Are Brick and Mortar Businesses Becoming Obsolete?

Table of Contents

• What is a Brick and Mortar Business?
• The Rise of Ecommerce
• Advantages Brick and Mortar Stores Still Offer
• Disadvantages of Brick and Mortar Model Today
• Strategies for Brick and Mortars to Compete
• Examples of Successful Brick and Mortars
• The Future of Physical Stores

Brick and mortar businesses, defined as physical retail locations and stores compared to online ecommerce shops, have faced increasing competition from online retailers over the past decade. Many analysts predicted brick and mortar's inevitable demise as shopping shifts more rapidly to digital channels, especially after the COVID-19 pandemic.

However, despite the meteoric rise of giants like Amazon and continual consumer migration to ecommerce, physical retail stores still retain distinct advantages that will ensure brick and mortar businesses never disappear entirely. As models adapt, albeit with store closures, the in-person shopping experience looks to provide value for certain categories and hybrid approaches.

What is a Brick and Mortar Business?

To start this discussion, it is important to clearly define what constitutes a brick and mortar business:

• A brick and mortar business is one that operates out of a physical building and storefront location as their main retail distribution method. Typically accessible to consumer walk-in traffic from off the street.
  • Examples of traditional brick and mortar retail stores:
    • Department stores like Macy's, Nordstrom, Sears
    • Small mom & pop local shops
    • Auto dealerships
    • Clothing boutiques
    • Book stores
    • Hardware stores

The term "brick and mortar" refers to the tangible materials these stores are physically made of, contrasted with online ecommerce businesses that have no physical retail presence. Brick and mortar businesses have historically been the foundation of consumer retail for the past century.

Today, brick and mortar retail also may be referred to more broadly as "physical retail" or "in-person shopping," encompassing various formats such as:

• Pop-up shops
• Trade show booths
• Kiosks
• Mobile retail vans
• Malls and shopping centers

No matter the particular retail format, the unifying aspect is the ability for consumers to directly visit, browse, and make purchases on-site. Contrasted to ecommerce where browsing and ordering occurs remotely through a digital device.

Understanding exactly what brick and mortar means provides useful context when evaluating the competitive landscape today between physical and online retail environments. While the rise of ecommerce and decline of certain brick and mortar chains seems to suggest a decreasing relevance, the value of tangible in-person shopping still remains for specific contexts.

The Rise of Ecommerce

Over the past decade since approximately 2010, online ecommerce has taken a steadily increasing share of overall retail sales. The COVID-19 pandemic from 2020-2021 then hugely accelerated adoption and penetration of shopping from home. Some key statistics:

• Global retail ecommerce sales grew from $1.3 trillion in 2014 to over $5 trillion projected in 2022
  • In the US ecommerce leap from $304 billion in 2014 to over $1 trillion estimated in 2022
• During pandemic lockdowns, ecommerce sales' share of overall US retail ballooned from 11% to over 19%
• Current US ecommerce penetration floats around 13-15% indicating much room for continued growth

Certain categories have seen online shopping claim nearly 50% or more of total sales:

• Books - Amazon captures over 80%+ of book sales today
• Office supplies & electronics - 63% online
• Apparel and accessories - Roughly 35%, up from 20% in 2019

However, other categories remain primarily purchased in-store:

• Auto parts - 15% online penetration
• Groceries - Despite convenience of Instacart, still just 5% online
• Furniture & home furnishings - Below 20% online

This variation shows customer behavior differs whether shopping online vs in-person depending on the product type. Factors like being able to touch, feel, try on, are still drivers toward physical stores.

Yet overall, consumers clearly have shifted notably toward online shopping for convenience, better prices/options, and home delivery speed. So brick and mortar stores must adapt to this new competitive digital environment.

