Advantages and Disadvantages of E-Commerce Businesses

Is e-commerce right for you?

A business owner looks at an online order.

Jordan Siemens / Getty Images

Consumers worldwide shifted a great deal of their purchasing to online retailers when the COVID-19 pandemic struck in 2020. E-commerce sales increased by 43%, or nearly $250 billion, in 2020.  Although most pandemic restrictions in the United States are gone, e-commerce is still booming. If you run or plan to run a business, make sure your customers can purchase your products and services online.

Key Takeaways

  • E-commerce increased rapidly during the COVID-19 pandemic, and it’s still growing.
  • An e-commerce store is cheaper to operate than a store with a physical location.
  • Take precautions to stay ahead of hackers and malware.
  • You’ll be able to reach more customers, but your customers will also be able to look at prices and products from more businesses.

What Is an E-Commerce Business

E-commerce refers to the use of the internet to place an order or to negotiate the price and terms of a sale. Although people typically think of e-commerce as a way to sell goods and services to consumers, it is also used in business-to-business (B2B) transactions.


Consumer-to-consumer (C2C) e-commerce occurs when individuals sell to each other on platforms such as Facebook Marketplace and eBay.

The COVID-19 pandemic fueled an increase in online spending that has continued to grow. FTI Consulting projects that U.S. online retail sales will reach more than $1 trillion in 2022. This would be an increase of 11.7% over 2021.

Advantages and Disadvantages of E-Commerce Businesses

Many smaller consumer businesses rely on e-commerce completely to sell their products. It is more cost-efficient to operate completely online, and advanced digital advertising technology allows businesses to more effectively target potential customers. Understanding the advantages and disadvantages of operating an e-commerce business allows entrepreneurs to determine if it is right for them.

  • Lower overhead expenses

  • 24/7 selling opportunities

  • Increased consumer base and ability to scale business

  • Customer data collection and target marketing capabilities

  • Preferred method of shopping

  • No customer in-store experience

  • Delivery

  • Technology and security

  • Easy price comparison and matching

Pros Explained

  • Lower overhead expenses: Many small e-commerce businesses can be operated by a solo entrepreneur, which means you likely won’t need to hire employees until you have sufficient revenue and sales to justify hiring someone. You also won’t need to face the cost of operating a brick-and-mortar store. You won’t need to lease property or face any of the numerous costs that come with operating a physical store.
  • 24/7 selling opportunities: E-commerce businesses are open as long as the internet doesn’t crash, since you don’t need to be available every time someone makes a purchase.
  • Larger customer base: Anyone your business can deliver to, who has access to the internet, is a potential customer.
  • Customer data collection and customer targeting capabilities: You’ll have access to customer data. You should be able to track customer buying habits and send out automated and customized emails encouraging future purchases. Targeting previous customers with carefully selected marketing messages can increase sales.
  • Preferred method of shopping: According to a 2022 Raydiant report, 55.6% of customers prefer shopping online.

Cons Explained

  • No customer in-store experience: According to Raydiant, 44.4% of consumers still prefer shopping in person when possible. This may be especially valuable to customers who want to try out a product or ask questions about different products.
  • Delivery: Many e-commerce businesses offer next-day delivery, and Amazon offers some customers same-day delivery. However, a one-person e-commerce store can’t usually ship items to customers as quickly. To increase your shipping speeds, try to have your products ready to ship ahead of time.
  • Technology and security: Phishing, malware, and ransomware can compromise or shut down your e-commerce business. You could be locked out of your systems or data if you don’t have sufficient protections in place. You’ll also need to ensure that attackers aren’t stealing credit card information or personal data from your customers. If your customers don’t trust your site, you won’t be able to sell them products in the future.
  • Easy price comparison and matching: Consumers can compare prices almost immediately. They don’t need to go to another store to find out who has the lowest price. Some shoppers will search for the absolute lowest price when deciding where to buy a product from, which means you’ll need to stay on top of competitor’s prices. Selling products online also means your competitors can monitor your prices fairly easily.

Is an E-Commerce Business Right for You?

The emergence of e-commerce created a means for numerous entrepreneurs to become hugely successful.

As with any business endeavor, starting and operating an e-commerce business requires capital, although the upfront costs are typically lower than those of a brick-and-mortar business. You’ll either need the financial resources to quit your day job and pursue your e-commerce business full-time, or you’ll need to build up your business while also working a day job. Either way, you’ll need emotional and financial support as well as grit and determination.

If you have had success selling goods on a consumer-to-consumer platform such as Etsy, it may make sense to create your own website and sell directly to customers, thereby avoiding the cut that a third-party platform takes. You can also continue to sell products on third-party platforms while operating your own e-commerce website.

When you decide whether or not to launch an e-commerce business, weigh the pros and cons and honestly assess the strength of your business when compared with the competition.

Frequently Asked Questions (FAQs)

How do you start an e-commerce business?

Starting an e-commerce business is similar to starting a traditional small business. You’ll need to conduct market research to gain insight into prospective customers and competitors. You’ll also need to write a business plan, figure out how to fund your business, and figure out how to promote your business. You’ll also need to register your business and get federal and state tax IDs.

Which e-commerce platform is best for a small business?

Wix, Squarespace, and Shopify are some of the most popular platforms for online businesses. The best e-commerce platform for your business will depend on the price and what your needs are. Platforms may offer a variety of services, including website design and customer communication, and ensure privacy and security. If you can, talk to other e-commerce entrepreneurs to learn from their experiences.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. United States Census Bureau. “E-Commerce Sales Surged During the Pandemic.”

  2. FTI Consulting. “U.S. Online Retail Sales to Top $1 Trillion in 2022.”

  3. Nightingale-Conant. “The Power of Passive Income: Make Your Money Work for You.” Entrepreneur Press, 2019.

  4. Raydiant. “State of Consumer Behavior 2022.”

  5. Clutch. “How Consumer Hunger for Two-Day Delivery Impacts Businesses.”

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