What Is Brick-and-Mortar?

What Is Brick-and-Mortar?

Let me explain what 'brick-and-mortar' means to you directly. It refers to a traditional street-side business that offers products and services to customers face-to-face in an office or store that the business owns or rents. Think of your local grocery store or the corner bank—these are classic examples of brick-and-mortar companies.

Key Takeaways

Brick-and-mortar describes a traditional business with a physical store or stores where you can browse and make purchases in person. These traditional stores have faced tougher times in the digital economy, where web-based retailers like eBay or Amazon enjoy lower operating costs and more flexibility for customers. Many brick-and-mortar companies have responded by creating connected web-based businesses to compete better with online-only firms. At the same time, the established brick-and-mortar model has influenced some previously web-only companies to open physical locations and gain the benefits of traditional retail.

Understanding Brick-and-Mortar

You might still prefer to shop and browse in a physical store, and many consumers do. In brick-and-mortar stores, you can speak with employees and ask questions about products or services. These stores offer experiential shopping, where you can test a product like a video game or laptop at Best Buy or even have lunch in Nordstrom's cafe while shopping. Brick-and-mortar businesses give you instant gratification when you make a purchase.

Some of you are wary of using credit cards or other payments online. You often associate legitimacy with a brick-and-mortar business because a physical presence builds trust. However, there are downsides for companies running these stores, including costs for leasing the building, employees for transactions, and utilities like electricity, heat, and water.

Brick-and-Mortar Store Sales

On a per-store basis, publicly traded retailers report same-store sales or comparable-store sales in their quarterly and annual SEC-regulated earnings reports. These metrics give you a performance comparison for established stores in a retail chain over a specific period. Businesses like restaurants, grocery stores, and general merchandise stores use these figures to evaluate financial performance and guide decisions about their stores.

At a macroeconomic level, the U.S. Census Bureau releases retail sales figures monthly and e-commerce retail sales quarterly. Global non-store retailing, including direct selling and e-commerce, reached $4,217 billion in 2023 and is projected at $4,712 billion for 2024.

Important Note on Competition

Many brick-and-mortar stores struggle to compete with web-based stores like Amazon.com, but companies such as Costco thrive by offering members services like online pickup.

Successful Brick-and-Mortar Store Example

With all the negative coverage of brick-and-mortar stores and the rise of Amazon, you might think this business model is finished. But Costco is proving otherwise. Costco Wholesale Corporation is a membership retailer that charges an annual fee of $60 to $120 per customer. As a member, you get cost savings and service benefits. By the end of fiscal year 2023, Costco had over 127 million members and a 92.7% renewal rate in the United States and Canada.

Costco ranked as the top third retailer in 2023 according to the National Retail Federation. It sells 10,000 products on its website and lets you buy online and pick up in-store, providing a strong alternative to Amazon for members.

Types of Brick-and-Mortar Stores

Several areas still support resilient brick-and-mortar business models, especially where face-to-face shopping is more convenient than online. For instance, convenience stores make up a large share of retail locations because their revenue comes from impulse purchases, which online stores can't easily replicate. Grocery stores let you inspect products personally and take them home right away, putting online options at a disadvantage. Specialty stores, like hardware or bookstores, meet specific needs but do face online competition. Department stores, with their variety of products across departments, are most vulnerable to losing sales to e-commerce.

Advantages and Disadvantages of Brick-and-Mortar Stores

Brick-and-mortar stores provide the advantage of an in-person shopping experience, which matters when you need to inspect a product. They're more convenient for items that don't ship easily, like a haircut. Certain businesses suit this model better, such as hair salons, veterinarians, gas stations, auto repair shops, restaurants, and accounting firms. If you're marketing a brick-and-mortar business, highlight the benefits of purchasing at a physical store.

On the downside, these stores have higher overhead costs than online ones and reach fewer customers. Commercial rental space is pricier than warehouse space, especially for locations relying on foot traffic or downtown spots. You also need staff to keep the store open, plus expenses for cleaning, insurance, and maintenance.

Adaptations for Brick-and-Mortar Stores

The growth of e-commerce has made many question the future of brick-and-mortar businesses. It's now common for these businesses to add an online presence to capture benefits from both models. For example, some grocery stores like Safeway let you shop online and get delivery in hours. This has led to terms like 'click and mortars' and 'bricks and clicks.'

Despite growth in the brick-and-mortar sector, many traditional retailers are closing stores, including Gymboree, The Limited, Radio Shack, and Gamestop. Others like Sears and Payless ShoeSource have gone bankrupt. Meanwhile, large e-commerce companies like Amazon have opened physical stores to market products and build customer relations, though not always successfully—Amazon's 2023 report showed $767 million in expenses related to store and facility closures.

How Many Brick-and-Mortar Stores Are There in the United States?

There are just over a million retail establishments in the United States, with the exact number at 1,078,177 as of Q4 2023.

Can Brick-and-Mortar Compete with E-Commerce?

Yes, brick-and-mortar stores can compete with e-commerce. The physical space allows for engaging, interactive in-store experiences. You get the good or service immediately, and stores can offer click-and-collect, in-store returns for online buys, and localized marketing for niche services.

What Is Brick-and-Mortar Banking?

Brick-and-mortar banking means handling deposits and loans through physical branches, unlike online banking apps or websites. Many retail banks are reducing branches to focus on mail, phone, or web services.

What Are the Costs Associated With Running a Brick-and-Mortar Store?

Costs include rent, utilities, payroll, inventory, insurance, and marketing. You might also face store maintenance, security, and technology investments, plus initial setup like design, fixtures, and signage. If you're considering starting one and unsure about costs, use the Small Business Association's start-up cost calculator.

The Bottom Line

Brick-and-mortar is a term for retail stores and offices you can visit in person, unlike online stores without storefronts. They offer a personal shopping experience but often get undercut by online stores with lower costs. Still, businesses like hair salons and grocery stores remain mostly in-person.