Articles
Commerce & Sales Channels

Brick and Mortar vs. Online Retailing

Commerce & Sales Channels
September 22, 2021
15 min read
Share:

Online shopping habits have taken root among consumers, but many shoppers seems anxious to return to an in-person retail experience. Weigh the pros and cons of brick and mortar vs online retailing to build a future-proof omnichannel strategy.

Is Brick & Mortar Dead?

The growing trend towards in-store fulfillment and staggering growth of grocery delivery in 2020 pointed to a dramatic shift in consumer preferences for brick and mortar vs online retail shopping. SMB’s were uniquely positioned to take advantage increased online spending as they pivoted to more direct sales and small parcel shipments in 2020, but as shoppers return to more in-store shopping, it’s clear that brick and mortar retail will always be part of a healthy omnichannel strategy. SMB’s should be asking now if their fulfillment strategy has the speed and resilience to meet the expectations of both ecommerce and brick and mortar channels.

Can Brick and Mortar Compete with Online Retailing?

Shoppers seemed to get very comfortable with the idea of shopping at home during COVID-19 shutdowns. New demographics began shopping online, and consumers even began to order perishables and big and bulky items for home delivery. Shoppers, however have expressed that they miss some aspects of in-person shopping. 23% of female shoppers indicated that they were “excited” to get back to a brick and mortar retail experiences as opposed to online.

Ware2Go’s 2021 consumer survey asked shoppers which items they would return to brick and mortar stores to purchase, and they indicated they preferred to shop in-store for:

  • Groceries and perishables (63%)
  • Clothing (52%)
  • Cleaning supplies (49%)
  • Furniture (40%)
  • Exercise equipment (39%)
  • Vitamins and nutraceuticals (34%)
  • Cosmetic (34%)

Even brands like Warby Parker, which began as a digitally-native brand with their revolutionary in-home try-on program, saw that their growth would be limited if they didn’t offer an in-store experience. In 2020, a year marked by decreased foot traffic in brick and mortar stores across all industries, Warby Parker still did 35% of their total sales through their brick and mortar storefronts.

Ultimately, brick and mortar and online shopping are not in competition but tend to feed one another. Truly successful brands find ways to blend the online shopping experience with the in-person shopping experience to create an omnichannel experience where shoppers feel that they can reach the brand through any platform, whether digital or online.

Brick and Mortar vs. Online Retail: A Revolving Door

While online marketplaces like Amazon seem to be designed for the new digital-first model of commerce accelerated by COVID-19, some traditional brick and mortar retailers have been incredibly flexible in sales and fulfillment strategies as they pivoted to an increase of online shopping. 

These new strategies demonstrate an interesting evolution in the importance of ecommerce vs. brick and mortar sales, and while traditional retailers are optimizing their operations to support  ecommerce growth, their brick and mortar locations are certainly not dead. In fact, retailers like Walmart and Target have taken creative measures to make this network of physical storefronts a competitive advantage, offering Buy Online Pickup In Store (BOPIS) options for most of their products, including 3rd-party marketplace vendors.

This brings to light a struggle that has always existed between brick and mortar and ecommerce retailers. While exacerbated by the high demand for BOPIS fulfillment options, brick and mortar retailers have always competed against fast shipping promises of ecommerce sellers. Consumers have long know that if an item is not immediately available for in-store pick-up, they can easily make their purchase online and have it delivered to their doorstep in 1 to 2 days.

Our 2021 survey data showed that, although many consumers adjusted their habits to in-store pickup at the height of the pandemic, 67% still prefer 2-day shipping to a BOPIS. If a consumer can’t find their product in-store, they will likely make a purchase

If merchants want to compete in brick and mortar stores, they must build a 1 to 2-day fulfillment network that supports both retail and ecommerce shipments. America’s fastest-growing motorcycle helmet brand, LS2, realized early on that fast shipping guarantees should be just as much a part of their retail sales strategy as their ecommerce strategy.

Watch the full LS2 story here.

