for products and services that your business can provide.

10. Holds Their Attention

When people read the newspaper or a magazine they may scan over the advertisements beside the article but there is no way to engage their attention. With online marketing you can encourage them to take action, visit your website and read about your products and services which results in vastly increased “stickiness” of your marketing message.