For years following the rise of e-commerce, many experts have predicted the death of physical stores. While the world has seen an increase in online shopping, the brick-and-mortar business model has not only survived but is still thriving in the 2020s. Let’s take a closer look at this business model, some examples, its key aspects, and some potential advantages and disadvantages.
What is the Brick and Mortar Business Model?
The brick-and-mortar business model is known as the traditional retail approach. It is often confused with the retail business model because of some of their similarities. Brick-and-mortar basically refers to having physical stores where customers can interact with products and sales staff directly. The entire essence is being able to offer tangible shopping experiences to customers. This means that they can touch, feel, and see the products they are considering. The retail model can be physical, virtual, or a hybrid of the two.
This is historically how commerce was handled for thousands of years. However, now that around 76% of U.S. adults shop online, visiting a physical store is no longer the only option. Even though online shopping has increased over the years, the brick-and-mortar model is still very successful in many industries. This is because there are just some things this business model offers that cannot currently be replicated online.
For example, real-time, personalized customer service. Interacting with people can significantly enhance the customer experience for retailers. When a person provides immediate assistance, advice, and hands-on service, customers tend to feel more valued. This human element can lead to higher levels of customer satisfaction and loyalty. This is difficult to replicate in an online environment.
Despite the growing trend of e-commerce, the brick-and-mortar model continues to hold significant value. It offers a unique shopping experience that caters to customers who value the immediacy and tactile nature of in-store shopping.
Examples of the Brick and Mortar Model
Now let’s take a look at some of the most well-known and successful brands and businesses using this model.
- Walmart: Offers a wide range of products, including groceries and clothing. Walmart has perfected physical retail with strategically located stores to maximize foot traffic and sales.
- Kroger: Similar to Walmart, this brand provides a variety of everyday products. This company really focuses on maximizing sales through strategic store locations.
- Macy’s: Provides a tactile shopping experience, allowing customers to try clothing and accessories.
- Nordstrom: Exemplifies tactile shopping, with an emphasis on fashion.
- Best Buy: Allows customers to physically interact with the latest electronics. They also offer expert, on-the-spot advice from knowledgeable staff.
- Independent Bookstores: This sector has experienced a resurgence, offering curated selections and community spaces. They provide a physical space for customers to browse and interact, despite the rise of digital alternatives. Barnes & Noble, for example, has opened several dozen new locations in 2023.
While you will notice that these examples also use online platforms to serve their customers, these companies still highly value and utilize their physical locations. As we stated before, there are some aspects to shopping that customers prefer to experience in person.
Key Aspects of the Brick-and-Mortar Model
Several key aspects of the brick-and-mortar business model make it unique. However, there are primarily 4 of them that brick-and-mortar businesses should focus on: physical presence, customer experience, inventory management, and location strategy.
The first and most obvious aspect is the physical store itself. This is the face of the business similar to how a website is the face of an online business. This space needs to be strategically designed to attract customers. It also needs to provide them with a comfortable and engaging shopping experience.
This means that things like store layout, lighting, and visual merchandising play a critical role. These things influence how customers perceive the brand and their products. For instance, Apple’s minimalist store design and open layout encourage customers to interact with their products in a relaxed environment. It enhances the experience which Apple hopes will help customers choose their brand when buying their next device.
The location of the brick-and-mortar business may be even more important than the physical presence. This is because businesses that use this model mostly rely on foot traffic. Ideally, brick-and-mortar businesses should be in areas with high visibility and accessibility.
This could be in shopping malls, high streets, or commercial districts. A company with a strong brand image and loyal customers may not necessarily need to be in those areas. That is if they have customers willing to find them no matter where they’re located. Or maybe in the brick-and-mortar business has marketing strategies that drive foot traffic. However, even those brands will benefit from being in a place where a passersby can stop in and shop.
Customer service is another pivotal aspect of the brick-and-mortar model. Unlike online shopping, physical stores offer immediate personal interaction. Well-trained staff can significantly impact sales by providing expert advice, like we mentioned benefits a company like Best Buy. For smaller businesses, being able to interact with local business owners is a plus for some customers. Walking into a store and dealing directly with the owner enhances customer experience for some people
Inventory management is also critical in this model. Stores must balance having enough stock to meet customer demand without overstocking, which ties up capital and storage space. Efficient inventory management, coupled with real-time data analysis, can help in maintaining the right stock levels and in planning for seasonal variations in demand.
