What Is Brick-and-Mortar?

The term "brick-and-mortar" refers to a traditional street-side business that

offers products and services to its customers face-to-face in an office or store
that the business owns or rents. The local grocery store and the corner bank
are examples of brick-and-mortar companies. Brick-and-mortar businesses
have found it difficult to compete with mostly web-based businesses like
Amazon.com Inc. (AMZN) because the latter usually have lower operating
costs and greater flexibility.

KEY TAKEAWAYS

 Brick-and-mortar refers to a traditional business that has a physical

store or stores where customers browse and make purchases in
person.
 These kinds of traditional stores have had a harder time in the digital
economy, in which web-based retailers such as eBay or Amazon benefit
from lower operating costs and more flexibility for customers.
 Many traditionally brick-and-mortar companies have created
simultaneous, connected web-based businesses so as to better
compete with online-only firms.
 Similarly, the long-standing and important brick-and-mortar model has
had an impact on some previously web-only companies that have
opened physical locations to realize the advantages of traditional retail.
Understanding Brick-and-Mortar
Many consumers still prefer to shop and browse in a physical store. In brick-
and-mortar stores, consumers can speak with employees and ask questions
about the products or services. Brick-and-mortar stores have the ability to
offer experience shopping whereby consumers can test a product such as a
video game or laptop at Best Buy or have lunch in Nordstrom's cafe while
shopping at the store. Brick-and-mortar businesses also provide consumers
with instant gratification when a purchase is made.

Some consumers are wary of using credit cards or other forms of payment
online. These customers often associate legitimacy with a brick-and-mortar
business, as a physical presence can foster a perception of trust. However,
there can be disadvantages for corporations that run brick-and-mortar stores
including the costs associated with leasing the building, employees to conduct
transactions, and utility expenses such as electricity, heat, and water.

Brick-and-Mortar Store Sales

On a per-store basis, publicly-traded retailers typically report same-store
sales, or comparable-store sales, in their quarterly and annual SEC-regulated
earnings reports. These financial metrics provide a performance comparison
for the established stores of a retail chain over a specified period of time.
Brick-and-mortar businesses that include restaurants, grocery stores, and
general merchandise stores use these figures to evaluate their financial
performance to guide corporate decision-making regarding their stores.

On a macroeconomic level, the U.S. Census Bureau releases retail

sales figures on a monthly basis and e-commerce retail sales figures on a
quarterly basis. Total retail sales in the U.S. were around $5.47 trillion in 2019
but are forecasted to fall to $4.89 trillion in 2020 as a result of the COVID-19
pandemic. 

Non-store retailing, which takes place outside of traditional brick-and-mortar

businesses, such as direct (door-to-door) selling and e-commerce posted
2019 sales of over $746 billion for the year. Sales are expected to dip to just
under $710 billion for 2020, due to the pandemic.

 
Many brick-and-mortar stores have found it difficult to compete with stores like
Amazon.com, that are web-based; however, companies such as Costco thrive
by offering its members services such as buy online and pick up in the store.

Successful Brick-and-Mortar Store Example

With all the negative press surrounding brick-and-mortar stores combined with
the popularity of Amazon, one might think that the brick-and-mortar business
model is dead. However, Costco is bucking the trend.

Costco Wholesale Corporation (COST) is a membership retailer that charges

an annual fee of between $60 and $120 to each customer. Consumers
receive cost savings and service benefits for being a member. Costco has
almost 100 million members and a 90% renewal rate from those members.

Costco beat out Amazon as the top Internet retailer in a consumer

survey done by the American Customer Satisfaction Index. Costco sells
10,000 products on its website and offers consumers the option to buy online
and pick up in the store, which helps offer its members a compelling
alternative to Amazon.

Special Considerations
The rise of electronic commerce (e-commerce) and online businesses has led
many to contemplate the future of the brick-and-mortar business. It is
increasingly common for brick-and-mortar businesses to also have an online
presence in an attempt to reap the benefits of each particular business model.

