In the age of e-commerce and online shopping, the idea of visiting a physical brick-and-mortar store might seem like a novelty. However, these tangible establishments remain a vital part of the retail landscape in Australia and around the world.
We’ll look over the general definition of a brick-and-mortar store, its various types, accounting methods and provide examples. We’ll also examine the current climate of brick and mortar stores in Australia, and discuss the pros and cons of opening such establishments in the digital age.
What is Brick-and-Mortar?
The term “brick-and-mortar” denotes conventional businesses operating from physical locations where customers interact face-to-face, often in offices or stores owned or leased by the business. Examples include local grocery stores and corner banks.
Brick-and-mortar enterprises often struggle to compete with web-based counterparts like Amazon.com Inc. (AMZN) due to their often lower operational expenses and enhanced flexibility.
Key points:
- Brick-and-mortar businesses maintain physical stores where customers can browse and make purchases in person.
- These traditional establishments face challenges in the digital era, where online retailers such as eBay or Amazon enjoy cost efficiencies and greater customer convenience.
- Many brick-and-mortar companies have ventured into online platforms to enhance their competitive edge against online-only firms.
- Conversely, some previously “online-only” companies have embraced brick-and-mortar models to tap into the benefits of traditional retail.
Understanding Brick-and-Mortar
Many shoppers still favour the experience of browsing and purchasing at physical stores. In B&Ms, customers have the opportunity to talk to staff about products or services, and engage in experiential shopping.
For instance, places like JB HiFi allow consumers to try out products like headsets or laptops, while shoppers at Nordstrom can dine in their café after making their rounds—an experience not easily replicated online. Additionally, brick-and-mortar stores offer immediate gratification upon purchase.
Types of Brick-and-Mortar Stores
Several sectors persist where brick-and-mortar establishments maintain a sturdy business framework. These tend to be scenarios where in-person shopping offers more convenience than its online counterpart. For instance:
Convenience Stores
These outlets hold a significant portion of retail business sites. Their revenue largely stems from impulse buys, a market area less likely to be occupied by online retailers.
Grocery Outlets
Allowing customers to physically examine and instantly take home their purchases places online stores at a competitive disadvantage in this domain.
Specialty Retailers
These establishments cater to niche customer needs, exemplified by hardware stores or book shops – but they still have to deal with online vendors who may have something those stores do not have on-hand.
Department Stores
Vast retail spaces with diverse product ranges across various departments. These are particularly susceptible to revenue loss due to online sales competition and high property taxes.
Advantages and Disadvantages of Brick-and-Mortar Stores
Brick-and-mortar stores provide the benefit of an in-person shopping encounter, particularly crucial when the shopper needs to physically examine the product. They also excel in situations where certain products or services, like a haircut, are not easily deliverable online.
Certain business categories naturally align with brick-and-mortar setups, including hair salons, veterinary practices, gas stations, auto repair shops, restaurants, and accounting firms. Marketing strategies for these physical establishments should emphasise the advantages consumers experience when buying in-store.
However, brick-and-mortar outlets often grapple with higher overhead expenses compared to online counterparts, limiting their customer reach. Rental expenses for commercial spaces tend to surpass warehouse costs, notably if the store relies on foot traffic or downtown locations. Additionally, maintaining adequate staffing, along with expenses for cleaning, insurance, and office upkeep, becomes imperative for their operations.
Example of Brick-and-Mortar Store in Australia
One well-known Australian brick-and-mortar store chain is JB Hi-Fi, which sells a wide range of electronics, including TVs, computers, gaming consoles, and audio systems. Some products are even categorised by equipment for content creators. Customers can visit their stores to explore and purchase the items in person – but there are also options to order online for delivery. The Southbank, Victoria-based company has a network of branches across Australia and in New Zealand.
The Future of the Brick-and-mortar Business
The surge of e-commerce solutions and online enterprises has prompted reflections on the future of brick-and-mortar businesses. Many brick-and-mortar establishments are increasingly adopting an online presence, aiming to leverage the unique advantages offered by each business model.
For instance, certain brick-and-mortar grocery stores like Coles enable customers to shop for groceries online and receive doorstep deliveries within a few hours, whether by in-house delivery riders or through app services such as DoorDash. These hybrid business models have given rise to terms like “click and mortars” and “bricks and clicks.”
The COVID-19 pandemic took its toll on Australian B&M’s like all others around the world, with some studies noting drops as much as 11 per cent in household spending as the virus took hold. The Recovery Protocol drafted by the Shopping Centre Council of Australia, Shop Distributive and Allied Employees Association, National Retail Association, the Pharmacy Guild of Australia, and the Australian Retailers Association governed measures to at least keep customer traffic running.
With the relaxing and lifting of pandemic restrictions in 2021 and 2022, Aussies were seen streaming back into the malls and B&Ms. In January 2023, Window Furnishings Australia looked over the Adyen Australia 2022 Retail Report, which noted that 73 per cent of Aussies want to shop at a physical store, against the 59 per cent global average, while 28 per cent of Australian B&M operators also offer digital retail services.
The 2022 Retail Monitor by Monash University’s Australian Consumer and Retail Studies unit touched on some key characteristics. For instance, on returns, 66 per cent of physical shoppers later brought home something they bought at the store against 42 per cent who bought online. Fifty-eight per cent believe a return policy per Australian Consumer Law is the most prominent factor in their purchase habits. Naturally, the returned merchandise will have terms and conditions applied such as having the official receipt and price tag attached and the condition of the items are still in mint.
FAQs
Why do some consumers prefer a physical store?
Certain consumers harbour reservations regarding online payment methods such as credit cards. They often perceive brick-and-mortar businesses as more trustworthy due to their physical presence, associating legitimacy with a tangible storefront. However, operating brick-and-mortar stores can present drawbacks for corporations, including expenses related to property leases, staff wages and commissions, and utility costs such as electricity, heating, and water.
How does a Brick-and-Mortar store evaluate its financial performance?
Publicly-traded retailers commonly disclose same-store sales or comparable-store sales in their ASIC-regulated earnings reports, measured on a per-store basis. These financial indicators serve as a performance benchmark for a retail chain’s existing stores during a defined timeframe. Brick-and-mortar enterprises such as restaurants, groceries, and general merchandise stores rely on these metrics to assess their financial standing, aiding corporate decision-making concerning their establishments.
Conclusion
Brick and mortar stores continue to be an integral part of the retail landscape in Australia. Their ability to provide a tangible shopping experience, personal interactions, and immediate gratification ensures their continued relevance. While the rise of e-commerce has changed the retail landscape, the adaptability of brick and mortar establishments and their ability to create engaging shopping experiences help them thrive alongside their digital counterparts.
DISCLAIMER: This article is for informational purposes only. AVANTE PARTNERS has no affiliations with any store brands mentioned.