Although the overheads associated with a brick and mortar store are far higher than if your business is simply an eCommerce venture, the necessity for a brick and mortar store for the highest conversion rates is becoming more pronounced. In fact in the USA offline sales are still 10x bigger than that of online sales and there are many reasons for that which we will explore below.
Many customers still prefer a brick and mortar store where they can physically view the product before buying it as well as asking the advice from physical rather than virtual shop assistants.
In fact, just 10 years ago you may have heard many analysts calling for the end of the brick and mortar stores. They were called old-fashioned, and the rise of the internet and ecommerce was going to close all physical stores.
We know now that this hasn’t been the case. Shoppers have turned to online sources for research and information, and will often go to a physical location – a brick and mortar store – to make the actual purchase.
What is Brick and Mortar?
The term “brick and mortar” is more commonly used today, in the digital landscape, as consumers need a way to differentiate between the retailers that work offline, and the ones they can access online. While Amazon is an “online” store, a brick and mortar store is one that you can physically visit in person.
Like any store, brick and mortar locations are all about driving amazing customer experience and sales. However, unlike online businesses, it’s possible for physical retailers to develop a closer in-person relationship with their customers. These retailers might have online shopping environments too, but they maintain their physical retail location for human interaction.
With a brick and mortar store, customers have the freedom to actually interact with the products that they’re interested in and speak to sales reps too. Look at Walmart for instance, you can shop online, but you get a very different experience in-person.
Although online businesses can save on overhead costs compared to the standard brick-and-mortar store, there are advantages to having a physical location. With a brick and mortar location, you can show your customers first-hand what your products are like.
While the demand for the online storefront is growing, and foot traffic to physical stores is slowing, there are still plenty of opportunities for having a physical presence if you run the correct business model. For instance, shopping locations like grocery stores that give customers access to the things they need instantly are a good idea for physical stores.
The Costs of Running a Brick and Mortar Store
As mentioned above, it’s generally cheaper to run an online store than a brick and mortar location, because there are fewer overheads to worry about. You don’t need to worry about things like electrical expenses for running your store, or real-estate if you’re online.
The actual cost of a brick and mortar store depends on the size of the store, the location, the kind of business you want to start, and other crucial factors. The Small Business Administration suggests that you can start a small store for as little as $3000, but there’s no one number for everyone.
To determine the cash you need to start your business, you’ll need a plan. Research your industry and think about the kind of startup costs you’ll encounter, as well as the monthly operating expenses involved. The plan also shows your business how long it will take to reach the “break point even” level. Notably, a business plan is essential for getting all the information you need for sales. However, it’s also a must-have for appealing to lenders too.
When calculating the costs of running your physical store, it’s best to overestimate. There’s a good chance that you’ll miss something on your list of must-have items that will add to your budgetary needs, so having some extra cash aside is generally a good idea. Additionally, costs that you didn’t plan for are likely to arise as you continue to run your store.
Start with your basic startup costs and think about the kind of research you might be able to do into competitors to get more information. Finding out what kind of costs similar companies contend with when starting a physical presence can help you to make more informed decisions. Some of the most common startup costs include:
- Rent: Unless you own a physical location already that you can run your store from, you’ll need to rent a space. The size of the space and the features it offers, as well as the location you’re selling in will all effect pricing here.
- Licensing and permit fees: Online shops can also require permits and licenses, depending on what they sell. However, it’s more likely that you’re going to need a wider selection of documentation options with a physical startup. You’ll need things like a certificate of occupancy and a seller’s permit.
- Store fixtures: Think about the things you see when you walk into a physical store. It’s not just an empty space, you’ll have to think about shelving, display racks, furniture, cases, and other things that you need to run your store. What about your checkout counters, for instance, and storage areas?
- Initial inventory: With a physical store, you need to be fully stocked with inventory on opening day, as well as enough products to last at least four months. If you don’t know the price of your products, you can use an estimated markup examination to back up the rates you see from your distributors.
- Equipment and tech: More than just the standard store fixtures in your location, equipment and technology allow you to get everything up and running. You might need display monitors for showing advertisements, web access for online interactions, computers, and point of sale systems. There’s also a chance that you need extra tech depending on what you sell.
- Business insurance: All companies should have insurance in place to protect them against various forms of legal issues. However, you will need a higher amount of insurance, and different kinds of coverage if you’re running an online store. Options could include worker’s compensation and property insurance.
