Brick and Mortar

Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Brick and Mortar Meaning

Brick andmortar businesses offer goods and services through physical outlets. The term is used to demarcate physical stores from e-commerce outlets like Amazon. Customers consider brick and mortar businesses more credible.

It is the traditional way of buying or selling goods. When it comes to the relationship between buyers and sellers, brick-and-mortar outlets still do better than e-commerce. Characteristically, a brick-and-mortar business has a high cost of setting up. Additionally, operating expensesOperating ExpensesOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more are also higher than other business models.

Key Takeaways

  • Brick and mortar is an ancient business model where goods and services are sold to customers from a physical outlet.
  • The physical stores have a footfall of local buyers. These customers can personally see, touch, and feel the products.
  • There can be different forms of brick-and-mortar outlets: supermarkets, grocery stores, convenience stores, departmental stores, superstores, discount stores, and specialty stores.
  • Due to large-scale storage problems, they offer a limited range of products.

Brick and Mortar

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How does Brick Mortar Work?

The term brick and mortar store are used often. These stores operate from a building. Think of that age-old grocery store operating much before e-commerce started delivering stuff at the doorstep.

This business model traces all the way back to 800 BC when Greek merchants traded at the city center. From 1700 to the 1800s, many “mom and pop shops” ran across the US. VendorsVendorsA vendor refers to an individual or an entity that sells products and services to businesses or consumers. It receives payments in exchange for making items available to end-users. They constitute an integral part of the supply chain management for providing raw materials to manufacturers and finished goods to customers.read more also sold their produce at roadside stalls. The industry witnessed tremendous growth in the mid-1800s and the early 1900s. That is when the department stores came into existence.

Characteristically, in a physical outlet, customers can interact with the seller face to face, clarify doubts, and try out products before purchasing them. As a result, recurring customers develop a relationship with the outlet. Owing to familiarity and credit history, the stores even allow purchases on credit. Unfortunately, physical stores suffered losses with the advent of the digital world. Now most customers shop online even for their necessities. However, traditional outlets will never disappear.

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Types of Brick and Mortar

Now, a physical store can be set up in any of the following formats.

  1. Supermarkets and Grocery Stores: This retail outlet sells household goods, food products, and consumables.
  2. Convenience Stores: For daily necessities, convenience stores sell eggs, milk, fuel, etc.
  3. Department Stores: These are multi-utility stores that offer a variety of products under one roof—electronics, appliances, clothing, jewelry, home décor, and accessories.
  4. Discount Stores: These outlets offer the products at a very low price without compromising on quality.
  5. Specialty Stores: These outlets offer niche products—for example, a dog food store.
  6. Superstores: A superstore is a blend of all the above,  available at a single location.

Brick and Mortar Store Examples

#1 – Costco Wholesale

The most renowned US multinational companyMultinational CompanyA multinational company (MNC) is defined as a business entity that operates in its country of origin and also has a branch abroad. The headquarter usually remains in one country, controlling and coordinating all the international branches. read more, Costco Wholesale Corporation, has a chain of big-box retail stores worldwide. The chain sells appliances, electronics, furniture, computers, outdoor living, jewelry, organic food, etc. It was designated as the world’s fifth-largest retail chain in 2020.

#2 – AT&T Wireless

The US telecommunications company AT&T Wireless provides several services such as entertainment, account management, and parental controls. In addition, the company has many retail stores assisting customers personally.

Brick and Mortar Marketing

Whether online or offline, every business requires marketing strategies to draw the attention of prospective buyers. Next, the product quality and the shopping experience determine whether the customer will shop again.  A brick-and-mortar store has a limited target marketTarget MarketA target market consists of different groups of individuals, households, and organizations towards which a company aims to offer its products and services.read more since it is mainly explored by local buyers. The best marketing strategy for such a business is to ensure high levels of customer satisfaction.

