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Why Start an Online Business - Advantages of the Online Businesses

Many entrepreneurs have moved to form online businesses as opposed to going through the traditional brick and mortar business model.  The online business model offers many advantages to entrepreneurs, namely through the ability to offer products at a lower cost than traditional businesses.  Traditionally, larger businesses had economies of scale that allowed them to offer product for cheaper prices.  Now, online businesses have the advantage of not having to pay rent, warehousing costs, and other costs that allow them to undercut traditional businesses. This provides these online businesses with a tremendous advantage.  Having said that, there are online business considerations that impact the manner in which online businesses operate that represent challenges for these businesses.
Online businesses do not have the distribution channels that traditional businesses do and therefore typically use their websites as their primary distribution method. This provides customers direct access to these businesses and avoid many of the costs and middlemen associated with traditional businesses. 

Having said that, it also presents many challenges to these online businesses. 

While customers have direct access to online businesses there remains a wealth of data available on the internet and it is difficult for customers to be able to locate the websites of online businesses directly.  Promoting the online businesses’ website is one of the many online business considerations for these companies and many companies do so through purchasing keywords from online search companies that allow their business to be located by customers in an easier manner then their competitors.  Other online businesses choose to advertise to promote their business and to attract customers, while others yet compete on price on various auction websites that are frequented by customers.  Having an online business stand out from the competition is the primary challenge that online businesses face.
Having a secure website and payment processing system is another challenge that online businesses face.  The majority of customers pay online through credit cards.  These customers are concerned with the security of these credit cards and want to receive assurance that the credit card information is well-protected and secure.  Online businesses will promote safeguards to protect client data including secure servers, websites, and third party payment processors with established reputations.  A poor reputation for not protecting customer security can significantly harm an online business and lead to a sharp decline in revenues.

 Online businesses face challenges just like any traditional business. 

There are some unique considerations that online businesses face that are unique to their structure, as indicated above.  How well these online businesses meet these challenges often dictates their success in the marketplace.

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