Brick and Mortar vs Online: Navigating Retail Business Models

Welcome to the ultimate showdown: brick-and-mortar stores versus online retail! It's the clash between physical stores and the click-and-buy convenience of online shopping. Each has its perks—personalized experiences in-store and anytime, anywhere access online. But it's not about picking sides. No, it's about blending both to thrive!

Picture walking into a brick-and-mortar store—touching products, and chatting with staff. Conversely, there's the ease of clicking through online stores. The trick? Understanding consumer preferences and balancing the allure of in-person shopping with the convenience of online transactions.

It's not a toss-up between brick-and-mortar sales and ecommerce. It's about strategy. We're diving into the dynamics of traditional storefronts versus the ever-growing realm of ecommerce. By leveraging technology, enhancing in-store experiences, and minimizing shipping costs, businesses can cater to today's mobile-centric consumers while maintaining a physical presence that offers instant gratification. Join us as we explore strategies that blend the strengths of both worlds for retail success.

Understanding brick-and-mortar stores

Brick-and-mortar retail, the backbone of traditional shopping, refers to physical stores operating in a fixed location where customers visit to browse and purchase products or services. These stores provide a tangible shopping experience, allowing customers to interact physically with items, seek assistance from knowledgeable staff, and make purchases on-site.

Pros of having a brick-and-mortar store:

Here are some of the benefits of owning brick-and-mortar businesses:

• Establishing a physical brand presence: With 94% of customers heading back to physical stores [1], especially after the pandemic-induced shift to online shopping, having a brick-and-mortar presence enhances brand visibility and trust within the community.
• Providing in-store experiential value for customers: In-store spending has surged by 8% year-over-year as of March 2022 [2], indicating a growing preference for tangible shopping experiences. This trend underscores the value of physical stores in engaging customers.
• Potential for higher income: Well-located and effectively managed brick-and-mortar stores often have the potential to generate higher income due to impulse purchases and immediate availability of products.
• Facilitating easier upselling and cross-selling: In-person interactions enable more natural and effective upselling or cross-selling opportunities, boosting total retail sales revenue. TIP: Check out our guide on how to boost online sales for more!
• Offering online orders with in-store pickup: Combining the best of both worlds, some physical stores offer the convenience of online ordering with the added option of in-store pickup, catering to various customer preferences.
• Allowing product testing for customers: Customers can physically interact with and test products before making a purchase, providing them with a hands-on experience that online shopping often lacks.
• Building customer connections through service: Face-to-face customer service allows for a more personalized approach, nurturing stronger customer relationships and loyalty.

Challenges of having a brick-and-mortar store:

Here are some considerations you should know before starting a brick-and-mortar business:

• Property rental costs: Securing and maintaining a physical space can incur significant rental expenses, especially in prime locations.
• Potentially higher costs compared to ecommerce: Operating a physical store generally involves higher operational costs, including employee wages, utilities, and maintenance, compared to running an online-only business.
• Expenses such as employee wages, store setup, and marketing: Apart from rent, costs associated with staffing, store infrastructure, and marketing efforts contribute substantially to the operational overhead.
• Inconvenience of physical store visits and queues: Customers might perceive visiting a physical store as less convenient compared to the ease of online shopping, especially during peak times or when facing queues.
• Limited sales based on in-store inventory: Unlike the seemingly endless inventory of online stores, brick-and-mortar stores are limited by their physical space, potentially resulting in missed sales due to product unavailability.

While brick-and-mortar stores offer unique advantages like hands-on experiences and personal connections, they also face challenges such as higher operational costs and limited inventory compared to the online retail landscape.

Understanding ecommerce

Ecommerce, short for electronic commerce, refers to the buying and selling of goods or services over the Internet. It encompasses a wide range of transactions, from online retail stores to electronic payments and everything in between.

In a world where convenience and accessibility are paramount, ecommerce serves as a convenient gateway for customers to explore, select, and purchase products or services without physical interaction or visiting a physical location. Shopping online has never been easier.

Pros of ecommerce businesses:

Here's why you should consider opening an online store:

• Explosive growth and market influence: ecommerce growth year-on-year surged by 27% in March 2022 [3], showcasing its robust growth trajectory compared to brick-and-mortar's 8% growth. This accelerated growth underscores the market dominance and potential of online retail.
• Projected market size: By 2027, online shopping in the US is forecasted to exceed $1.7 trillion [4], indicating the vast revenue potential and market share commanded by ecommerce.
• Mobile commerce's ascension: Projections indicate that over 10% of all US retail sales will come from mobile commerce by 2025 [5], highlighting the increasing importance of mobile-friendly online stores to tap into this growing market segment.

Challenges faced by ecommerce supported by statistics:

Here are some cons of owning an online shopping business that should be considered:

• Consumer trust and online presence: One-third of customers don't trust retailers that solely operate online [6], highlighting the challenge of establishing credibility and trustworthiness in the digital realm.
• Cybersecurity concerns: Ensuring the security of online transactions and safeguarding customer data against cyber threats remains an ongoing challenge that demands constant vigilance and investment in security measures.
• Competition and differentiation: With the vast number of online businesses, standing out in a saturated market and differentiating products or services pose significant challenges for ecommerce platforms.
• Logistics and customer experience: Efficiently managing logistics, including shipping costs, timely deliveries, and handling returns, while ensuring a seamless customer experience remains a balancing act for online retailers.
• Balancing online presence and service: Striking the right balance between a user-friendly online interface and providing excellent customer service is essential but challenging in the digital landscape.

