What is Brick and Mortar?

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Definition:

A brick-and-mortar business is one that has a physical location where it offers products or services to customers in person.

🤔 Understanding brick and mortar

Brick-and-mortar businesses have at least one physical location rather than existing entirely online. This represents a traditional business model in which companies have a real storefront and interact with customers face to face. All the retailers you visit in person are by definition brick and mortar, while e-commerce companies and online banks with no physical sites are not. A brick-and-mortar business model has advantages, such as allowing customers to view and sample products and enabling personalized service, but typically comes with higher costs and a smaller potential market. While online retailers have caused many brick-and-mortar stores to shutter, some internet-based businesses have started opening physical locations, since plenty of people still prefer to shop in person.

Example

Walmart is a well-known example of a brick-and-mortar store. Even though you can order most of what the retailer sells online and get it delivered to your doorstep as soon as the next day, many customers prefer to visit Walmarts in person. In fact, the company has more than 11,300 stores around the world. (Source: Walmart 2019 Annual Report)

Takeaway

Brick-and-mortar businesses are like dating the old-fashioned way....

A growing number of people are using online dating apps to meet their significant others. But plenty of people still prefer to meet someone in person. Even though the conventional way of getting together is becoming less common, both methods are still popular.

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What are examples of brick-and-mortar businesses?

Walmart has many brick-and-mortar locations, but the corporation also has a huge online presence. Plenty of other retailers rely solely on a brick-and-mortar business model. Consider your local grocery store: It may have a website, but in most cases, you can’t shop online.

Some brick-and-mortar stores, such as a local mom-and-pop shop, consist of just one location. Others are chains that you can find in many places, such as Kroger supermarkets. Brick-and-mortar businesses include everything from restaurants to shoe repair shops to banks. The key is having a physical location — whether or not it’s made of actual bricks.

What are the advantages and disadvantages of brick and mortar?

The brick-and-mortar business model comes with both benefits and downsides. Some of these are just part of owning a physical business, while others stem from today’s economy.

Advantages

The biggest advantage of a brick-and-mortar business model is that many people still prefer to shop in stores. Online sales made up just 11% of retail spending in the third quarter of 2019, according to data from the U.S. Commerce Department.

Brick-and-mortar stores have a “showroom” advantage: Customers can stop in and view items in person. Salespeople can use this opportunity to talk through a purchase with a customer and help weigh the pros and cons. The personal connection that salespeople and owners can build with customers in person is also hard to replicate online.

Even companies that have traditionally operated only online have seen the importance of physical stores. Since 2015, e-retailer Amazon has opened brick-and-mortar stores in over a dozen states.

Disadvantages

Perhaps the biggest obstacle for brick-and-mortar businesses today is competition from digital retailers. Online retail is growing at an exponentially higher rate than brick-and-mortar retail. Between 2000 and 2018, e-commerce increased 300%, while department store sales decreased 50%.

Brick-and-mortar stores are also more expensive to maintain. Owners have to lease or buy a physical space, invest in inventory and decor, and pay for upkeep. Unlike some of the other costs of doing business, these expenses don’t get cheaper when sales go down.

Another disadvantage inherent to a brick-and-mortar business model is that you’re only able to reach those who can physically visit your store. A local shop doesn’t have the potential market of an online site that can reach anyone in the world.

Why do some customers prefer brick and mortar vs. online?

Some preferences are generational — Surveys show that younger generations prefer online shopping more than their older counterparts. But there are other reasons consumers may choose one over the other.

Brick and Mortar

Despite the convenience of online shopping, many people prefer to see and handle a product before they buy it. You won’t get the wrong size when you’re shopping in a store and can try an item of clothing on. You may also want to sample makeup, test out furniture, or check the quality of groceries before buying them.

Many people also enjoy shopping in stores because they get personal customer service. Others see shopping as a social experience — It’s a chance to get out of the house and be around other people, and an activity you can do with a friend or loved one.

Shopping in a store also sometimes comes with an added sense of trust. In the case of a local small business, many customers may personally know and trust the business owner. Some consumers also prefer to spend their dollars locally because it aligns with their values.

Finally, some people avoid shopping online because they aren’t comfortable with technology or are wary of sharing credit card information online, especially after hearing about frequent data breaches.

Online

Convenience is a big draw in online shopping. You can buy just about anything you need at any time of day without leaving home. You can avoid paying for gas to get to the store, taking the time to drive there and find parking, and the hassle of waiting in lines. Often, you can get free shipping and returns, which means the convenience comes without any increased cost.

Another reason people like online shopping is that they can often save money. When you’re physically in a store looking at a product, it’s hard to compare prices across different brands and retailers. When you shop online, you have the ability to quickly compare products and prices across stores and find the best deal. You can also easily look for coupons and discounts to bring your costs down even more.

Many people do a combination of brick-and-mortar and online shopping. They go to physical stores to see a product in person, but may buy it online to get the best deal.

What is the future of brick-and-mortar stores?

Brick-and-mortar businesses still make up the largest share of retail sales, but e-commerce is quickly narrowing that gap. Will brick-and-mortar stores eventually become obsolete? The answer is probably not.

It’s true that some companies have had to close brick-and-mortar locations or go out of business entirely because of competition from e-retailers. For example, Toys “R” Us closed all of its U.S. stores after filing for bankruptcy in 2017.

But other legacy businesses have started adapting to the online economy. Some traditional grocery stories, for instance, have started letting customers order groceries online and either pick them up at the door or have them delivered. This business model is also known as “click-and-mortar,” which represents a hybrid between traditional brick and mortar and online shopping.

Some industries have been relatively insulated from the rise in online retail. People still go to restaurants, even though food delivery has been around a lot longer than online shopping. And though you can buy the fixings to make your drinks at home, people still go to bars. According to the Commerce Department, the percentage of people buying their gasoline online is still zero.

Rather than brick and mortar disappearing altogether, more companies may embrace the best of both worlds. For example, e-commerce giant Amazon has not only opened its own physical stores but also acquired supermarket chain Whole Foods, which relies heavily on a brick-and-mortar model.

Meanwhile, digital technology is influencing even those sectors in which customers aren’t buying online. For example, apps like GasBuddy allow users to find gas stations with the cheapest prices in the area. Even if they aren’t shopping online, these customers are making purchasing decisions online.

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Sign up for Robinhood and get your first stock on us.Certain limitations apply

The free stock offer is available to new users only, subject to the terms and conditions at rbnhd.co/freestock. Free stock chosen randomly from the program’s inventory.

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