Brick and Mortar vs Ecommerce: Pros, Cons, and Profits

Suppose you’re passionate about retail and are considering a new business venture. In that case, chances are you’ll find yourself at a familiar crossroads – brick and mortar vs eCommerce.

Although online and offline retail are part of the retail landscape, they are unique and characterised by specific features. Understanding how online and physical stores differ will help you make all the right choices as a business owner.

The following sections explore the pros and cons of running an online business vs. a brick-and-mortar business. We cover some of the most critical aspects of business, like start-up costs, operational differences, customer experience, profitability, and more.

Brick and Mortar vs E-commerce: Key Differences

In essence, a brick-and-mortar store usually sells to local customers via a physical location with a physical presence. On the other hand, eCommerce means selling online via an online store.

Here’s how these two business models differ and what you can expect to achieve from each.

Pros of Brick and Mortar Stores

Offering a tangible shopping experience to customers can deliver a lot of advantages for brick-and-mortar shops.

Let’s see more on that in the following lines.

Opportunities to Physically Touch Products Before Purchasing

One of the most significant advantages of brick-and-mortar stores is that they provide experiential value by enabling shoppers to physically touch products before buying them.

This is especially important in niches like clothing, where physically testing how a top or a skirt looks is key to making a purchase decision. 

However, it can also be equally vital for electronics, beauty, and others. 

Although consumers can often return products in eCommerce, the ability to see the item before purchasing eliminates the need to spend additional time returning it.

Payment Flexibility

There’s a popular belief that eCommerce stands out with advanced payment methods and flexibility. However, physical retail has made dramatic improvements in recent years, catching up to all that eCommerce offers, and more.

In fact, physical stores offer more payment flexibility today by providing a range of payment methods, including tap to pay, mobile wallets, credit and debit cards, cash, gift cards, and more. 

Impulse Purchases 

Physical retail stores often rely on impulse purchases for an additional source of income.

Although a customer may initially visit a store to purchase a single item, they can sometimes leave with multiple goods. Physical stores strategically position certain items at critical locations to trigger impulse purchases and inspire shoppers to spend more.

Upselling and Cross-selling Opportunities 

One of the unique advantages of physical shops is their ability to inspire shoppers to spend more, a strategy often summarised as cross-sell vs. upsell.

In a cross-sell, customers are encouraged to purchase complementary items that enhance their original choice, like accessories or add-ons. On the other hand, an upsell involves promoting a more advanced or premium version of the initially selected product.

While both cross-selling and upselling can be achieved via eCommerce, physical stores often have higher success in motivating additional spending. This advantage is due to the customer’s ability to evaluate the product in real-time and see the immediate value of both complementary and upgraded items.

Instant Access to the Product

When shopping from a physical store, customers don’t have to wait to receive the product after days or sometimes weeks. Instead, they can instantly enjoy all it offers by directly picking it up from the store and getting Instant gratification. 

This can be incredibly motivational for some shoppers to complete the purchase instead of leaving it for another time (as is popular in the case of eCommerce).

After-sale Services

In a brick-and-mortar environment, customers can communicate with sales associates. These professionals will not only provide exceptional service and support during the shopping and purchasing process. Still, they can also be precious for after-sale services.

For example, these could include answering questions about the product, how it can be used, return policies, and others.

Cons of Brick and Mortar Stores

At the same time, brick-and-mortar stores also have to consider a range of drawbacks.

Below, we will review the most important ones.

Substantial Overhead Costs

Running a physical retail store inevitably involves significant overhead costs that could otherwise be avoided with eCommerce.

For example, business owners need to make extra capital available to invest in utility bills, transportation expenses, employee salaries and benefits, rent, and other expenses.

Maintenance Costs

In addition, there are severe maintenance costs that you’ll need to be prepared for if you want your store’s appearance and physical space to remain attractive and appealing. 

After all, presentation is key when it comes to brick-and-mortar stores. A messy and poorly maintained store can quickly push away your customers, navigating them directly to your competitors’ doors.

Insurance Costs

Operating a physical shop requires comprehensive insurance coverage, including property, liability, and employee insurance.

These are some of the main types of coverage brick-and-mortar businesses must maintain.

Because these costs recur, they represent an ongoing liability for the business.

Local Reach

Physical stores have a limited reach compared to online shops.

While an eCommerce store can attract customers worldwide, a brick-and-mortar store is restricted to its local audience.

