The question faced by most new entrepreneurs is whether to go for a fully online business or have online as well as offline presence too. There are several factors that go into deciding whether your new business should be fully online. Understandably, the biggest factor is infrastructure costs.
Getting venture capital, funds from crowdsourcing and bank loans can prove arduous and uphill task in India, despite the government implementing some initiatives aimed at promoting entrepreneurship.
Most new entrepreneurs are fired by ambition while finances throw a wet blanket. Hence, they believe in online businesses more than offline ones.
Here are major reasons why new entrepreneurs believe in online trade rather than offline, which is also a big market.
Brick & Mortar Infrastructure
Take a realistic look at India’s real estate market. Buying or leasing an office is almost unaffordable for any new entrepreneur. Nor is it feasible to invest upon infrastructure such as warehousing and storage facilities. Setting up brick-and-mortar infrastructure is indeed expensive and can in some cases, even the capital set aside for opening a venture would not suffice.
Given this scenarios, online business is the best option. Setting up a website including buying a good domain name, hosting and other essentials costs a few thousand Rupees. Resources like Facebook Business are free. It is possible to set up an online store using e-commerce platforms such as Shopify, without much hassle or investment.
In stark contrast, setting up an offline business requires an office or store and warehouse, signboards, furniture and other paraphernalia that eats heavily into the capital earmarked for a venture.
Setting up a store or office also means hiring a good interior designer for proper layout and aesthetics. Modern day Indians shoppers are highly conscious ambience or a store or office. Hence, spending on creating such ambience is imminent. This can be avoided by online business.
Setting up an online business does not involve cutting through miles of red tape and overcoming bureaucratic hurdles to procure permits, licenses and other documents from government authorities. The Ministry of Corporate Affairs (MCA) has now simplified registration procedures for startup ventures. Several law firms provide the service for a few thousand Rupees. Under Indian laws, there are different types of registrations available for startup ventures.
Anyone looking for funding from Venture Capitalists (VCs), crowd sourcing platforms and other lenders needs to come up with excellent startup ideas that would attract investors. There are several such ideas available online that are relatively new and innovative.
Online businesses need not rush to get any registration, unless they are looking at some brick and mortar presence. New entrepreneurs can wait till their venture is successful and begins making profits before registering. Existing laws allow companies established less than seven years ago to be registered as startups. Hence, new entrepreneurs have plenty of time.
For brick-and-mortar businesses, an entrepreneur needs to get various clearances from the civic administration to register an office or store as well as those from local fire department. Plethora of licenses and permits cost a lot of money and eat heavily into the capital. These can simply be circumvented by opening an online enterprise.
Staffing & Payroll
Online businesses can operate be operated by entrepreneurs themselves or their close family members. At best, an online business can function efficiently with skeletal staff. These can be recruited locally if needed or hired on part-time basis. Online food ordering platforms recruit part-time delivery crew. Ditto with giant e-commerce companies like Amazon India that outsource deliveries to local agents that hire freelance staff that are paid on basis of number of packages delivered successfully.
Minimal staffing means a trim payroll. Rather than doling out fat pay packets to employees, new entrepreneurs can effectively utilize the money for expanding operations or launching new product and service lines.
Another advantage that new entrepreneurs can derive out of online business is by hiring staff at distant locations where they wish to expand. In such situations, it is possible to recruit part-time staff or freelancers till a new market becomes lucrative and starts paying adequate dividends to justify fulltime employees.
Business from Apps
Apps are the trendiest way for e-commerce in India. According to various reliable sources, over 23 percent of Indians bought stuff online using smartphone based apps. This amply proves that apps that work on mobile Internet are fast emerging as most preferred e-commerce channel in this country.
Nowadays, it costs a few thousand Rupees to have a customized app created for a new enterprise. These apps are accessed by potential customers during spare time, especially long commutes. Apps increase the probability of an interested person culminating as customer. App based business is something possible only if new entrepreneurs are online. They can display the app and provide link for its download through the website of their enterprise.
Another major reason why new entrepreneurs believe in online business is due to market growth. According to various projections, over 330 million women and men from different age groups will use e-commerce to buy stuff by the year 2020. This translates as whopping US$45 billion worth purchases. Numbers in terms of e-commerce users and total worth of purchases can be much higher. These figures are sufficient for any new entrepreneur to believe in online business.
Additionally, major e-commerce outlets in India including online retailers and Asset Management Companies (AMCs) are introducing newer, modern forms of payment for clients. These include payment through Unified Payment Interface (UPI) portal of National Payments Corporation of India, a government organization. Hence, new entrepreneurs can offer various channels to clients shopping for their goods or services.
There are several more distinct advantages why new entrepreneurs believe in online business though offline is also a big market. The biggest benefit of offline shopping or buying at brick-and-mortar stores is the instant gratification. A consumer gets first-hand feel and look of the product. Yet online businesses score because they are able to ship goods swiftly, reducing delivery time. Secondly, customers get the option of choosing a delivery address and time. Online makes it possible to send gifts instantly- which is not possible with most offline ventures. These basic factors are why new entrepreneurs believe in online business despite offline ones also being profitable.