Small Businesses That Sell Online Outpace Brick-and-Mortar Store Sales

Small- to medium-sized businesses (SMBs) that focus on online sales outperform those that rely on physical stores, according to the PYMNTS Intelligence report “SMB Growth Report: Online vs. In-Store SMBs.”

The report revealed how online SMBs record higher revenue, better growth prospects and more access to financing, while in-store businesses face limitations due to cost-cutting measures and a more conservative growth strategy.

One finding from the report is the difference in revenue performance between online-focused and in-store SMBs. Online SMBs reported an average annual revenue 21% higher than their in-store counterparts. The data showed that 52% of online-focused SMBs reported positive revenue growth, compared to 42% of in-store SMBs. In contrast, 21% of in-store SMBs reported declining revenue, compared to 15% of online SMBs who experienced a downturn.

This disparity suggests that online businesses benefit from higher sales and sustained growth. The ability to access a larger, global customer base and use eCommerce trends seems to provide SMBs that operate mainly online with a more optimistic outlook on their financial future.

Another advantage of operating online is better access to external financing. According to the report, online SMBs were more likely to use available financing options than those operating mostly in physical locations. Fifty-two percent of online-focused SMBs reported having access to credit or other financial resources, compared to 48% of brick-and-mortar businesses. Additionally, online businesses were 36% more likely to actively use financing than their in-store counterparts.

However, while in-store SMBs had equal access to financing, they were 78% more likely to have credit available but not use it. This suggests that many in-store businesses either lack knowledge about how to use financing or are hesitant to take on additional debt, even when resources are available.

According to the report, there was a difference in growth strategies between online and in-store SMBs. Online businesses were 25% more likely to have implemented growth strategies in the past year, focusing on innovation through new products, marketing or customer engagement. This approach helped them stand out in a competitive marketplace.

In-store SMBs, however, focused on survival through cost-cutting rather than innovation. While this may offer short-term stability, it risks limiting long-term growth. Twelve percent of in-store SMBs reported implementing no growth strategies in the past year, compared to 3.6% of online-focused businesses.

Officials at online SMBs were less worried about competition from larger retailers compared to in-store businesses, with 18% expressing concerns versus 31% of brick-and-mortar businesses. This confidence came from the digital marketplace’s scalability, flexibility and the ability to target niche markets and build direct customer relationships.

Online SMBs benefited from higher revenue, better growth and greater access to financing, positioning them for long-term success, the report found. Conversely, in-store businesses prioritized cost-cutting as the market shifted online. Expanding digitally is key for these businesses to stay competitive and tap into new revenue streams.

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