Online shopping is showing massive growth this Holiday season. Anyone who consistently uses the Internet will most likely shop for goods online. Businesses are aggressive in looking for ways to reduce their costs and raise their profit margin. Eliminating the middleman of a physical store can significantly increase their savings. Thus explains the rise in internet-based start-ups.
For most entrepreneurs, an online business is without a doubt easier and more convenient to manage, although it faces a completely different set of challenges. Market research for the target market and demographics should be done in both business types. However, in running an online business, there is no need to specify a particular area and the business will not be limited by its location. Instead of doing the legwork, online entrepreneurs can do their market research sitting down in front of their computer making use of various online resources.
The start-up capital to open an online business is also much less compared with that of a physical “brick-and-mortar” store. Marketing and advertising costs are also significantly less with the presence of various online marketing tools. In fact, most online marketing tools are even free of charge. However, it takes quite a lot of time and effort to advertise an online business. Some of the most common advertising strategies often used by online business entrepreneurs are; blogging, visibility in various forums and chat rooms, social networking sites and blogs. Online visibility is the key.
Online businesses also have less overhead costs. As long as the aspiring entrepreneur has a computer, good Internet connection, mobile phone or landline phone, and email address, an online business can be successfully launched. Familiarity of various Internet tools is likewise important to maximize available resources for an online business. Having a website that is solely dedicated for the business is important thus it would be necessary to have a domain name and a web host.
The declining interest for brick-and-mortar based start-ups can be attributed to the presence of online businesses. A brick-and-mortar based business demands a lot of physical requirements that dramatically increases its cost of operations, marketing and advertising. However, virtual online business set ups are arguably easier on the legwork and most definitely easier on the budget. Moreover, start up capital for online business set up is less because they operate online as compared to a brick-and-mortar based store which demands for a good location, space rental, store renovation, operation costs, employee salary, and other variable costs. This comparison between the set ups of virtual online business and brick-and-mortar business has come to the attention of a lot of entrepreneurs, including the ones who are still on the planning stages of their business. Ideally, the business set up preferred by most of entrepreneurs is the one that requires minimal cost in terms of capital and operations yet delivers a decent profit.
Case Study: Instagram VS Kodak
Eastman Kodak’s losses increased to $312 million while struggling to emerge from bankruptcy protection. The company is working on preparing for the next disaster, consider selling its patents and pulling the plug on consumer inkjet printers. The decrease in its revenue caused the company to eliminate 775 jobs during the third quarter and the charges that occurred from this move accounted for its latest loss. More than 2,800 workers were affected since the start of the year. Since the end of 2007, this 132-year old company has now lost more than $3 billion. Once considered a pioneer of technology, Kodak filed for bankruptcy protection last January and is currently seeking court approval to wait until the latter part of February for bankruptcy reorganization plan.
Meanwhile, Facebook’s $715 million acquisition of photo-sharing app, Instagram, happened less than 18 months after Instagram launched. Following the super-hyped “billion dollar” acquisition of Instagram, Facebook is actually costing the company much less because of its falling share price. This is revealed to the public in the company’s quarter report. So far, Facebook has already shed off $521 million in cash and stock.
$57 Million (Nov. 2012 Market Cap)
$715 Million (Sept. 2012 Acquisition)