This limitation poses challenges for expanding reach. Growth for a physical store requires opening new locations, which demands substantial investment and higher costs. 

The Need for an Omnichannel Experience

Last, let’s not forget that today’s consumers demand an omnichannel experience. 

This means that even if you’re focused on growing your brick-and-mortar stores, expectations will be that you also have a solid online presence and an online shop.

As a result, brick-and-mortar businesses will need to set aside additional money to create a reputable internet presence to remain competitive in the market.

Pros of E-commerce

Now that we’ve covered the basics of brick-and-mortar stores, let’s dive deeper into all that eCommerce has to offer.

Below you’ll find some of the most noticeable eCommerce pros:

• Fully personalised customer experience: For customers shopping online, this means recommendations based on their consumer preferences. This naturally improves customer satisfaction with the brand and results in loyalty, retention, and lasting customer connections.
• Lower costs: Businesses that operate via online shops or mobile apps where their customers shop online also enjoy lower costs.
• High demand: Perhaps the strongest advantage of eCommerce is simply the fact that there’s a significant demand for it. This means that running an eCommerce business online can be more profitable than ever.
• Convenience: Another powerful benefit of eCommerce is the convenience it offers to consumers. Rather than having to drive to a physical store, spend time browsing, and interact with employees, individuals can simply shop from the comfort of their smart devices.
• Wider access: Best of all, eCommerce isn’t limited to location. A successful online shop can operate and ship to multiple cities, countries, and continents.

Of course, expanding into different markets still requires extensive market research and strategies. However, the costs associated with this move are far lower than in the case of brick-and-mortar stores.

Cons of E-commerce

While eCommerce offers exciting opportunities, it’s still limited by a few challenges worth considering.

Let’s see more on that below:

• No physical interaction: One of the major drawbacks of eCommerce stores is that they can’t provide physical interactions with the consumer. This means that it’s much harder to select products in some cases as there are no opportunities to test and try them
• Concerns around payment security: Another serious disadvantage of eCommerce is that there are a lot of individuals who feel uncertain about the reliability of online transactions. Shoppers are often sceptical about sharing sensitive payment data with online shops due to the risks of data theft and fraud.
• Shipping costs: When purchasing goods from a physical store, shoppers directly receive their goods with no waiting times and shipping costs.

Last but not least, returning products and receiving after-sale services is much harder and time-consuming when dealing with online shops.

For example, rather than simply bringing products back to a physical location, the consumer must package the product back in its original form, send it via a carrier to the seller, and wait for the funds to be returned to their bank account. 

Comparing Start-Up Costs

When comparing the start-up costs that physical retailers and online businesses are required to cover, it’s safe to say that eCommerce stores hold the advantage.

Setting up physical locations requires space. Businesses can choose between two options – purchasing retail space or renting. Both can incur significant expenses that can temporarily disrupt normal business operations or, to say the least, put an additional weight on the financial stability of the company. 

In addition, physical retailers must pay for utilities, storage, employees, insurance, and products from the very start.

For eCommerce, most of these start-up costs are eliminated. They can get the business running by simply setting up a website. There are plenty of options that even enable online stores to sell products without physically owning them before the sale. 

Operational Differences

On an operational level, the popular belief is that retail stores have higher operational costs than online retailers. 

To some extent, this is true as there are a lot more business operations to cover as opposed to when operating online. These include rent, storage, multiple employees, and more. 

Even if eCommerce businesses don’t have to plan for such expenses, they have separate ongoing costs to consider. Some of the most popular ones are website hosting, app expenses, shipping costs, storage space, and more.

Customer Experience in Brick and Mortar

The most important thing to understand about brick-and-mortar retail or in-person shopping is that it provides a sensory experience. 

This is incredibly powerful as it enables shoppers to try, touch, and interact with products before making a purchase. In addition, the attention and support from sales staff adds an extra layer of human touch, encouraging shoppers to leave with their purchase instantly instead of preferring to find it online.

Customer Experience in E-commerce

When it comes to customer experience with online businesses, it’s usually more convenient, letting shoppers purchase desired products from anywhere, at any time. 

In addition, online stores can offer more extensive product descriptions, which are always available to the shopper. Consumers can also read customer reviews, comparisons, and research the product in depth.

Marketing Strategies: Brick and Mortar vs E-commerce

Another serious area of differentiation is marketing.

The marketing efforts of brick-and-mortar stores and eCommerce businesses are inevitably different. At the same time, they may often use similar strategies to reach new customers.

