Online Retail: Everything You Need to Know to Compete
So, what is online retail and how can you compete in some of the most competitive niches?
We’ve got you covered.
In this post, we take you through what makes for a winning online retail business model and give you the foundational tools you need in order to optimize or build a successful online retail brand from scratch.
We will also highlight the best types of online retailing, online retail marketing strategies, and online retail examples that you can use to “steal” strategies from.
Here’s a full breakdown of the sections we will cover — feel free to click ahead if you’re looking for very specific information.
Let’s jump in!
1. What Is Online Retail?
Online retail refers to both on- and offline brands who sell a selection of or their entire product catalog online. Rather than having to go into a physical store, customers can shop at their favorite retail store for consumer goods from their devices.
Or, more simply, online commerce enables customers to shop directly with brands on their computers, phones, or tablets.
Online retailers can sell exclusively online, or they can have online selling as part of a bigger multichannel brand — they have a physical store and marketplace store (think Amazon sellers) and a webstore for online retail.
Regardless of which eCommerce type they use, online retailers have the following in common; they:
- Purchase final products from either manufacturers or wholesalers, or make their own
- Sell these products directly to customers for a profit
Here is a list, according to Statista, of some top-earning online retail examples dominating the US and taking most of the market share. Many of them sell their own manufactured products and those of other retail brands.
- Home Depot
- Best Buy
So, does that mean online retail is the same as eCommerce? Not exactly.
Let’s take a closer look.
2. eCommerce vs. Online Retail
When it comes to eCommerce vs. online retail, there is a crucial difference. While both eCommerce brands and online retailers sell their products online directly to shoppers, they differ slightly in the types of products they sell and the available business types and models.
The simplest definition for eCommerce refers to any commercial transaction conducted electronically on the internet. And online retail has one key element of eCommerce, which is the ability for shoppers to buy products online. A dropshipper brand, for instance, falls under eCommerce, not online retail.
It helps to think of online retail as being under the umbrella of eCommerce as a whole.
As highlighted in the list above, Chewy is an excellent example of a top online retailer in terms of earnings and size. As you can see below, they sell a multitude of products from various brands, all from one central store.
They have had tremendous success dominating the eCommerce pet market niche, becoming a hub for pet owners looking at everything from dog beds to horse grooming products.
The bottom line is that eCommerce as a whole is growing at a fast rate with customers opting for online shopping. Therefore, more and more newer retailers are taking an online retail business model approach. Unlike combined omni-stores, they have a lot of success selling exclusively online.
3. Why Choose the Online Retail Business Model?
eCommerce’s online retail is fast becoming a popular business model because of a brand’s ability to keep operational costs low while expanding into new markets more quickly. For this reason, even new, more prominent brands are opting for online-only models.
Take LookHUMAN, for example. This mega online retail example was founded by Print Syndicate, who created new apparel and accessory designs based on trending memes and events.
They have manufactured in-house and launched as an exclusively online retail brand that generates around $5,000,000 in revenue each year.
Bottom line: The online retail business model offers significant earning potential at lower costs. AKA, profitability. But that’s not the only benefit. Here are the top reasons for choosing the online retail business model:
- Offers much wider market reach
- Reduces overhead and upfront costs
- Boosts customer satisfaction (thanks to the ease of use)
- Offers more access to growing markets
- Quicker shopping journeys
- Provides more flexibility for brands and shoppers
4. Top Types of Online Retailing
There are six online retail business model types. These include:
- B2C (business to consumer). For this online retail model, businesses are selling products directly to consumers. Here you are dealing directly with end-user shoppers.
- B2B (business to business). In this business model, online retailers sell products to other companies. This can be end-user business customers or other online retailers — wholesalers could fall in this category.
- C2C (consumer to consumer). Usually done online, C2C facilitates product or service commerce between private individuals. Examples of this online retail model include Etsy, eBay, and, in some cases, Amazon.
- C2B (consumer to business). C2B is the opposite of the transition B2C model. Here consumers offer products/services to businesses in exchange for payment. For example, influencer services or affiliate marketing would fit under this category.
- B2G (business to government). These online retailers facilitate the sale and marketing of goods to federal, state, or local agencies.
- B2B2C (business to business to consumer). Combining B2B and B2C, this online retail business model involves one business selling products in partnership with another brand to an end consumer. A good example of this would be print-on-demand online retail brands where the retailer facilitates the sale of a made-to-order product.