Advantages Brick and Mortar Stores Still Offer

Despite the gloom and doom predictions, physical retail stores actually retain meaningful advantages - when leveraged correctly. Benefits unique to brick and mortar include:

In-Person Product Evaluation

• Ability to personally see, touch, and try products in real life
  • Test makeup, fragrances clothes for fit
  • Assess produce freshness grocery shopping
  • Judge furniture quality and comfort
• Virtual try-on tech improving but cannot fully replicate physical inspection
• Consumer surveys show many people still prefer evaluating certain products in-store

Immediate Ownership Joy

• Purchase something and walk out of store with it instantly in-hand
  • Avoid waiting days or weeks for ecommerce delivery
  • Enjoyment of instant gratification

Store Layouts that Inspire Discovery

• Tactical placement of products promotes impulse browsing
  • Endcaps, featured displays and aisles
  • Promotional signage
  • Sensory elements like music, lighting and scents

Personalized and Knowledgeable Assistance

• Ability to ask staff questions in real-time
  • Tailored outfit recommendations
  • Technical guidance on electronics
  • Decor ideas from home goods experts

Entertainment Factor

• For many demographics, shopping excursions offer recreation
  • Mall walking health activities
  • Trying on makeup and clothes can be fun bonding
  • Coffee shops and amenities enhance experience
• Turn boring errand into enjoyable journey

While online shopping prioritizes speed + efficiency in transactions, physical stores when designed effectively provide a human connection and sensorial experience. This capacity to inspire, surprise and delight patrons endures as an advantage over ecommerce - reflected in consumer behavior data showing moderated attrition of in-person retail across categories.

Disadvantages of Brick and Mortar Model Today

At the same time, traditional physical retail stores now face sizable disadvantages in today's omni-channel retail environment split between digital and in-person presence.CORE CHALLENGES:

Higher Fixed Costs

• Rent, local taxes, utilities, and payroll are extremely expensive
  • Especially evident after pandemic losses
• Hard to stay profitable compared with low-overhead ecommerce operations

Difficulty Competing on Convenience + Price Efficiency

• Online players dominate on factors like:
  • Website/app stickiness
  • Fulfillment and shipping speed
  • Dynamic real-time pricing
  • Third-party marketplace optionality
• Very hard for single-location stores to match

Less Inventory Variety + Breadth

• Square footage limits total SKUs able to be displayed
• Restricted to mostly popular and mass appeal items
  • Niche products better discovered online
• Mainly an issue for generalists rather than specialists

Location + Operating Hour Limitations

• Only easily accessible to local geographic shoppers
  • Not 24/7 availability like ecommerce sites
• Weather, neighborhood decline can also impact store traffic

Brick and mortar businesses must either firmly lean into areas where the physical experience shines comparatively...or find creative ways to compete through hybrid channels.

Strategies for Brick and Mortars to Compete

We will cover examples later of retailers finding success despite, and even because of, their physical stores. But at a high-level brick and mortar businesses can employ tactics like:

• Offer Premium In-Store Experiences
  • Engaging activities, events, workshops
  • Reframe store from transactional to recreational
• Provide High-Touch Customization
  • On-site tailoring, custom printing, individual styling
• Strategically Price Match with Online
  • Discount items already lower priced online
  • Be willing to sacrifice margin for customer acquisition
• Enable Buy Online Pick-Up In Store
  • Leverage physical proximity for speedy fulfillment
  • Get online customers in door to cross-sell
• Utilize Stores as Micro Distribution Hubs
  • Ship online orders from local branches
  • Enable faster delivery at lower cost

The above strategies showcase ways for brick and mortar players of all sizes to bypass the inherent constraints around scalability, convenience and pricing. While volume and simplicity tend to favor pure ecommerce models, physical retail if carefully blended with digital tools can return to strength in today's market.

But this requires first understanding, protecting and optimizing the sensory human elements innate to in-person shopping.

