Why Online Business Makes Sense in a Recession

As Wall Street swings up and down, consumer spending drops, and news headlines reveal banks failing left and right from the mortgage crisis, it seems probable (if not inevitable) that our economy is heading towards a recession. But don’t crumple up and toss away your well-thought out, ingenious business plan yet! A slow economy does not necessarily mean that your business can’t make money. There are still plenty of opportunities for success if you engage in the right sector, and the best place to be right now is virtual.

Ecommerce was up 13% in the first quarter of 2008 with online revenues at over $32 billion. Compared to store sales, online retail is growing at triple the rate, which means that customers are increasingly shopping online. One study by Nielsen Online suggested that convenience and ease of use is a big reason why people are changing their buying habits. People are able to shop any time of the day while having access to a large selection of products and prices to compare between.

High gas prices are also causing shoppers to think twice about spending extra money to drive to the mall. In some cases it costs more to drive to the store and pick up the item than it does to have it delivered to your doorstep. Stores like Zappos.com, an online retail shoe store, have created entire businesses by exploiting the convenience of online shopping and free shipping. Their business model supports free shipping (both ways) with a 365 day return policy. Because storefront costs are low, they can pass along savings to their customers in the form of free shipping. Zappos was founded in 1999 and they’re projecting over $1 billion in sales for 2008.

Starting a business online allows you to cut out overhead expenses typically associated with launching a new company. By starting online you can reduce the rental payment, utility bills, and staff wages from your costs. And you can keep your online store open 24 hours a day, 7 days a week. This flexibility lets you keep your day job while you work on your personal business at your own time and pace.

If you have more than one business idea, you can try them all out with little additional cost to see which one will work best. Online Ecommerce tools allow you to test out your market before you risk too much investment capital. For instance, if you’re thinking about selling a product, you can test out the market by selling on EBay before spending the money to set up and market a new website. EBay already has millions of customers coming to their website regularly, so why not take advantage of that?

Another benefit of having an online business is that it allows for automation. You can save a lot of your own personal time, risk, and frustration if you create your business so that you can outsource its functions to places that already specialize in them. Once your business has gained some success, you can contract out things like manufacturing, order fulfillment, or customer service. By doing this you can potentially free yourself from the majority of the day-to-day operations, giving yourself time to focus on more important things like designing your next great product or idea.

As the U.S. economy remains unstable, the internet provides a customer base with less boundaries and more diversity. Not only can you sell your products or services to people worldwide, buy you can also find potentially new, untouched markets.


These are just a few of the advantages of starting an online business during a recession. Please share any thoughts or ideas you have on the topic!