For example, some brick-and-mortar grocery stores, such as Safeway, allow

customers to shop for groceries online and have them delivered to their
doorstep in as little as a few hours. The increasing prevalence of these hybrid
business models has spawned offshoot terms such as "click and mortars" and
"bricks and clicks."
Despite fairly sustained growth in the broader brick-and-mortar landscape,
many traditional retailers are closing stores nationwide including Gymboree,
The Limited, Radio Shack, and Gamestop. Meanwhile, other stores such as
Sears and Payless ShoeSource have declared bankruptcy.

However, the importance of the brick-and-mortar model has been given

credence by several large online e-commerce companies opening physical
locations to realize the advantages of traditional retail. For example,
Amazon.com Inc. has opened brick-and-mortar stores to help market its
products and strengthen customer relations. Aside from opening a cashier-
less grocery store in Seattle and dozens of bookstores nationwide, Amazon
also acquired grocer Whole Foods in 2017 for $13.7 billion—a move that
many analysts said highlighted Amazon's urgent desire to strengthen its
physical retail presence.

That said, some business types, such as those that operate in the service
industry, are more appropriately suited to brick-and-mortar forms, such as hair
salons, veterinarians, gas stations, auto repair shops, restaurants, and
accounting firms. It is crucial that marketing strategies for brick-and-mortar
businesses highlight the advantages a consumer has when purchasing at a
physical store.

It's clear that the retail landscape has changed, and the brick-and-mortar
stores will have to adapt to the ever-changing technological landscape to
avoid becoming the next Sears or Payless.

Why Customers Purchase Online

Aside from the ability to compare product specifications and browse reviews,
online shopping has a number of other advantages:

 Being able to shop 24/7

 Saving money - online shopping allows the customer to compare pricing
and find the best possible deals
 Not having to use a personal vehicle and deal with parking and other
issues or take transit to shop in-store
 Saving time - in-store shopping can be hugely time consuming,
particularly if it involves visits to multiple stores in different locations
 Convenience - many people dislike crowds, cashier lineups, etc. and
prefer to shop from home
 Availability - hard to find items are much easier to source online
  Free shipping is sometimes available from online vendors. For example,
for a small yearly fee the Amazon Prime service includes free shipping
on most items ordered through Amazon.

Why Some Customers Prefer Brick-and-Mortar

Shopping
 Being able to physically interact with an item before buying, particularly
with personal items such as clothes, cosmetics, furniture, etc. or with
grocery items that need to be checked for quality and freshness
 Goods can be obtained immediately rather than waiting for shipping
 Customer service - the ability to speak directly to a sales representative
and get further information and advice about products or services
 Avoiding shipping costs
 Avoiding the hassle and complexity of returning unwanted items
 Much faster and easier to return a defective or unwanted product in-
store rather than shipping back to an online retailer
 The experience - many people enjoy a shopping outing in retail stores,
often with spouses or friends and conjunction with other activities such
as dining, having a specialty coffee, etc.

How Can Small Business Take Advantage of Online and

In-store Shopping Trends?
In today's market, virtually all large brick-and-mortar retailers also have a
strong online presence. For small brick-and-mortar businesses, deciding
whether or not to spend the time and effort to expand into online sales is less
clear. According to Forbes, only about 28 percent of small businesses make
their sales through the internet.

Given that most people tend to search for businesses on the internet, your
business should always have an online presence, even if it consists of
a Facebook page or simple website containing your address and contact
information, as well as a brief description of your product or service offerings.

If you do decide you want to sell your products online you don't have to go to
the trouble and expense of setting up a complete separate e-commerce
website. Setting up a Facebook or eBay storefront, or selling through Amazon
as a third party, is all relatively simple and serve as inexpensive ways to get
into online sales.