Overall, most online retailers will fall into the B2C or B2B category and can center around a wide variety of niches, such as electronics, apparel, and toys/hobbies.
Let’s look at these top niches/types of online retailing in terms of both popularity and revenue in the US. (Note that these tend to change per location.)
Most Popular Online Retail Categories
Here are the most popular niches from 2021 to 2022 in order of most popular to least — ranked based on the percentage of Americans who purchased from a store within a specific niche:
- Consumer electronics
- Books, games, movies, and music
- Beauty and personal care
- Food and beverage
Highest-Earning Online Retail Categories
According to Shopify, fashion is ranked as the most popular category of all internet purchases. However, it’s toys, hobbies, and DIY that is dominating in terms of revenue:
- Toys, hobbies, and DIY
- Beauty and personal care
But category or niche is only a small piece of the successful puzzle…
5. What You Need to Start a Successful Online Retail Store
So, what makes for a well-performing online retail store? Whether you’re looking to take your retail brand online or want to start a successful online retail store from scratch, you will need a:
- Inventory management
- Online storefront
Ideally, all these elements should work together seamlessly to form the foundation of a converting store brand. Let’s look at each in a little bit more detail.
Online Retail Niche
Defining your niche or industry is the first step to building a solid foundation for a thriving eCommerce store. Even if you’re currently offline and looking to sell online, you want to establish your online niche, which may be slightly different from how you’ve positioned yourself offline.
According to Neil Patel’s eCommerce niche guide, to find a good niche fit for your online retail business, you’ll want to:
- Do some keyword research
- Assess your competitive landscape
- Review margin and profit potential
- Determine your budget and resources
- Track growing eCommerce trends
Online Retail Market/Audience
Once you have your niche, you want to drill down your primary online retail audience. This will be vital in choosing what products to sell online and how to market them successfully. The best way to do this is to look deeply at your industry research to find the specific needs of potential customers in your niche. Then you will want to segment them by important audience types. This includes:
- Buying intent, motivations, and concerns
You will then use all these metrics and research to create an overall buying persona, and then segment buying personas for your online store brand. Here’s an example from HubSpot.
Online Retail Product
The next important step in building your online retail brand is choosing your products. Ultimately, you want to look for products in your chosen industry/niche that solve a problem for your targeted shopper.
Here are some product-choosing tips you can follow to help you find the best products to sell online:
- Look to your keyword research to see what your audience is actively searching for
- Search trends for opportunities you can get ahead of — but be sure it has lasting appeal
- Research customer satisfaction surveys and see how you can provide a product that improves reviews
- Find products that solve your customers' most significant pain points
- Opt for products that offer higher margins or higher volumes
And if you are an offline department store or smaller retailer taking your products online, this list above will also help you. You can use it to assist you in choosing which of your offline products to put on your online store first.
Online Retail Manufacturer/Supplier
If you’re totally new to online retail, now is the time to determine how you’re going to manufacture your products and order the materials you need. Alternatively, you can look for a third-party manufacturer to create your products.
Whether you’re looking for a manufacturer or a material supplier, Shopify suggests following these steps:
- Decide if you want domestic or overseas suppliers
- Do thorough research on suppliers and wholesale manufacturers
- Reach out to the top 10 to determine if they can meet your product and budget needs
- Negotiate minimum order quantities (significant for new online store brands)
- Finalize payment terms
Online Retail Inventory Management
Another vital element to a successful online retail store is laying a good foundation for backend management. A big part of this is retail logistics and inventory management. For a well-functioning inventory strategy, you will need to:
- Incorporate advanced AI and automation technologies
- Set your retail KPIs and goals
- Lay the foundation for backend admin management
- Build strategies that take customer experience and satisfaction into consideration
- Plan transport management to maximize efficiency and diminish costs
- Invest in the right inventory optimization tools and warehouse management strategies
Online Retail Brand
It’s not enough to make sure you have the right products and that they are easy to find. You need to set your online retail store apart from your closest competitors. This is where eCommerce branding comes in.
Your brand should talk directly to your audience, telling them how you solve their problems or needs. It should have personality (and voice) and set the tone for all your on- and off-site marketing.
The elements that make up an impactful eCommerce brand include:
- Color palette
- Brand voice
- Product design
- Product packaging
- Customer service
- Store merchandising
Online Retail Storefront
Your website or online storefront is the final but most important piece of building a winning online retail brand. Once you’ve chosen your eCommerce platform, the next step is planning your online visual merchandising.
