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A Comparative Cost Analysis of Retail Store and Ecommerce

If you are trying to start a business in the UK, you might be weighing whether to set up a retail store or take your chances in the world of e-commerce. If you have the resources, you may also be thinking of setting up both. One of the most important deciding factors that you should consider is the cost of setting up your business.

It is very important that you consider the cost of setting up and operating both a retail store and an online store. Not being able to think this through can cause your business to be part of the 80% of new business that falls within 18 months from launch. It is essential that you take every financial nook and cranny of setting up your desired business setting. You wouldn’t want to waste your time, effort, and resources in putting up a business that will end up closing right away.

To help you decide what kind of business will work for you best, here’s a comparative cost analysis of retail store and e-commerce business.

RETAIL STORE

To a lot of people, opening a business is a dream. Our traditional picture of a business is one that involves having a physical setup – a retail store. Nowadays, retail stores are usually confined to a shopping mall. In setting up a business in a retail store setup, here are some of the costs that you need to consider:

  1. Lease
    One of the most obvious differences between a retail store and an online store is the presence of a tangible store. This requires space. And space requires you to either own a space or at least rent it. For most cases, renting is the best option, especially considering that retail stores are really principally found in malls.
    Decent retail stores are usually set up on floor space around 1,000 square meters (10,763 square feet). The lease on modest areas would cost around £3,300.
  2. Physical Setup
    To make a retail store worth going to, you will have to work on its looks. Physical setup is crucial and you will have to spend a lot of money for it. This would cost you more or less £8,000.
  3. Staff
    Some businesses start by getting the help of family members and relatives. Even if your retail store would start this way, this doesn’t mean that it will stay that way forever. Hiring staff would surely be needed sooner or later.

If you plan on operating a small store, at least two staff members are necessary. Considering that you’ll need to abide by the maximum 48-hour work week and that you have a store that will be open from 09:00 to 19:00 from Mondays to Sundays, you will have 2 staff working 6 hours a day for 7 days. At the minimum wage of £7.20, it will cost you around £2,419.20 a month.

Adding all three basic expenses would already cost you a whopping £13,719.20 per month! This doesn’t include utilities, marketing, employee benefits, and miscellaneous expenses. True enough, owning a retail store is quite the dream, and for a lot of people, it remains a dream.

ONLINE STORE

The rise of e-commerce has made it possible for more businesses to thrive through the World Wide Web. Far-reaching and easy to set up, online stores are also less costly to establish, making it a better choice for a lot of first-time business owners.

To start an online store, here are some expenditures that you need to consider:

  1. E-commerce site cost
    In place of the physical setup of a retail store, you will need to come up with your e-commerce site. This is your virtual store. A decent e-commerce site will cost you around £4,800 and would already be bundled with a complete shopping cart functionality, rating and review features, a blog, integration with social media, and a full and dedicated tracking service for your visitors and sales.
  2. Web Hosting
    You will need to power up your e-commerce site with high-speed servers that would be able to handle a decent amount of traffic. A reliable web hosting service will cost you more or less £25 a month. If you want an all-in-one package solution, there’s always e-commerce platforms like Magento, which is famous for large businesses, and Shopify for selling clothing online. Shopify has partnered with Amazon, meaning you’d be able to enjoy numerous benefits from Amazon, too.
  3. Marketing
    In order to maximise the potentials of your online store, you will have to do a lot of marketing activities. Some of those that you can do are the following:
    Pay-per-Click (PPC) advertising£400 a month
    Digital Marketing (including content marketing, and technical support) – £2,000.
  4. Shipping
    Make doing business easier by just paying for order and shipping services instead of doing it yourself. You will be charged a minimum amount per order fulfilled. You can also try dropshipping — it doesn’t require much capital, has a low overhead, and there’s a wide selection of products you can sell.
    With an initial investment of £4,800 and monthly expenses around £2,400 plus shipping service expenses, e-commerce stores are indeed far cheaper to operate than retail stores.

THINK IT THROUGH, WHICH IS BETTER FOR YOU?

Cost is just one of the considerations in setting up a retail store or an online store. With the cost analysis above, you will be able to make a more informed decision. So think wisely! Which one will work better for you: retail store or online store?

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