- Advertising: The chances are that you’re going to need some help getting people informed about your store. Don’t make the mistake of thinking that you’ll make a fortune through word of mouth alone, or you could risk losing a lot of cash. Think about how you can advertise yourself both online and offline.
- Cleaning and maintenance: Yes, you do need to keep your store clean. This usually means hiring professionals to come in and clean everything for you. There’s the option to pay for services every so often, or you can keep some employees on hand for cleaning if you know that you’re going to need it more often.
- Web hosting and online assets: Even if you’re running an offline store, you can’t rely on that alone for your sales. You’re going to need to develop an online presence with plenty of extra social media pages, email marketing, web hosting, and other expenses to pay for. The more advanced you want your site to be, the more you’ll pay.
- Signage: Your signage in an offline store doesn’t just include the signs on your physical building that display your name. You may also need signs to show people where to go, or tell your customers which products are in each aisle.
- Décor: To make your store look good, you’re going to need to pay for things like painting, shelving, and even attractive flooring for your customers to see. The more attractive your store is, the more professional you’re going to look.
- Professional services: This section refers to a whole host of different costs, ranging from things like paying for your employees to work with you, to having a lawyer support you with various forms of documentation. You may also need to pay for an accountant to handle things like taxes and VAT on your account.
On top of all that, you may be able to think of additional expenses that you need to consider too, such as time clocks, security cameras, office supplies, schedule books, and countless other components. You might even decide to work with a graphic designer on branding and making a new logo.
Operating expenses like electricity, filling your supply chain, and paying employees can all seriously drain your budget initially, at least until you start making a decent profit.
Ecommerce vs Brick and Mortar
Both ecommerce and brick and mortar stores can wrongly be categorised in the same category. Outsiders will see them ‘retail' and they'll both be treated as the same thing. Before we dive deep into brick and mortar and the developments of it, it's always a good start to highlight how it differs from ecommerce.
There are similarities between the two but it's important to understand the key differences between them:
Location – as you are hopefully already aware, an ecommerce store doesn't have a physical location as all items are sold through a virtual shopping cart and goods are remotely shipping to the customer.
A brick and mortar business exists as a physical store or as a range of stores. It is quite rare that you will see one exist without the other these days and it's a good idea to operate both to maximise sales.
Transactions – the traditional means of paying for goods at a brick and mortar store is via card or cash. However, more of them are having to adapt to the changing times and the ‘digital wallet'.
As more people are using Apple and Android Pay to purchase goods, retail stores are having to adapt.
Marketing – when it comes to marketing ecommerce and brick and mortar stores can be very different. Brick and mortar stores will use traditional techniques such as leaflets, television, radio, billboards and newspapers.
On the other hand, ecommerce stores advertise via digital marketing, making use of paid search, social media and email.
Brick and mortar stores haven't caught up in this respect and there are plenty of ways that they can use digital marketing to their advantage, in particular, data collection which we will cover below.
Human interaction – card abandonment rates are typically around 80%, when shoppers are online there isn't anyone on hand to answer a question immediately or alleviate a concern. This can't be said for brick and mortar stores as members of staff can offer their time to customers to answer any questions.
This means you are likely to have a much better conversion rate with a physical store than that of an ecommerce store.
Expenses – when it comes to expenses it can be quite dismissive just to say that brick and mortar stores will cost far more than setting up an ecommerce store, but it's not the entire truth.
When you set up an ecommerce store, a package such as Shopify with some hosting and a domain can be relatively cheap but there are costs that you may not factor into the equation.
Ecommerce expenses can include but are not limited to:
- Customer acquisition
- Loss of customers to competitors
- Web hosting
- Platform package
- Expert help (design, development)
Brick and mortar store expenses can include:
- POS software
- Property Tax
- Inventory warehousing
How Mobile is Driving Brick and Mortar Stores
Invest in your mobile website – a study by mobile software developer SOTI suggested that 92% of shoppers were willing to shop at a brick and mortar store if they offered a mobile shopping experience online.
The idea being that if you can provide them with a good experience while they are on the go then they are likely to visit your shop if they are in the vicinity.
If you are offering a good mobile experience online then customers want to see that replicated in store. The same study from SOTI showed that 94% wanted more mobile-enabled technologies such as interactive kiosks, barcode scanners. Another idea is to ensure that customers can access wi-fi whilst in your store.
Research location-based advertising – it's no surprise that in order to increase sales at your physical store you need to be investing in local advertising. Long gone are the days where you would place an advertisement in the local paper or you would go flyering. Mostly for the fact that these options are time-consuming and also very costly.