Ecommerce's rapid growth and potential for market dominance are juxtaposed with various challenges, including building trust, cybersecurity concerns, competition, logistics management, and ensuring a superior customer experience. Successfully navigating these challenges will be critical for sustained growth and success in the dynamic ecommerce ecosystem.

Comparing Brick-and-Mortar to Ecommerce: Evaluating Their Standings

When placing brick-and-mortar stores head-to-head with ecommerce, it seems like a closely matched competition. Physical stores generate more revenue, but they come with higher operational costs. Interestingly, despite being less prevalent than online retailers, brick-and-mortar shops tend to enjoy a higher level of consumer trust.

Top 5 predictions for brick-and-mortar vs ecommerce in 2024

• The strongest growth for offline retail: 2024 is poised to witness the most robust growth for brick-and-mortar retail since the post-pandemic rebound in 2021. With 80% of shopping still occurring in physical stores and a $4.9 trillion total annual retail sales in 2021 [7], expect substantial returns for those invested in physical stores in 2024.
• Impact of global inflation: Global inflation remains a pressing concern, with 40% of respondents saying [8] it is higher than social inequality and unemployment combined. This inflationary pressure will continue into 2024, warranting vigilance for merchants of both online and offline establishments.
• Rise of multichannel selling: The importance of multichannel selling amplifies, as 43% of shoppers now research products on Amazon [9]. Shopping behavior has transcended the binary of in-store versus online, urging retailers to identify where customers discover their products.
• Emergence of reccommerce: A paradigm shift in shopping habits emerges, with 76% of global consumers favoring ethical retailers [10]. Reccommerce, centered on buying used and secondhand products, gains traction in ecommerce. Brands like Lululemon are pioneering initiatives like "Lululemon Like New," tapping into the pre-loved item market.
• Livestream shopping takes flight: Livestream shopping garners $9 billion on TikTok in 2023 [11], signaling a seismic shift in retail. Social media platforms fuse with retail, enabling influencers to showcase products and exclusive deals in real-time. This integration creates a surge in demand as younger demographics vie to be the first to make purchases during live broadcasts.

Why you need a retail POS for your store

In today's dynamic retail landscape, a robust Point of Sale (POS) system is indispensable for both online and brick-and-mortar establishments. Whether operating in the digital realm or through physical storefronts, here's why investing in a retail POS is essential for the success and efficiency of your business.

• Unified operations and seamless integration: A retail POS system serves as the nerve center of your operations, unifying online and offline sales channels. It allows seamless integration of inventory, sales, and customer data across various platforms. For businesses running both online and brick-and-mortar stores, a POS acts as the central hub, ensuring coherence in sales tracking, inventory management, and customer interactions.
• Efficient inventory management: Effective inventory management is critical for retail success. A retail POS streamlines inventory tracking, providing real-time insights into stock levels across different sales channels. This functionality ensures accurate inventory counts, minimizes stockouts and facilitates timely restocking for both online and physical stores. You can avoid overselling products and optimize stock allocation with synchronized inventory data.
• Enhanced customer experience: Delivering a seamless and personalized customer experience is paramount in today's competitive market. A retail POS system empowers businesses to access comprehensive customer profiles, allowing for tailored interactions, personalized marketing, and loyalty programs. Whether customers engage online or in-store, a unified POS enables a consistent and personalized experience, fostering customer satisfaction and loyalty.
• Streamlined sales reporting and analytics: Accurate and insightful reporting is fundamental for informed decision-making. A retail POS generates detailed sales reports and analytics, offering valuable insights into sales trends, popular products, and customer behavior. This data-driven approach aids in refining marketing strategies, optimizing product offerings, and identifying growth opportunities across both online and brick-and-mortar platforms.
• Secure and efficient transactions: A reliable POS system ensures secure retail payment processing for online and in-store purchases. It offers various payment options, including credit/debit cards, mobile payments, and online transactions, ensuring smooth and secure transactions and thereby enhancing customer trust and satisfaction.

In conclusion, whether operating online or maintaining a physical storefront, investing in a robust retail POS system is crucial for streamlining operations, optimizing inventory management, delivering superior customer experiences, accessing valuable insights, and ensuring secure and efficient transactions. Embracing a unified retail POS empowers businesses to thrive in today's multichannel retail landscape.

The checkout showdown concludes

Wrapping up the comparison between brick-and-mortar and online retail, it's evident that both realms hold unique advantages and challenges. Brick-and-mortar stores offer tangible experiences and higher customer trust, while online platforms provide global reach and scalability.

However, the future isn't about choosing one over the other but embracing both. As we step into 2024, the retail landscape will witness stronger offline growth, the rise of multichannel strategies, and innovative shopping trends like reccommerce and livestream shopping. The key to success lies in embracing the best of both worlds—seamlessly integrating brick-and-mortar and online strategies.

Whether it's through a retail POS for streamlined operations or catering to evolving consumer behaviors, thriving in retail hinges on a balanced approach, leveraging the strengths of both realms to cater to diverse customer preferences and navigate the ever-changing retail horizon.

Interested in learning more about retail stores? Check out our helpful guides: hybrid retail store and retail stores profit margin.