Online Retailers Benefit From Lower Overheads

Why is it that internet retailers often seem able to offer lower prices to customers than their more traditional rivals. While there are a number of reasons why this can be the case, one important factor is that online stores can often benefit from lower overheads.

If we think about the sales model of a traditional, physical store then we can see why this might be the case. A traditional shop is likely to try and attract customers by being positioned in a popular location.

Depending on the particular store, the exact location may vary but you might expect to find them on a high street, on a retail park or in a shopping centre. These are all places where there are going to be plenty of potential customers.

This seems to make sense but it does actually cause some problems for consumers. The problem with maintaining premises in popular locations is that shops will tend to be more expensive in these places. That would mean paying a lot to purchase them, or spending a lot on rent.

Given these circumstances, the shop owner has two options. The first option would be to reduce the size of store that they require. The problem with such an approach is that it will probably lead to them holding less stock and having fewer products on display.

This will mean that customers have far less choice available. So what’s the second option for the retailer? The obvious answer is to increase prices. Once again, this isn’t good news for customers.

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But there are other additional costs too, not least from the fact that the shop is likely to have a number of sales staff. This can seem like a positive, until you realise that their wages are also likely to lead to higher costs for consumers.

As this illustrates, traditional stores have high overheads that are often hard to avoid. Online retailers, on the other hand, don’t need to have premises in expensive areas. They also have fewer sales staff.

That means that they’re able to offer lower prices to customers. This helps to explain why you should always look for better deals online.

By Rusty