Here is a list of locally based advertising strategies that you can try out very quickly:
- Google Adwords – location-based targeting is fantastic in targetting the people that matter to you locally, which we touch on in more detail below
- Yelp – according to expanded ramblings, 82% of people who visit Yelp have the intention of making a purchase and this is a fantastic resource for local businesses
- Foursquare – Foursquare enables you to target audiences based on major factors such as taste preferences, demographics, and visit history. It gives you the ability to reach 150 million unique users across their mobile app as well as the web
- Groupon – the American company do a fantastic job of connecting subscribers with local merchants. The company boasts almost 50 million subscribers
- Living Social – very similar to Groupon but less popular, Living Social does the same job of offering local offers. This can be on a range of different products and is often mistaking for just offering services
Use paid search – paid search is massively underused when it comes to brick and mortar. It's a fantastic tool for raising awareness of your store. As you can add:
- Telephone number
- Opening hours
- Distance from the shop (on mobile)
As well as this you can also get users to set a reminder when they are near your shop so you can generate some footfall.
(Image courtesy of Specialized Digital Marketing)
If done right this can have a massive impact on your physical store. The bonus of location-based AdWords is that you only pay for clicks in your local area, which keeps the cost low. Get started on Google Adwords today.
Turn your shop into a showroom – in June of last year, Shopify published an article to their website about showrooming. What is showrooming you ask? Well, it's this:
Showrooming is when a customer comes to your shop to check out your product but purchases it whilst online at home.
This happens at people want to be able to see and feel the product first and perhaps speak to a human in the process. However, as many items are listed cheaper online they then make the purchase there. So essentially your physical store becomes a showroom for your online store.
Again this comes back to the fact that you should be providing a good experience whilst they are in the store, which includes:
- Wi-fi access – enable free wi-fi in store so that people can access your store for product research. Perhaps you could ask for an email address and/or phone number here so you can keep them in the loop with discounts and offers
- Local shipping – offer free shipping to their house. This means they don't have to be inconvenienced with taking the product away today, especially if its large and it gives them something to look forward to
- Reviews – make reviews easy to see on your website so that they can make an informed decision
Use mobile payment technology – we live in a day and age where human interaction is becoming a thing of the past. Go to your local supermarket and people will be using self-checkouts. Visit your favourite ecommerce website and you'll be met with a live chat representative or even a chatbot.
The same is being said now for bricks and mortar stores and this can be done via mobile payment technology.
Companies such as Scandit have transformed brick-and-mortar retail using mobile barcode, text, object recognition technology and augmented reality for shoppers.
Its technology is already been used by huge retail brands such as Louis Vuitton, Macys and Clarks.
The benefit for your company include:
- More options – customers don't need to bring their products to a till which saves them time on queuing creating a more satisfying shopping experience
- Reduced staff – as a business you will spend less money on employees as now the power is in the customer's hands to perform the transaction
- Equipment expenses – less money will now be spent on checkout hardware such as barcode scanners and tills as customers can just perform the transaction with a smart device
Digital receipts – mobile phones and digital wallets are now becoming more important. Over 250 million people, for example, are using Apple Pay and transactions are increasing every year by 500%.
Therefore, paper receipts are a thing of the past and customers want the ease of receiving a digital receipt. On these receipts as well there is ample opportunity for you to advertise discounts, reward schemes or request feedback from your customer.
Shopify POS is a fantastic tool that enables you to send digital receipts to your customers.
In-store rewards – having in-store exclusive rewards for your customers is a great way to encourage them to visit you. Some ideas for rewards would include:
- Discount if they ‘check in' on Facebook
- In-store only voucher code
- Prize draw
- Concierge services such as free home delivery
How to Stand Out With Your Brick and Mortar Store
As well as embracing mobile technology there are some other fantastic ways that you can help your physical store stand out from the rest, these include:
- Invite customers to events – Eventbrite ran a great article on how t-shirt and tote bag company Bad Pickle Tees used their website to bring people to their events. They integrated their Eventbrite listing on to their website so anyone visiting a product page would be able to see the dates of what events they were attending a book a place on to it. Shoppers may want to see your product first and an event is a fantastic way of doing that. Additionally, they will need to enter their email address and phone number in order to attend the event so you can market to them in future.
- Click and collect – according to Econsultancy, 44% are likely to purchase a product if there are allowed to collect it from the store. This has a two benefit as the customer is able to pick it up at their own conveinence. Most deliveries tend to come during conventional working hours and the recipient may not be home. Also for the business, you can have the opportunity to speak personally to the customer and upsell or offer them other items.
