Just like the evolution of humankind, humans have witnessed an evolution in many other things. One prime example of this concept is the changes in business models. When humankind started learning ways of doing business/trading activities, they started with the barter system. That said, people used to trade commodities with commodities.
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Evolution of Business Models
Things started getting better, and with the evolution of the currency concept, humans started trading things in open markets. Things got better, and mankind built “Brick-and-mortar” stores. The history of brick and mortar goes back to 7500 BCE, when merchants used to sell their products in markets in different villages.
During the late 18th century, the door-to-door selling business model followed the traditional brick-and-mortar business model. Door-to-door selling gained prominence until it saw its demise in the early 1980s. In 2010, there were only 7000 door-to-door salespersons in the United States.
The latest addition to business approaches/models is online selling (eCommerce), which started in the 1970s but gained prominence in the 1990s. As of now, it is one of the most accepted and practiced business models all over the globe.
What is Brick and Mortar?
Brick and mortar is one of the oldest and still the most common business models. It is a business model where sellers offer their products or services in a store, office, franchise, shop, or any similar type of physical structure. Common examples include shopping malls, brand franchises, banks, offices, etc.
How Does Brick and Mortar Business Model Works?
Before the prominence of online selling, brick and mortar was the most common business model. However, things have changed drastically, and businesses are now focusing on a mixed-approach. That said, many companies are now focusing on online selling as well as physical stores to get a better reach.
Brick and mortar is still people’s favorite because it offers a lot of irreplaceable benefits. For example, it is easier to gain customer’s trust with a brick and mortar approach. A huge proportion of people still prefer shopping in physical stores. They prefer testing/checking a product before buying. It is safe to say that brick and mortar builds trust between the seller and the buyer.
Advantages of Brick and Mortar Business
There is absolutely no doubt that a massive percentage of people still prefer brick and mortar shopping, and why shouldn’t they? It offers them “trust,” and here are some top advantages of brick and mortar business.
People love going to stores, franchises, shopping malls, etc., because they can feel or touch the products there. They can check the product quality easily, and this builds a physical connection between seller and buyer. Brick and mortar stores still have a lower purchase return ratio than online stores. Most importantly, you can try or test the product before buying.
Brick and mortar business also brings better convenience to the buyers. With online shopping, your product may arrive in 2-4 days or even more than that. However, if you are shopping in a physical store, you will get your product instantly. Besides, a lot of people feel insecure while using their debit/credit cards for online shopping.
Brick and mortar allows people to get better advice from in-store experts or salesmen. But, when you do online shopping, you have to rely on product reviews, which can be fake. On the contrary, you can get better and true guidance in a physical store, and you can always check the product quality for yourself.
Well, people don’t only consider shopping as “purchasing things” because they see it as a fun opportunity. People love to socialize, and online shopping cannot provide this luxury. Moreover, physical stores offer free samples very often, and you don’t get them on online platforms.
Disadvantages of Brick and Mortar Business
Just like its perks, brick and mortar business has some drawbacks as well, and here are a few of them:
Well, this is the first major drawback of brick and mortar business as physical stores need commercial space. Unfortunately, leasing a commercial space is not cheap by any means. Moreover, leases are binding legal contracts that generally last for years. So, if your business fails, you still have to pay your lease. Besides, rents definitely increase overall costs.
Complete guidance from salesmen or experts may sound enticing for buyers, but not for sellers. Either you are giving a service or have a physical store, you will have to hire people to assist you. Therefore, you will have to pay them as well. The payroll may include basic salary, medical and dental allowances, etc., and these costs can be very high.
Startup and Overhead Costs
Brick and mortar store/business requires huge capital to start with. For instance, if you want to purchase a franchise, you may have to pay hundreds and thousands of dollars. Moreover, you will also be paying property taxes, business insurance, utilities, and other sizeable costs. Also, you have to bear all of this even before earning any profit. A huge risk, isn’t it?
A brick and mortar store has a limited reach. That said, these stores can only reach out to a smaller audience unless these stores are major industry players/contributors. Moreover, if you want to establish yourself at a national or global level, you will need “tonnes of money.”
Some Major Examples of Successful Brick and Mortar Businesses
Walmart needs no introduction as it is an American household now. It is one of the largest chains of retail stores, including grocery stores, hypermarkets, and discount department stores. Walmart has 11,510 stores and clubs in 27 different countries (till October 31, 2020). Moreover, Walmart has 2.2 million employees in the United States and other countries. In terms of revenue, Walmart is the world’s biggest profitable retailer.
Costco is another American giant in the retail industry. It is no surprise that Costco stands as the second-largest retailer across the globe, standing behind Walmart. As of December 31, 2019, Costco has 786 warehouses, where 546 are in the United States, and the remaining are located in several other countries. As of 2019, the company has 254,000 employees.
Challenges Faced by Brick and Mortar Business
Brick and mortar is facing immense challenges, especially with the advent of eCommerce. Here are some major challenges brick and mortar facing lately:
High Competition With Ecommerce/Online Business
Ecommerce is the biggest competitor of the Brick and Mortar approach. Ecommerce is giving real tough time because of its versatility. That said, E-commerce possesses a bigger portfolio when it comes to product diversity.
Ecommerce stores also give a greater discount because of low overhead costs. Brick and mortar stores still have to worry about rents, employee costs, maintenance, and property taxes.
Customer Satisfaction and Inventory Management
Ecommerce has changed the shopping trends with its diversity. Customers now prefer variety in everything, and if they don’t find their desired product in a physical store, they simply order it from any eCommerce store. Physical stores that try to keep extra inventory also bear huge costs as well.
One of the most unwanted things from customers’ point of view is surveillance in brick and mortar stores. Although a lot of people are unaware of the fact that online platforms save/use their personal information, people still have concerns over privacy issues in physical stores. Surveillance cameras may get bad guys, but good guys don’t like them too.