Examples of Successful Brick and Mortars

Proof many brick and mortar stores can still thrive is visible across categories embracing the right hybrid strategies:

1. Showfields - "The Most Interesting Store in the World"

• Experiential NYC concept store
• Features high-production themed environments
• Rotates emerging DTC ecommerce brands every quarter
• Integrates layered entertainment like classes, photo ops
  • Provides testing ground for new products before broader retail distribution
• Showcases power of physical retail for customer acquisition

2. Leesa - "Our stores make the online mattress shopping experience better"

• Digitally native mattress brand with 20 US stores
• Showrooms provide ability to personally test out mattresses
• Digitally native mattress brand with 20 US showrooms
• Physical locations let customers try mattresses in-person
  • Over 50% of showroom visitors end up purchasing
• Drives high conversion relative to other sales channels
• CEO notes showrooms are their most efficient acquisition method
  • Higher avg order value than online-only buyers
• Enable seamless integration between digital and physical

3. Untuckit - Apparel chain using stores as marketing

• Originally DTC ecommerce men’s casual shirt brand
• Later opened 100 US physical stores
• Found in-store customers spent 4x more over their lifetime
  • Dropped catalogs to reinvest budget in new locations instead
• Stores experience high repeat traffic and frequency
• In-person shopping inspires further online orders

4. Neighborhood Goods - "Modern department store" model

• Dallas-based concept housing multiple curated brands
• Showcases both popular ecommerce brands and local products
• Built hi-tech checkout + POS system
• Acts as testing ground for new products before wider release
• Highlights future symbiotic role between digital and physical

The above retailers illustrate that when online interfaces intertwine with tangible brick and mortar presence, leverage across both channels expands according to Capgemini research:

Channel	% Sales Influence
Physical Stores	61%
Desktop Site	15%
Mobile App	12%
Other	12%

So even as transactions migrate online, traditional stores remain the strongest driver of sales growth - their impact bolstered by unified retail ecosystem.

The Future of Physical Stores

The retail apocalypse seen over the past decade will continue evolving with more nuance this decade. Reports estimate:

• Over 75,000+ store closings still coming by 2026
• Many malls and existing chains will vanish
• In parallel over 150 million sq feet of new retail construction underway
  • Representing still nearly $140 billion investment

This apparent contradiction suggests consolidation but also emergence of uniquely positioned concepts. Retail categories and store positioning best aligned for ongoing relevance seem to be:

Inevitable Death:

• Mid-market apparel chains already losing ground
• Tech/office supply big box giants
• CDs, DVDs, books

Uncertain Path:

• Department store bargain basements
• Mainstream grocery chains

Strong Outlook:

• Luxury apparel brands playing up exclusivity
• Smaller borough food halls + alcohol
• Emerging hybrid online/offline models

So rather than a blanket doom, nuance exists - as most evident in retailers actively bridge ecommerce with physical through initiatives like:

• Order online, pick up in store
• Virtual try-on connected to locations
• Consistent branding and pricing
• Referrals across channels

With carefully built symbiotic digital/physical infrastructure, stores can become core assets exacerbating traction online and vice versa.

Conclusion

In conclusion, brick and mortar stores retain important advantages like personalized service, immediate ownership, and experiential joy that will ensure physical retail remains an essential component of a retailer's strategy despite ecommerce's inroads and ongoing changes in consumer behavior.

As internet-first direct brands open their own stores and interactions between online and offline shopping intensify, expectations are that the line between physical and digital retail will only continue blurring.

Many industry experts project over 80% of purchases will still involve some brick and mortar element by the end of the decade - whether through try-on, pick-up, showrooming, or an integrated BMI + ecommerce ecosystem.

The retailers that consistently link tangible in-person moments to digital convenience + efficiency will drive the future of phygital (blending physical + digital) retail. This leaves much room for traditional brick and mortar storefronts of all sizes to persist by highlighting experiential strengths while seamlessly coordinating with virtual store counterparts.

So rather than facing outright extinction...adaptation and imagination present strong likelihood brick and mortar businesses evolving tactfully can thrive.