- Exclusive in-store deals – most people have become accustomed to finding cheaper deals online for products as opposed to in-store. However, offering a cheaper price in-store isn't such a bad idea. You aren't spending money on shipping or for the employee to pack and deliver that product so can afford to offer a better deal at your physical store. Send out an email with an exclusive in-store deal. If you have the technical know how you can create a ‘Store locator' so people can find the closest store to them.
- Sync your online and offline sales – to slightly contradict ourselves here it can also be a good idea to sync the prices that you do see across your online and offline stores. If someone, for example, sees a price online and you won't price match that in store then you can run it to a problem and potentially harm that customer relationship. Creating consistency and openness to your business is vital.
- Create an in-store experience – the expectation on retail stores has increased exponentially in recent years and stores aren't just a physical space to store all your inventory.
- Shoppers into fans – it can be easy just to send a one size fits all email campaign, or offer a bog standard loyalty card but think about ways you a personalise for the customer. Use your CRM system to log their interests and target them based on this.
- Guest speakers – not everything has to be a flash sale to drive traffic. Are there authors, local celebrities or guest speakers in your niche that can visit your store? Collaborating with an author for a book signing based on your store's target market could be a great start
- Pop-ups – the pop-up shop industry has grown to over $10 million. They have created such a buzz as they are seen as being very exclusive. You could try releasing a new set of products and only releasing them at a pop-up to gather interest
- Reward sales staff – the biggest benefit of a brick and mortar store over an ecommerce store is human interaction. Your physical store allows you to put faces to the brand you are creating. Millenialls are interested in the story behind your company and want to invest themselves in it and the products. Therefore, its vital that your staff are briefed on how you got to where you are and what your mission is. In time you can incentivise your sales staff with commissions and vouchers based on good performance.
- Tech is your friend – customers are becoming more tech-savvy with every passing year, so ensuring you are at the forefront of retail technology is very important. As we have touched on earlier these can include but are not limited to:
- Digital screens – add digital screens within your shop. This can display the latest offers, allow customers to browse products, check stock availability or ask for assistance.
- Discounts via smartphones – collect phone numbers when customers make purchases and send them discounts and coupons to their smartphones
- Point of sale – use iPad POS so that your staff can bring the till to the customer. Therefore they can purchase the product without queuing and receive a digital receipt whilst they are there.
- Beacons – a beacon is a small, low-powered transmitter equipped with Bluetooth that delivers messages based on person proximity. If your store has an app you can target bluetooth enabled smartphones by sending them marketing messages. According to beaconstac, 80-90% of Android users only use an app once before uninstalling. With this technology, you can target customers to reuse the app and take advantage of your offers.
How Point of Sale (POS) is Revolutionising Brick and Mortar Stores
If you are looking for a point of sale option for your brick and mortar store then it can be very overwhelming. There are hundreds of companies now who are all offering fantastic features.
Below are 5 features that we feel matter the most, which in turn should help you decide which POS system you should choose.
1. Product lookup
A good POS system should allow you to have a short command which will bring up your most popular products.
This will quicken the process for both the customer and the staff. It will also increase job satisfaction for your employees as it makes their job so much easier. A feature like this can be handled by Vend.
2. Multiple payment methods
As we've touched on earlier, allowing your customers to pay via many different means is vitally important. Find a POS system that allows mobile payments as well as being able to split payment via different methods.
3. Bulk product imports
Having a POS system that allows you to upload multiple products in the first instance is a big dealbreaker. If you are a business with a lot of products then manually uploading each one individually can be a very tedious business.
4. Searchable customer information
Being able to quickly search for customer information if they come into the store or contact you is incredibly important for a number of reasons including:
- History – this allows your customers to return items if they have lost the receipt, or for your benefit to target them based on product purchases.
- Properties – you may want to edit your customer information such as a change of name, number or address
- Loyalty – you can quickly add a customer to your loyalty program so that they are sent VIP offers
Reporting is essential in determining the success of your business, so having a POS system that supplies the following reports is vital:
- Dashboard – if you are running a brick and mortar and an ecommerce store time is precious, so having a dashboard which you can see all the important statistics is vital
- Product – make decisions on your products by seeing which are selling well and which aren't
- Employee – which of your employees is performing well and who isn't? Reward hard work to increase job satisfaction
- Customer – see who are your best customers and who haven't visited for a while to inform your marketing messages
- Custom – find a POS system that enables you to create your own custom reports
Pros of Brick and Mortar Stores
Instantaneous – purchasing a product in the store gives a customer instant gratification. If you are purchasing from an ecommerce store then you have to rely on delivery, which invariably can come from a third party that isn't directly representing the ecommerce store
Try before you buy – you can't replace the fact that you can try on something before you buy it. Customers these days are expecting free returns online and may even buy the same product in several sizes with the intention of returning at least one.
