As a new business owner, you’ll have a lot of difficult decisions to make. From staffing and product lines to marketing and accounting, the directions you choose to take your company in could drastically alter the ways in which it evolves over time. But in this day and age, one of the most difficult decisions new business owners face is whether to open a brick-and-mortar location.
If the terminology is new to you, ‘brick-and-mortar’ simply means physical company premises that your customers and clients can visit. Businesses from a huge range of industries may operate brick-and-mortar locations – from accountancy firms and cafés to retail shops and charities.
At first glance, the decision to set up a brick-and-mortar location might seem like a no-brainer. But they can be a huge drain on your finances, and an online shift in many consumer markets can sometimes be a challenge when trying to attract footfall.
To help you decide whether a brick-and-mortar location is right for your business, we’ve written this detailed guide outlining both the arguments for and against them – as well as some of the more creative ways in which you can utilise your existing brick-and-mortar space.
Why companies are turning away from the brick-and-mortar model?
When asked why their company would consider shutting down an existing brick-and-mortar location (or decline to set up a new one), most business owners would cite a huge surge in e-commerce as the primary culprit.
According to the Pew Research Centre, 80% of individuals now identify as online shoppers. And as those shoppers continue to make more and more of their purchases online, many studies indicate they are abandoning brick-and-mortar retail.
The latest Retail Performance Plus Year over Year Report conducted by RetailNext found there’d been a 7.5% drop in foot traffic in brick-and-mortar stores between December 2016 and December 2017 – equating to a 5.5% decline in overall sales. Why?
Above all else, convenience. As a customer, online shopping is incredibly attractive because you aren’t bound by closing hours or regional location. You don’t need to worry about finding a babysitter so you can head out for a day of shopping, and you don’t need to leave your desk. You can purchase a weekly food shop while at work, take care of your Christmas shopping on the couch and find exactly what you’re looking for without having to rummage through a giant retail store for an hour.
Beyond the convenience factor, researchers have found many shoppers are also opting to go online because of slow logistical processes taking place in brick-and-mortar stores. For example, one study from Synqera found 73% of consumers reported checkout waiting times as the number one gripe when shopping at brick-and-mortar locations.
Above all else, you’ve got to bear overheads in mind. By opening up a brick-and-mortar location, you may also be opening your business up to rental fees, excessive utility costs, additional insurance plans and high local authority business rates.
If you’re operating in an industry that’s being adversely affected by the rise of e-commerce, can you really afford to pay all of those overheads?
Why do some companies still choose to go brick-and-mortar?
Having listed all the reasons some companies are choosing not to open brick-and-mortar locations, it may sound like opening physical premises for your company is a complete and utter waste of time and money. But as always, the answer is not that simple – and to be honest, the brick-and-mortar route may actually be a smart move for your business.
Despite the fact that four out of five shoppers claim to make purchases online, researchers at Syngera also found that more than two-thirds of shoppers still prefer to shop at traditional, brick-and-mortar stores. Believe it or not, in the United States brick-and-mortar is even on the rise.
According to the National Retail Federation, the number of physical retail stores actually grew by 4,000 in 2017. That means that for every American company that closed a store, 2.7 companies opened a new one. Why?
One reason shoppers are getting fed up with online shops is because the thriving e-commerce industry still needs to work out a few kinks. Because of hyperactivity across the global shipping industry in 2017, multinational delivery companies like UPS can no longer cope. Meanwhile, the hassle of returning online items by post is more than some consumers can bear.
Meanwhile, brick-and-mortar locations continue to offer customers and clients something they don’t find online: good customer service. Cool websites might include chat functions or contact details to phone a customer helpline, but sometimes customers want to speak with a real human, face-to-face. They want knowledgeable staff on-hand to answer questions in real-time.
Better yet, brick-and-mortar stores offer customers a wide range of opportunities to engage in shopping experiences. By putting on a class, in-store event, themed shopping night or product demonstrations, you can add value to your brick-and-mortar store that even the best e-commerce sites cannot compete with.
Another reason companies still choose to go brick-and-mortar is because customers respond well to curated collections. Whilst big-box retailers like Asda and Tesco have started to take a hit from encroaching online competition like Amazon, big brands are finding brick-and-mortar success by downsizing and offering customers a more exclusive in-store experience.