There are several advantages and disadvantages of the brick-and-mortar business model. Some are more obvious than others. In the next section, we will look at a few of the advantages and disadvantages.
Advantages of the Brick-and-Mortar Model
Enhanced Customer Engagement
One of the foremost advantages of the brick-and-mortar business model is the enhanced customer experience it offers. Physical stores provide a tangible shopping environment where customers can engage directly with products. This hands-on interaction is crucial, especially for products where texture, fit, or color are important.
While there are ways to increase consumer engagement online, the in-person experience is much more immersive and impactful. You can see how a sofa will fit in your living room using 3D design applications. However, you will not be able to sit and feel the material to know just how comfortable the sofa is. This distinction makes the brick-and-mortar experience one-of-a-kind.
Immediate Product Accessibility
Brick-and-mortar stores offer immediate product accessibility. This is a significant benefit for customers seeking convenience and instant gratification. Unlike online shopping, where there is typically a wait time for product delivery, physical stores allow customers to see, purchase, and take home products immediately.
This is particularly advantageous for last-minute purchases or for consumers who prefer to physically inspect items before buying. Immediate accessibility also eliminates shipping costs and the uncertainties associated with online product deliveries. For example, things like delays or products being damaged during transit.
Personalized Customer Service
The brick-and-mortar model excels in providing personalized customer service. Store staff can interact directly with customers, offering assistance, advice, and personal recommendations. While the chatbots that exist can also do this, the human element can make the experience more enjoyable and effective.
Sales associates can quickly address customer queries, and guide them through product selections. They can do this while making light conversation, telling jokes, or giving opinions. This provides a level of personal attention that is challenging to replicate online. This human touch not only improves the immediate shopping experience but can also build long-term customer relationships and loyalty.
Local Market Integration
Brick-and-mortar stores can play a key role in contributing to local economies and communities. By being physically present in a neighborhood, these stores can tailor their offerings and services to the specific needs and preferences of the local market.
This localization of services fosters a closer connection with customers who may prefer supporting local businesses. Additionally, physical stores can participate in community events, sponsor local activities, and contribute to the local economy through employment and commerce. This integration helps in building a loyal customer base and enhances the store’s relevance and appeal in the local context.
Disadvantages of the Brick-and-Mortar Model
High Operational Costs
One of the main disadvantages of the brick-and-mortar model is the high operational costs it incurs. Physical stores require significant investment in rental space. This is especially true if they’re located in high-traffic areas with higher rent.
In addition to rental expenses, there are costs associated with maintaining the property, such as utilities, store design, and regular upkeep. These stores also need to invest in staff for sales and customer service, adding to the payroll expenses.
Compared to online retailers, who can operate with significantly lower fixed costs, brick-and-mortar stores often face a steeper financial challenge, making it harder to compete on price and profitability.
The physical nature of brick-and-mortar stores inherently limits their reach to the customers in their immediate geographical area. Unlike online stores that can serve a global customer base, physical stores are confined to the local population or those willing to travel to the location.
This limitation can restrict the growth potential and market size available to the store. This is even worse for niche products or in areas with lower population density. Additionally, attracting customers requires more localized marketing efforts.
Inventory Management Challenges
Since one of the key aspects of brick-and-mortar stores is inventory management, it is also one of its biggest challenges. Stores need to balance the right amount of stock to meet customer demand without overstocking, which can result in tied-up capital and storage space issues.
Unlike online retailers which can operate with centralized warehouses and just-in-time inventory systems, physical stores must have a sufficient range of products on hand. This can lead to difficulties in managing stock levels, especially for products with variable demand or short life cycles. Excess inventory also risks becoming obsolete or requiring deep discounting to clear, impacting profitability.
Vulnerability to Market Fluctuations
Physical retail locations are more vulnerable to market fluctuations and external factors than online businesses. Things like economic downturns, changing consumer preferences, or even adverse weather conditions can significantly impact foot traffic and sales.
For instance, during economic recessions, consumers may cut back on in-store shopping. This will affect the revenue of brick-and-mortar stores more acutely than online retailers. Similarly, local events or disruptions can lead to temporary closures or reduced customer visits, directly impacting the store’s performance.
This susceptibility to external influences makes the brick-and-mortar model more volatile and uncertain compared to its online counterparts.
The brick-and-mortar business model is still alive and kicking today. While it is not without its challenges, consumers seem to still enjoy the experience of walking into a store to browse, purchase, and interact with another human being in person. This means that this business model that has been around for centuries may still be viable centuries from now.