Like traditional merchandising, how you display your products is vitally important to overall product discovery.
If you’re new to creating an online store, you will want to follow these steps to ensure you are set up to do just that:
- Select and buy an online retail domain
- Choose your eCommerce platform or a website builder
- Pick or build your online store template
- Implement store branding
- Add your products
- Invest in optimized product sorting tools (such as Kimonix)
- Choose and set up your payment gateways
- Plan your online retail marketing strategies
6. Expert Online Retail Marketing Hacks
Once you’ve built your online retail store, it’s time to take it up a notch. It’s not enough to aim purely to boost online retail sales. Instead, you want to be able to boost market share in your niche as quickly as possible. This is where your online retail marketing strategy comes into play.
And with the rise of digital commerce, online retail, and online shopping, it’s now more important than ever that retailers invest well in high-performing marketing funnels.
So, where do you start? Here are our top online retail marketing hacks:
- Stick to what you know, and do it well
- Use advanced merchandising to boost online retail sales and profits
- Boost eCommerce sales and product launches with email marketing
- Use social media to complete your omnichannel marketing experience
Let’s dive deeper into each.
Stick to What You Know, and Do It Well
Yes, capitalizing on trends can help you boost sales in the short term. But if you add consumer goods that aren’t in line with your brand, you run the risk of alienating existing customers — ultimately, driving down long-term growth potential.
Instead, you want to take the less is more approach — only diving into trends that fit your brand and help you stand out, long term.
Here’s an example from New York store Fishs Eddy. Known locally for their kitschy dishes and glasses, they sell some of their best-selling products online, without compromising on their offline brand feel.
Use Advanced Merchandising to Boost Online Retail Sales and Profits
How potential shoppers find your products is the key to boosting sales, not only for making an online retail sale, but for long-term profitability. Happening both on- and off-site, online product discovery comes down to your online merchandising.
On-store product sorting is an integral part of advanced merchandising. When combined with just the right automation and advanced multi-parameter strategies that factor in both marketing and retail KPIs, you not only boost product discovery but ensure you are factoring in profit margins as well.
The best way to achieve this is with advanced product merchandising tools such as Kimonix.
Boost eCommerce Sales and Product Launches with Email Marketing
The next way you can dominate your niche while boosting consumer goods is through email marketing.
Email marketing enables retailers to build one-on-one relationships with customers and potential shoppers who have signed up. Not only does it offer the best ROIs as far as online retail marketing goes, but the brand wholly owns this marketing channel.
And when combined with eCommerce sales and product launches, email marketing can go a long way to competing in your niche.
Why? Because it enables you to get new products to shoppers who already know your brand quickly, efficiently, and for less spend than, say, a PPC campaign.
Here are just some of the other types of email marketing online retailers should be using to stay fresh in the minds of their consumers:
- Welcome emails
- Seasonal campaigns
- Retail sale notifications
- Cart abandonment emails
- Milestone (birthdays and other special occasions) incentives
Use Social Media to Complete Your Omnichannel Marketing Experience
It should be no surprise that social media is a powerful marketing tool for online retailers. Each social media platform plays a key role in creating an omnichannel marketing experience, enabling you to meet your customers where they are — and drive them through your sales funnel.
Social media enables online retail brands to target new potential customers (drive awareness), interact directly with customers in real-time (give customer support), and build product interest with remarketing.
Additionally, with the growing interest in live commerce, social media is also a must-have selling tool that taps into real-time intent. Some top social media platforms that offer live commerce to include in your marketing strategy are:
If you’re an Amazon seller, you can also take advantage of Amazon seller live commerce.
Final Thoughts: To Compete, You Will Need to Tweak, Test, and Tweak Again
Whatever niche you create your eCommerce business in, there is no doubt that you will have ever-growing competition. This means finding ways to stand out is the only way you can compete long term and dominate market share. This is continuous — or at least it should be!
Behind every online retail success story, there is a brand who frequently tweaks, tests, and tweaks their front- and backend strategies repeatedly.
Whether it’s a social media marketing strategy, a digital touchpoint, or inventory management, success is always dynamic. This not only ensures continued eCommerce sales, but long-term profitability and market share as well.
Still have questions? Our online retail experts are standing by. You can reach out here.