Whether or not you have an online presence, the best way to compete with
online stores is to build long-term relationships with your customers by
providing excellent customer service. Customers enjoy a sense of familiarity.
Being addressed by their first name, enjoying a friendly interaction with sales
staff, receiving personalized service and feeling that their needs are being met
are sure ways to keep customers coming back.

As an example, a good salesperson in a clothing store can be extremely

helpful to a customer by providing advice on appearance, sizing, mixing and
matching articles of clothing, assistance with fitting, care, and maintenance,
etc. Without any customer assistance or the ability to try on an item in
advance, the only recourse for an online clothes shopper is ordering an item
and hoping that it fits and is suitable, otherwise sending it back by return
shipment.

Online shops are great, but there are also plenty of

reasons to choose a brick-and-mortar store.
The internet has forever changed the way we shop. Many people turn to online shopping
whether they're buying clothing, groceries, or anything else they want or need. But is online
always the way to go? Though online shops are great, there are also plenty of great reasons to
choose a brick-and-mortar store!

If you're about to open a retail business, you should make this decision carefully. When
deciding whether to go online or go with brick-and-mortar, you'll need to consider factors
such as:

 How you'll build customer relationships

 The amount of time and money you can dedicate to hiring employees
 The cost you're willing to pay for overhead
 The expense of shipping

Weighing all these factors and others will help you make the best choice for your business's
future. To find out more about all these factors, keep reading.

Brick-and-mortar retail
Pro: Customer relationships lead to customer loyalty.

A lot of people choose to shop at brick-and-mortar locations because they like to have a
personalized experience. Shopping at a physical location allows them to build relationships
with the staff and with other patrons. This is great for you as a business owner! It means that
people feel a connection to you. Because of that, they're likely to keep coming back to your
business for more.
Having a physical retail location can also make it easier for people to find your business
because they'll see it every time they pass by. People won't necessarily hear if you've just
started an e-commerce business. But as soon as your brick-and-mortar store opens, people
will see and notice. They'll come in to check it out – and you can start building customer
loyalty!

Con: Consumers are limited to shopping based on the store's hours.

Physical retail locations are limited by their business hours. For some people, those hours will
be convenient. But there are plenty of others who may not be able to stop by during your
store hours. That, in turn, could limit your income.

You might find it stressful to have an operation that's open 24/7, i.e. an e-commerce business.
But this will be so much better for revenue. Customers will know they have constant access
to your products whenever they want them.

Pro: Brick-and-mortar locations simplify exchanges and returns for customers.

Just about everyone has fallen victim to an impulse buy at least once in their life. Making a
return can be a little stressful. But it's significantly easier with a brick-and-mortar store than it
is with an online retail location. There's no shipping involved. Usually, customers can just go
into the store with their purchase and the receipt and quickly make an exchange or get a
refund. This can be a huge advantage to customers.

Returns and exchanges are also a headache for the business owner. For example, sometimes a
customer might claim they've received a damaged item. But that can be difficult to verify
when the item isn't physically in front of you. There's a lot less guesswork a customer can
come in and show you their purchase.

Con: You'll have to spend more time and money on hiring.

Hiring and managing employees can be one of the most stressful parts of owning a business.
It's true that whether or not your business is in a brick-and-mortar location you'll have to hire
at some point. But hiring for your brick-and-mortar location is typically more expensive and
time-consuming than an online store. Physical locations need more upkeep and employees to
continue operating at top condition.

Pro: Taxes are more straightforward.

Contending with state and local taxes as a small business owner is always stressful. As a
brick-and-mortar seller, you only have to worry about one tax rate. On the other hand, if
you're an online seller, you have to deal with multiple tax rates. This is a clear advantage that
brick-and-mortar retail locations have over online stores.

Online retail
Pro: Online stores come with minimal overhead.
Opening an online business is more cost-effective. You don't have to pay for overhead and
there are fewer operating costs. You can often pass these savings along to the consumer,
which can be another thing that attracts customers. This is different from physical retail
locations where you'll have to pay for rent and utilities. These kinds of costs are some of the
most expensive for business owners.

