Brick and Mortar Retail vs. E-commerce
What is the Solution?
1. Executive Summary
Although the recent development of the Internet has skyrocketed business sales for the
average e-commerce company, there are many advantages that they are missing out on that
a brick and mortar organization can provide. So where is the ultimate middle-ground a
firm can search for when aspiring to provide quality products and quality customer service
in the most efficient way? The following is a discussion on the differences between brick
and mortar retail and e-commerce followed by a description of what the final solution is to
solve this problem.
2. Introduction
In a world where technology is changing every day, traditional businesses are becoming
more developed and taking advantage of the many positive attributes that e-commerce can
offer. While traditional businesses (brick and mortars) have recently been faced with stiff
competition from e-commerce; traditional firms are attempting to survive by making an
evolutionary leap into the electronic medium. As the overall business climate continues to
change, traditional firms are beginning to add new capabilities that are conducive to the
Internet. The question is, what is the middle-ground solution to allow companies to truly
reach their full potential? In order to fully understand why this giant leap is necessary, it is
essential to first understand a brick and mortar versus e-commerce. Once this is fully
recognized, it is essential to look at the advantages and disadvantages of each so that one
can truly understand why adaptation is necessary for survival.
3. Brick and Mortar
A brick and mortar refers to a company which possesses a building for operations (Brick
and Mortar Business). These traditional businesses deal with customers face to face;
therefore, they are able to provide customer service better than a click and mortar. An
example of a brick and mortar is the local grocery store such as Harris Teeter or Lowes
Foods. Here, consumers can walk into a physical store location, purchase selected items,
and retreat to their final destination.
a. Advantages of a Brick and Mortar
While there are many criticisms against the operation of a brick and mortar, there are
numerous advantages that give organizations that support this idea a competitive
advantage. First, customer interaction plays a large role in the success of a corporation. So
often, many companies that operate solely online experience the consequences of
unsatisfied customers when customers realize they purchased a product that they could not
actually see, and then have to deal with the repercussions of poor customer service by not
being able to discuss their unsatisfactory experience face to face with an associate. Second,
by maintaining a retail outlet, firms are able to keep up with industry trends. Charlene
Steinhauer, CEO of Childrens Wear, Inc. says about her brick and mortar company, By
interacting with customers face to face, weve learned what they want in childrens
merchandise and how they want to buy it (McGarvey, Connecting the DOTS). Third, a
brick and mortar provides real-world warehousing for merchandise that an online
operation cannot. When a customer visits a particular store, he has the ability to visually
test and choose what he wants in a matter of minutes. Fourth, depending on ones type of
business, having a physical location has the potential to attract walk-in customers. Finally,
this movement gives a corporation the appropriate space to work freely and allows one to
become mentally and physically immersed in running a business.
b. Criticisms against a Brick and Mortar
Among the advantages described above, there are numerous disadvantages of brick and
mortars that are notable. Primarily, it frequently occurs that that sales staff on the floor are
notoriously uneducated about the specific products the company sells; therefore, it may be
difficult to give the knowledgeable consumer exactly what he/she wants. Second, retail
stores tend to stock the lower-end versions of its products first since they are more
competitively priced; therefore, it is difficult to obtain a guarantee that the consumer would
be receiving superior quality (Oricchio, Buying Decisions). Third, operating via a physical
store inhibits the organization to reach a wider array of consumers. Fourth, when
maintaining a physical location, there are higher risks and start up costs such as lease and
purchase costs, labor expenses and high utility and maintenance expenditures.