One bright example is fashion retailer Nordstrom’s decision to launch a new concept called Nordstrom Local in 2017. Rather than carrying full inventory, the new Nordstrom Local stores don’t carry a full store inventory but rely on personal stylists in order to showcase potential purchases and place bespoke orders for customers. The success of this initiative clearly demonstrates retailers could have more to gain by showcasing a range of high-quality and unique products than by launching a site with everything under the sun.
Yet beyond consumer buying habits, many small business owners continue to open brick-and-mortar locations because they help to legitimise a business. Physical company premises still carry a lot of weight across some industries in terms of brand recognition and go a long way towards establishing brand trust. You can even have your cake and eat it, too.
According to a 2017 study by British Land, opening up a brick-and-mortar can even boost your online presence. The research found that when a new brick-and-mortar store opens, traffic to a retailer’s website from the surrounding postal area increases by an average of 52% within six weeks of opening. Brands with less than 30 stores benefited the most from store openings, with uplifts in local traffic to their websites of an average 84%.
Bearing all that in mind, there’s still a whole lot to be said for opening a brick-and-mortar location. In some industries, the arguments for opening a physical store might be stronger than others – and so when in doubt, it’s worth doing plenty of market research to find out what is already working or not working across your target market.
What can you do to ensure your brick-and-mortar location succeeds?
As you might have guessed, one of the biggest ways to ensure your new brick-and-mortar location succeeds is by infusing it with various digital elements. Just as research has found that the opening of brick-and-mortar locations boosts online traffic, surveys also show that integrating your website with services at your physical store can drastically bolster business.
According to one study from OrderDynamics, 37% of retailers now offer click-and-collect services – with British Land reporting a 46% rise in UK consumer use of the clever link between physical and online shopping. So, how do you go about setting up these sort of services?
If you’ve already got a website, e-commerce services like Shopify will enable you to set up an online shop in which customers have the ability to select the items they’d like to buy from your store and pay in advance, before arranging a time and a location with which to come and pick up the items they’ve already paid you for. Not only will that bolster in-store traffic, but who knows? You might even convince the collector to tack on an impulse buy in-store.
As previously mentioned, working to create a unique shopping experience for consumers at your brick-and-mortar location can also help you to build a new level of customer loyalty.
The Cassandra Report, which is an ongoing annual study of youth culture, found that 70% of millennials say they dislike loud and busy brick-and-mortar shops. Instead, they tend to opt for relaxed environments with a calming atmosphere – and so it’s worth experimenting with your in-store lighting, arrangements and ambience in order to create a welcoming environment customers can’t find in flashy online shops.
Likewise, it’s worth trying out events that will add value to your brick-and-mortar shop and give consumers a stronger relationship with your location. Host product demonstrations. Put on workshops to teach customers how you create your products, and let them try their hands at creating something. Bring in guests for talks, play live music – the possibilities are virtually limitless.
The bottom line
At the end of the day, brick-and-mortar locations aren’t for everybody. If you’re setting up a company with the sole purpose of selling a single product or service online, the time and energy involved in setting up and maintaining a physical store simply will not be worth the trouble.
It’s also worth researching how consumers within your target market are interacting with existing competitors. If your customers don’t shop in-store there, chances are they may not want to shop in-store with your company, either.
That being said, there is still a lot to be said for opening up a real, physical location for your new company. Research suggests consumers like to browse in-store, and they like to speak face-to-face with knowledgeable staff members. They like to experience new things, and the hassle of dealing with shipping and returning e-commerce items is often too much hassle.
Just remember: industries change at break-neck speed, and so you’ll need to be ready to change your practices at the drop of a hat. What works for your brick-and-mortar location today may not draw customers in forever, and so you should constantly reassess your practices and be willing to try new things. Conduct customer surveys to find out what your shoppers want, listen to their feedback and do your best to deliver.
Above all else, don’t forget to have fun with it. Deciding to open up a brick-and-mortar location is a huge step for your business – and although it will mean a lot of work, it will also open up a brand new world of exciting possibilities.