Brick and Mortar vs. Online Presence

This question tends to come with some clients: should we open (or expand) our brick-and-mortar store or focus online?
The usual advice is: play to your strengths. Let’s go through both store styles’ pros and cons and see which one would work best for us.

By Ryan Niddel

Physical Location


The main difference between a brick-and-mortar store and an online store is the physical location. A brick-and-mortar store needs to have a physical location to be classified as such, and online stores are not required to have such a site.
Having a physical location may cost more, but it comes with several advantages:

– Brand awareness: with a physical location, consumers get a complete brand experience, including store visuals, music, customer service, and product arrangement.


– Advertising: a great storefront can be as effective as having billboard signage. Having a beautiful display can easily attract guests.


– Storage: a physical store can act as a storage unit for a business.


More and more brick-and-mortar brands are opening an online store counterpart for an additional revenue stream.


Operating Expenses


Operating an online store may seem like a more cost-effective way to run a business, but it’s not always the case.


Online business owners have to deal with infrastructure costs, shipping and return expenses, and customer acquisition daily.

On the other hand, brick-and-mortar store owners have to factor in rent, labor, taxes, and warehousing when punching in numbers.

Operating expenses are some of the more expensive liabilities we face as business owners. Before deciding on a store style, consult with a management consultant or business consultant first.


Taxes


Taxes on brick-and-mortar stores are more straightforward. Businesses with physical stores only have to worry about one tax rate. Online store owners, on the other hand, have to learn about multiple tax rates. Business consultants would also be of great help in this aspect.


Consumer Spending


Online shopping is proliferating, but physical stores still report higher average spending than online stores. Here is an interesting fact: 71% of all shoppers spend $50 or more when shopping in-store, but only 54% of all online shoppers do.


Additionally, customers shopping in-store are more prone to impulse buying. Around 89% of women and 78% of men report buying more items than they planned when making in-store purchases, and only 77% of women and 67% of men report buying extra items when shopping online.


Another consideration when purchasing products online is the shipping fee. Customers don’t enjoy paying shipping fees on top of their purchases.


Testing Items


Allowing customers to test items is one of the most essential advantages brick-and-mortar stores have over online stores. Besides helping close sales, being able to see, feel, and test items also minimize in-store returns.
Many consumers admit to bracketing or buying several items at once to try and return those that do not work. Practices like this lead to tedious and expensive returns for online stores.


Apart from bracketing, online stores also have to deal with returns that don’t match the color or size that a client was expecting.


Wrapping Up


Both brick-and-mortar and online stores have pros and cons. While online stores are easier to set up than physical stores, and the industry is growing faster, they have more rigorous processes requiring expert supervision.


Think about your strengths and weaknesses as a business and match them with knowledge of both business models’ ins and outs to decide which one suits your company better or if you can run both at the same time. Using the right business model is critical in achieving your business goals.

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