4. E-commerce
E-commerce is referred to as, the buying and selling of products or services over electronic
systems such as the Internet and other computer networks (Electronic Commerce). Under
the same principle as traditional in-store commerce, e-commerce involves buyers and
sellers coming together and swapping commodities for money. Unlike a company that
operates as a brick and mortar, a company that operates solely on the internet is more
likely to reach a larger audience as well as gain a competitive advantage over brick and
mortar competitors due to its ability to provide the utmost convenience. While there are
many advantages to operating a brick and mortar as opposed to operating a firm via the
Internet, there are also many advantages and disadvantages a business can experience
when venturing into e-commerce.
a. Advantages
While many consumers question the success rate of companies that pursues e-commerce,
there are numerous advantages that derive from this movement. First, e-commerce offers
buyers maximum convenience. A consumer has the ability to visit multiple vendors web
sites periodically throughout the day and compare prices and services without having to
leave the comfort of their own home. This convenience gives consumers immediate
feedback on exactly what they are looking for at the precise time. Second, e-commerce
offers sellers an opportunity to reduce costs while at the same time provide market
expansion since e-commerce is open to anyone with access to the Internet. E-commerce
minimizes the need for a physical store as well as the need for staff members; thus
reducing overall labor expenses. Internet technologies also permit sellers to track the
interests and preferences of their customers with the customers permission and then use
this information to build an ongoing relationship with the customer by customizing
products and services to meet the customers needs (E-commerce advantages). Not only has
e-commerce exploded over the past decade, but year after year, organizations are reaping
the benefits of profitable earnings and successful customer service due to their ongoing
ability to satisfy needs via the Internet. A fourth advantage e-commerce presents is lower
transaction costs. The reason for this is because e-commerce employs an automated order
tracking and billing system, therefore, allowing consumers to oversee the entire business
cycle from ordering, building, shipping, etc. For example, Dell tracks each computer
through the entire manufacturing and shipping process, thus, allowing customer to see
exactly where their order is at any given time (The advantages of e-commerce).
b. Drawbacks
With advantages come drawbacks, and in this case, there are numerous drawbacks that
e-commerce presents. First, many consumers consider shopping a social experience and
enjoy the thrill of testing out individual products before purchasing. For these types of
consumers, an experience like this cannot be duplicated over the Internet. Second, there
are security issues that consumers are uncomfortable with when partaking in e-commerce.
For instance, what is the guarantee that credit card transactions are secure and safe? Third,
returning goods is typically not a hassle-free process when purchasing via the Internet. The
uncertainties that surround the return process are hectic and stressful. For instance,
consumers constantly question issues such as, Who pays for the return postage? Will the
refund be paid? This headache-prone event would seem much easier if one was returning a
product to a shop. Fourth, there is a loss of personal service that takes place when a
consumer chooses to partake in e-commerce rather than traditional commerce. The reason
for this is because e-commerce cannot provide the richness of human interaction that
traditional in-store commerce can. This reason alone gives consumers the impression that
e-commerce is inadequate compared to traditional business.
Figure 1 represents a summary of reasons consumers hesitate to participate in e-commerce.
Figure 1
(Introduction into e-commerce)
5. Statistics
In order to understand the level of importance e-commerce is having on todays economy it
is necessary to look at previous statistics stating where retail e-commerce has been and
where it is going today. Retail e-commerce is simply the process of buying and selling
retail over the Internet.
In 1999 online apparel sales exceeded $1 billion (less than 1% of apparel sold over the
Internet) and skyrocketed to $22 billion by 2004. The reason for this abrupt increase was
due to a combination of increasingly large online consumers and online retailers. Figure 2
represents the dramatic increase between the years of 1999 and 2004
Figure 2
(Beck, Online Apparel Retailing)
While there was a significant increase in Internet sales during these years, there has
recently been some customer hesitancy to purchase apparel via the Internet for reasons
such as lost loyalty and online return problems. Brian Beck from yourfit.com surveyed a
random sample of 1000 consumers expressing why they are hesitant to purchase apparel
online. Table 2 gives a visual representation of the findings.
Table 2
(Beck, Online Apparel Retailing)
These factors have resulted in a $3.3 billion loss in revenue in the US online apparel
industry. Beck states, Todays online apparel merchandising tools have not succeeded in