Con: Customers may be deterred by the inability to see items in person.

Being able to see an item in person and touch it can have a big impact on a consumer's
purchasing decisions. This is especially true when it comes to clothing. If you're selling
clothing online, customers won't have the opportunity to try it on. This could lead to more
returns, which is a serious consideration.

Pro: Online Shopping is usually more convenient.

Online shopping appeals to consumers because it's convenient. They can do it from the
comfort of their own home. It takes less time and effort, and it allows consumers to compare
prices and features of products with ease.

When consumers know it takes little effort to do something, they are more likely to do it.
This is especially true of the 21st-century consumer. People can shop online anytime,
anywhere which makes it exceptionally popular.

Con: Shipping is expensive.

Some customers may be quick to purchase online if there's a great sale. But sometimes
customers forget about the additional cost that will be applied at checkout: shipping. Shipping
can add a significant expense to online orders. Sometimes the cost of shipping is enough to
deter customers from making a purchase. This can make your online business less lucrative
than you'd hope.

It's not just the cost of shipping that's problematic. Sometimes it's also the time that it takes a
package to arrive at a customer's house that deters them from making a purchase. People love
instant gratification, especially in our modern world. They get impatient easily. And
sometimes they simply may not be able to afford to wait 2-5 business days before getting a
product. This is something else you'll have to consider when deciding on what type of retail
business to start.

Pro: You don't have to worry about zoning laws.

Another advantage of owning an online-only business is you don't have to worry about
following your local zoning laws. You have a lot more flexibility about where you can run
your business, as long as you have an Internet connection. Many e-commerce sellers choose
to run their businesses from the comfort of their own homes! It's one less regulation your
business will have to worry about adhering to.

Summary
There are pros and cons to both types of retail. With a brick-and-mortar location, you can
create customer loyalty by building relationships and simplifying the return process. Taxes
are also less of a headache. But your sales will be limited to your operating hours. You'll also
have to go through more extensive hiring, which is an additional expense.

On the flip side, an online store has minimal operating costs and is usually more convenient
for the customers. You can work from anywhere without having to worry about zoning laws.
But you could also lose sales by not making items physically available to customers and
forcing them to pay for shipping.

Remember that you also don't necessarily have to choose between an online and brick-and-
mortar retail location. You can do both! There isn't one correct choice for your store. Both
retail and online have their advantages and disadvantages. The choice that's right for you will
also depend on what kind of products you're selling.

Image Credit: vavlt / Getty Image

ADVANTAGES OF BRICK AND MORTAR

Many customer still prefer to shop and browse in a physical store. A lot of people choose
to shop at brick and mortar locations because they like to have a personalized experience.
The customer can speak with employees and ask any questions about the products or their
services. Next, brick and mortar stores have the ability to offer experience shopping
before buying where by the customer can test a product such as a clothes, furniture,
cosmetics, video game or laptop at best buy that need to be checked for the quality and
freshness or have lunch in any cafe while shopping at the store.

Brick and mortar businesses also provide customers with instant gratification when a
purchase is made. With brick and mortar method, those customer can chose whether they
want to pay with cash or credit cards. When buy from the store itself, the customers can
obtained the goods immediately rather than waiting for shipping and also they can
avoiding the shipping fee. Making a return can be a little stressful but it will be much
faster and easier to return a defective or unwanted product in store to make n exchange or
to get a refund rather than shipping back to an online seller.

Lastly, brick and mortar seller only have to worry about one tax rate. On the other hand,
for online seller, they have to deal with multiple tax rates. This is a clear advantage that
brick and mortar retail locations have over online stores.
DISADVANTAGES OF BRICK AND MORTAR

Brick and mortar have their disadvantages as well. Firstly, every physical store has their
own business hours. For some people, those hours will be convenient but there are plenty
of others who may not be able to stop by during the store hours. Because of this, it will
limit the store income.