Online stores frequently rely on online advertising and different online channels, like social media, email, and SEO. The digital landscape offers a wide array of techniques to engage potential customers, educate them, and convert them into shoppers. 

In addition, marketing for eCommerce stores relies on valuable insights captured from the online behaviour of consumers. This means that marketing messages can be fully personalised and relevant to the individual throughout all stages of their buyer journey. 

On the other hand, in the retail business, marketing is a bit different. Oftentimes, physical retailers still rely on traditional forms of advertising, like print and broadcast. However, in today’s digital world, most physical stores also utilise the power of online marketing strategies for maximum effects.

Sales Channels and Reach

It’s also essential to acknowledge the differences between the channels used to reach online eCommerce and brick-and-mortar sales. 

As mentioned above, physical retailers are often limited by geographic location. Shoppers must travel to the store in person, making the business’s reach generally local. It’s therefore key to select a location with high foot traffic. At the same time, increasing your reach would mean opening up new store locations.

On the contrary, online stores enjoy a global reach and the ability to sell anywhere in the world. As such, eCommerce businesses usually employ a range of sales channels, like websites, third-party platforms or marketplaces, and social media.

Inventory Management

Inventory management is also handled differently in brick-and-mortar stores and eCommerce shops. 

Brick-and-mortar businesses usually keep inventory stored in warehouses positioned close to the store. In a lot of cases, there are specific space limitations that must be carefully addressed. It’s key that inventory management eliminates the risks of overstocking or running out of items. 

Meanwhile, inventory management for eCommerce stores is usually much more flexible and scalable. This is because the majority of online retailers rely on centralised warehouses or partners with third-party fulfilment centres. 

With the help of inventory tracking software, eCommerce businesses can ensure that stock levels are always accurate across platforms. 

The Role of Technology

When it comes to technology, brick-and-mortar stores typically invest in POS systems, in-store digital displays, and mobile payment providers.

With a reliable POS system, retailers can streamline the checkout experience, track inventory, and manage customer relationships. They can also gather valuable insights on customer purchase history and more. At the same time, via interactive displays, touchscreens, and kiosks, physical stores can engage better, advertise products, and inform shoppers when necessary.

In contrast, eCommerce businesses use different types of technology to attract and engage online shoppers. Some of the most popular solutions include eCommerce platforms (like WooCommerce, Shopify, and Magento), AI-powered recommendation engines, automation, and analytics.

Financial Performance and Profit Margins

When comparing the financial performance and profit margins of traditional retail sales and eCommerce, there are several factors to consider.

Let’s see them below:

• Overhead costs: As noted above, brick-and-mortar stores have much higher overhead costs than online stores. This can potentially mean that profit margins are much lower.
• Sales volumes: Physical retailers’ sales are also limited to foot traffic and the local area, potentially limiting sales volumes. In contrast, eCommerce growth is unlimited as online businesses can target anyone around the world.
• Capital investments: While physical stores need to invest in things like furniture, fixtures, displays, and in-store technology, eCommerce can enjoy much lower capital investments.

Considering these points, we can summarise that eCommerce stores can oftentimes be more profitable and enjoy higher profit margins. 

Conclusion: Choosing the Right Model for Your Business

When selecting the right business model for you in the brick-and-mortar vs eCommerce debate, it’s fundamental to consider all of the differentiations outlined above.

Take into account your future goals, the types of products that you offer, and your available resources. Also, make sure to extensively research your market and weigh the pros and cons of each model based on your specific niche.

This strategic analysis will help you make the right choice and achieve maximum results as a retailer.

Frequently Asked Questions

Is brick-and-mortar or eCommerce better?

When discussing brick-and-mortar vs eCommerce, it’s impossible to provide an accurate answer on which one is better. Ultimately, it comes down to what you’re striving to achieve, your available resources, and other factors.

What advantages do companies who use both eCommerce and brick-and-mortar models have?

Companies that use both models can have shoppers buy online and offer the flexibility of picking up products in-store, combining the convenience of online shopping with the immediacy of in-person pickup. This hybrid approach allows them to reach a broader audience, offering seamless omnichannel experiences that build customer loyalty and cater to various consumer preferences.

What are the benefits of merging e-commerce and brick-and-mortar inventory systems?

Integrating both systems can help businesses optimise stock levels, ensure consistent product availability across sales channels, and provide a seamless customer experience.