The Online Vs Offline Business Model

With ever rising numbers of businesses investing heavily in setting up and marketing their online presence, it’s worth taking a moment to distinguish between online and offline business models. Both of these possess unique strengths and weaknesses, as outlined below:

  • Cost of setting up & doing business. Few would argue that it’s cheaper overall to do business online than offline. Essentially, an online business is just a website – it’s very inexpensive to create and host a basic website, with domain name registration often costing no more than a couple of pints of larger and basic hosting available for a fiver or so a month. The widescale availability of free, powerful CMS systems like WordPress means that an online business can be up and running for buttons.  Contrast this to an offline business model, where premises need to be rented, staff hired and rents and rates paid. Sapping expenses.
  • Cost of advertising and marketing. In the earlier days of the online business model, marketing used to be far cheaper and simpler. Grabbing cheap traffic for good buyer keywords, even on big sites like Google Adwords, was entirely doable. This has changed quite dramatically, with PPC and social marketing for big traffic keywords now exclusively the domain of big companies with lavish budgets.
  • Barriers to entry. Pure and simple logic dictates that the more difficult and expensive something is to start-up, the less people will try. Consequently, offline businesses often enjoy more robust barriers to entry against competition than purely online businesses where a clone website offering identical products/services can be bundled up very quickly. This is precisely why there are so few monopoly websites around.
  • Tapping into local demand. A physical offline store is far better suited for tapping into localized demand than a website. The physical shop offers customers the luxury of being able to talk in person to staff, and see the merchandise up front and up close before buying.
  • Measuring performance. One of the revelations of the online business model is the accuracy with which all aspects of ROI and other key metrics can be calculated. Thanks to free tools like Google Analytics, all aspects of online business can be measured – from the effectiveness of marketing campaigns to the demographics of customer purchases. In contrast, in the offline business world there remains a lag and a fair bit of cumbersome guesswork in determining the effectiveness of marketing campaigns and the like.
  • Company morale and cohesion. Increasingly, as more companies are embracing the internet they find that the organization doesn’t actually even exist as a whole and unified entity. Small digital corporations can exist almost entirely online, with stakeholders who never even get to see each others face, let alone sit next to each other or socialize down the pub. This happens because a lot of companies increasingly use techniques such as outsourcing to execute their requirements. It follows naturally, there will be more cohesion within an offline company where staff get the opportunity to bond and form professional relationships.

While both online and offline business models have their pro’s and cons, it does seem that as business and industry evolve, the overwhelming majority of companies are embracing a hybrid model that makes use of both.