Alternatively, physical stores can advertise on local media, like newspapers, radio, and local events. In addition, the stores can send discount coupons, send emails, and call potential clients.

Recently, many physical stores have added ecommerce features to their business. They are resorting to social media marketing, targeting prospective buyers on Instagram, Facebook, and similar platforms.

Advantages

The physical stores have a legacy. It is still the widely accepted business model throughout the world. Following are its advantages:

  1. Personalized Experience: The customers can easily view, feel and select products in person before making a decision. Physical stores are an experience, each with its own unique ambiance. These factors especially benefit products aimed at children.
  2. Credibility: Customers can physically visit a store in case of grievances. As a result, physical stores have more credibility over e-commerce and other business models.
  3. Customer Satisfaction: Many customers still prefer nearby stores for daily utilities. Customers derive satisfaction out of the instant purchase, by picking the product personally rather than ordering it online.
  4. Word of Mouth Publicity: if the customers like a product or service, they recommend it to friends and family.

Disadvantages

The disadvantages of operating a physical store are as follows:

  1. Colossal Investment: It is an expensive affair since setting up a brick-and-mortar store requires investing in infrastructureInfrastructureInfrastructure refers to fundamental physical and technological frameworks that a region or industry establishes for its economy to function properly.read more.  
  2. Significant Operating Cost:  Operating a physical store requires various regular and recurring expenses like salary, electricity, advertisement, inventory, and property tax.
  3. Restricted Customer Base: Because of the geographical limitation, a physical outlet can capture only target customers from its vicinity, shrinking its market reach.
  4. Ecommerce Trend: Customers prefer saving time by opting for online purchases.  It is hard for traditional physical stores to compete with the convenience offered by e-commerce.
  5. Open Hours Restraint: The physical stores have fixed timings for opening and closing every day. Also, many such outlets have a day off every week. Therefore, unlike the online shopping platforms, customers cannot shop at any hour of the day.
  6. High Product Prices: Since the fixed costsFixed CostsFixed Cost refers to the cost or expense that is not affected by any decrease or increase in the number of units produced or sold over a short-term horizon. It is the type of cost which is not dependent on the business activity.read more associated with such businesses are high, the prices of the products sold are higher than those offered by an e-commerce store.
  7. Limited Variety: Since most physical stores have large-scale storage problems, they offer a limited range of products.

Brick and Mortar vs. Ecommerce

Historically, physical retail stores were the only business model known to the consumers. However, with the evolution of the digital era, e-commerce has rapidly emerged as a more convenient way of shopping. E-commerce businesses sell their products and services online using shopping websites and social networking sites.

Electronic Commerce Applications

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Compared to physical stores, e-commerce has a significantly larger clientele, expanding across a country and beyond. Setting up an e-commerce enterprise costs less.

The brick-and-mortar stores predominantly prefer traditional payment methods like cash and card payments. In contrast, ecommerce businesses primarily accept payment through online transfers and cash on delivery. E-commerce enterprises resolve issues by employing robust customer relationship systems to interact with and assist online customers. They offer SMS, emails, phone calls, and chatbot support.

Frequently Asked Questions (FAQs)

What are Brick and Mortar?

It is the traditional business model where a company has a physical store. Customers can physically examine the products before buying them. Some of the most common examples of such businesses are shopping malls, fuel and gas stations, and barbershops.

Will brick and mortar stores survive?

Even decades after the e-commerce boom, customers still lookout for a personal experience. Physical business models are indispensable when it comes to fine dining, spas, hotels, automobile showrooms, etc. But with the changing consumer expectations and preferences, even physical outlets now require an online presence.

Is Amazon a brick-and-mortar company?

Amazon entered the brick-and-mortar race in 2015 with Amazon Books, a physical book outlet in Seattle. In 2017, the company took over Whole Foods and now owns 460 retail stores across the US, Britain, and Canada. On February 25, 2020, Amazon Go was launched as the first cashier-less physical grocery store.

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