Invest in Online Business: Yes or No?

“Location, location, location!”

This is the mantra that you will often hear from most marketing practitioners. Marketing gurus have preached about this as though it was their gospel. But does this mantra still stand in today’s business environment?

What the Pandemic has Taught Us

If there is one thing that the Covid-19 pandemic has taught business practitioners, it’s that no business is safe from it. The Covid-19 has affected more businesses than we care to imagine. It doesn’t matter where your location is, what industry you are in, or how good your products are. This pandemic can affect any type of business, both in good and bad ways. Furthermore, another realization that the pandemic has highlighted is the importance of mitigating your risks from black swan events such as this. If only we can make businesses “pandemic proof”–if that is even possible.

Although there are no sure-fire ways to make your business “pandemic proof,” there are ways to make your business investments more resilient to such black swan events. Let’s discover the advantages of a business model that is inherently resilient to events like the pandemic.

Online Business: A Hedge Against Black Swan Events

One of the main types of businesses that have weathered the Covid-19 pandemic pretty well is online businesses. That’s because online businesses can continue their business operations without the need to travel from one location to another. This is probably one of its most glaring advantages compared to brick-and-mortar stores. You don’t need your customers to go to a physical store and do business with you. Instead, you may continue serving them online.

As a testament to the online business model’s resilience to black swan events, online businesses have seen drastic growth since the pandemic started. It’s been noted that e-commerce businesses grew by $105 billion in the year 2020 alone. For instance, Amazon, the e-commerce behemoth from the U.S., saw a high growth of around 220% in the same period. In contrast, traditional brick-and-mortar stores were shutting down from left to right. It’s a sad sight to see, but this is reality. While doing business online has become a hedge against such black swan events.

Flexibility & Scalability

Perhaps one of the reasons why many online businesses were able to weather the pandemic is because of its flexibility. Unlike most traditional businesses, online businesses often require less capital to put up and even lesser operating costs to keep afloat. You don’t need to think about a physical retail outlet and the cost associated with running it. As such, it’s easier to scale down your business, if necessary.

On the opposite end of the spectrum is its scalability. Just as it’s very easy to scale down, online businesses can also scale up once the opportunity presents itself. If you need more people to run your online business, you can easily hire people and have them work online without worrying about office space.

Are you looking to expand your business volume? Then you may simply increase your online marketing presence or focus your online marketing on a new area or demographic. Such scalability is probably one of the reasons why many online businesses have flourished to capitalize on the opportunity that the pandemic has presented. Traditional brick-and-mortar businesses on the other hand are tied down by the capital cost it needs to expand. These are the costs that online businesses do not need to worry about.

Passive Income: The Online Business Dream

Passive Income is the type of income source that requires little to no effort. That’s because passive income streams are self-generating. It means that its business owner doesn’t need to take an active role to generate income. On the other hand, Active Income refers to the type of income that requires its business owner to actively participate in the generation of the income.

Although this does not apply to all types of online businesses, most online ventures inherently can generate passive income. For example, online businesses platforms that provide software as a service can often passively generate income. One good example is Netflix. They generate income by providing an entertainment platform as a service. Although it may be argued that it requires effort to maintain this service, they don’t need to create another tangible product to continue their business.

On a lesser scale, websites that generate revenue through advertising may also enjoy passive income. A web page that is already generating revenue from ads may continue to generate income without too much activity.

Click & Mortar: A Good Middle Ground

Starting or investing in an online business does have its perks. However, there are those who have already sunk some of their capital on a traditional brick-and-mortar business.

It’s not the end of the world. There have been many traditional businesses that have gone the route of expanding online while still maintaining their traditional brick-and-mortar presence. It can also be a viable route if it’s possible in your current business venture.

The Bottom Line

Starting a business is a tall order. Not everyone has the capacity and acumen to start a business. Moreover, the same is true for starting an online business. It requires technical skills as well as the tenacity to push through with your business plan. However, it does have a whole lot of advantages, especially for those who plan to start small.

So, if you think that starting an online business is for you, then consider the points that we have discussed above before you start.