This can eat into your bottom line as an ecommerce store as you will have to pay for the initial shipping of the product.
Social occasion – shopping in an ecommerce store can be a lonely experience and it can't compete with the social aspect that a brick and mortar store offers with friends.
Customer experience: Customers want to feel like they’re getting a unique experience whenever they shop with a brand. Online retailers can struggle to deliver this, even with a unique website or app. When you have a link to your customers in person, you can create more memorable interactions. You could even create apps for mobile devices that generate vouchers for people who visit you in person.
Relationship building – when shopping online most of (if any) your communications are done through live chat, email or social media which doesn't allow you to connect directly with a human.
Having a face and a story to tell can hell customers buy into your brand which can convert them into fans.
More sales – it's no surprise but having multiple channels that customers can purchase products means that you will increase sales. You may find that some people are reluctant to buy online and they may be searching for a brick and mortar store.
No shipping – shipping products is an expensive business. If you don't have your own delivery team then the mercy of your products lies in the hands of a third party courier. Not only can this be quite expensive but this doesn't factor in the returns and the broken or missing products that need to be redelivered
Security – in-store transactions are a lot more secure than ecommerce stores. Hackers and suspicious activity is, unfortunately, a common thing in the ecommerce world. If there is a breach of security then this may deter customers from returning, whereas this is far less likely to happen with a physical store.
Customers feel more empowered: In a physical store, your customers hold all the power. While that might seem true of an ecommerce business too, online stores don’t allow customers to ask sales teams for assistance in a matter of seconds. Your online store also doesn’t allow your potential customers to pick up an item and examine it.
Easier returns: If your customer has any issues with a product you’re retailing, they can simply return it to your brick-and-mortar presence. This cuts down the time of the return and refund process, so you can manage your books faster.
Cons of Brick and Mortar Store
Employees – yes that's right you will have to pay people to operate your store. All sorts of considerations including holiday and sickness pay as well as ensuring job satisfaction need to come into it
Overheads – the overheads of running a brick and mortar initially are much more than running an ecommerce store. You need to ensure you have enough capital. Commonly a brick and mortar store follows the success of an ecommerce store as it is very costly when you consider warehouse costs, rent, employees, hardware amongst others
Time constraints – the amount of time it takes you to launch a brick and mortar store as well as successfully run it can be very time-consuming. This means it might deviate your attention away from your ecommerce store
Store hours – your ecommerce store is essentially a 24/7 365 days a year shop window. If you have a brick and mortar store then you have opening hour constraints, as well as deciding if 7 days a week is a viable business option for you
Travel – of course, if people want to visit your store then they are going to have to travel to you. You can overcome this with a pop-up store and perhaps doing a tour of a certain part of the country.
Limited scalability: If your traditional business starts to grow at an incredible pace, and you generate more total retail sales, you might decide that you want to grow and open more locations. Unfortunately, that means tracking down new real estate, employees, and figuring out where to open up shop. Online, you can just expand delivery areas.
Limited reach: With a traditional brick and mortar store, you’re limited to delivering the best experiences to the people who are closer to your physical destination. That can make it harder to establish a wider presence for your entire city or country.
Is a Brick & Mortar Store Right for You?
As we mentioned earlier the initial set up costs for running a brick and mortar store are expensive. If you have already built a brand online and have the money to spare then go for it!
It's also vitally important in 2019 that you are at the forefront of technology. So getting involved with and embracing POS, beacons, digital wallets and digital marketing is essential.
If you haven't started selling at all then we would suggest dipping your toe in the water with ecommerce first. Setting up a brick and mortar store is costly.
If after some time you start to build up some money then sample starting a pop-up store at an event. If this becomes a success then you can start looking at a permanent store.
Brick and mortar stores aren't the traditional vehicle that they used to be. The way millennials are interacting with them and their expectation levels of digital screens, personalized shopping experiences and mobile technology has moved the goalposts.
Brick and mortar stores can act as a great accompaniment to your ecommerce store which can in turn reciprocally benefit both.
Have you opened up a brick and mortar store? Looking to move into pop-up stores? Leave a comment below and let's get the conversation started.