It stands to reason that, having now grown accustomed to the convenience of the BOPIS model, consumers will be all the more likely to turn to an online competitor if an item isn’t available to pick up in-store or won’t arrive in a manner of 1 or 2 days. 

What Are the Pros and Cons of Brick and Mortar?

Shoppers anxious to return to in-person shopping at brick and mortar stores miss the opportunity to touch and experience products first-hand before purchasing them. This is why return rates for ecommerce purchases are historically higher than return rates for brick and mortar purchases.

There is also a level of immediacy to in-store shopping that just can’t be replicated in an online shopping experience. Our 2021 consumer survey data showed that 54% of consumers choose an in-store purchase or in-store pickup when they need an item immediately.

The advantage of brick mortar retail to merchants is that shoppers spend an average of $50 more during an in-store shopping trip vs an online shopping session. Consumers tend to make more impulse buys in-store and may be more likely to pick up accessories and add-ons. Our survey data indicated that 84% of consumers find that they discover new brands in-store either “sometimes” or “often”. This can be a big opportunity for brands looking to expand their market share and find new customers. Our survey responded that the following things attract their attention to new brands in brick and mortar stores:

  • Price (68%)
  • Promotions or product placement (50%)
  • Package design (43%)
  • Sustainable business practices (34%)

The downside of brick and mortar stores, especially for emerging brands, is that it can be difficult to get onto the shelves of retail stores, much less get preferred placement like an aisle end cap. Small to mid-sized brands looking to grow retail sales should consider building a partnership with a retail distributor to help them get their foot in the door.

There is also less ability to target shoppers in an in-person shopping experience. Unless your product their product is on promotion, the only resource they have to grab attention is packaging. In an online shopping experience, merchants have photos where they can display badges and shipping promises, eye-catching and click-able display banners, online reviews, and so many other tools at their disposal to stand out to their best customers.

What are the pros and cons of eCommerce?

eCommerce is has become a breeding ground for startup, niche, and luxury brands. It launched the direct to consumer (D2C) movement and opened up consumers’ options for high-quality and unique products delivered directly to their doorstep. For brands, ecommerce gave them an avenue to launch their own digital storefront with very little startup cost and the flexibility to scale up quickly.

eCommerce businesses can also pivot quickly. The digital world is simply more malleable than the physical one, so when supply chains are disrupted or consumer shopping habits change, ecommerce stores can change tactics quickly to find their customers wherever they’re shopping or change their product catalogue at a moment’s notice.

Online shopping also provides merchants with unparalleled access to consumer data. Practically every move that shoppers make online can be tracked and used for marketing and personalization that drives conversions and creates loyal brand advocates. The marketing levers that merchants can pull online result in a nearly frictionless shopping experience where online browsers are converted to shoppers in an instant.

The cons of ecommerce for merchants are that online retail is an endlessly crowded space, with new D2C brands popping up seemingly every day. There are also endless platforms for consumers to shop on, from marketplaces to social media to Google Shopping, ecommerce merchants have to be everywhere at once to make sure they’re getting in front of their best-fit customers.

Online shoppers also have incredibly high expectations when it comes to customer service and fulfillment. Shoppers expect ecommerce brands to be immediately available with customer service. They expect regular communication about order and fulfillment statuses with real-time last mile carrier tracking, and most importantly, they expect fast and affordable shipping options.

Children’s toy and furniture brand, ECR4Kids, learned quickly when they branched into ecommerce sales that their current in-house fulfillment model was not equipped to handle the delivery expectations of online shoppers. They saw that if they wanted to be competitive in the online marketplace, they needed to expand their team by partnering with an outsourced fulfillment partner that could provide the warehouse network to meet 2-day delivery expectations and the technology that would enable them to scale quickly with demand.

Looking for an ecommerce shipping solution? Reach out to one of our fulfillment experts.

Is eCommerce Cheaper Than Brick and Mortar?

At first glance, it would seem that an ecommerce business is hands-down less expensive to run. It requires less overhead like a physical building with signage, utilities, and support staff. Labor can be contracted or outsourced more easily, and digital advertising can be turned on and off quickly according to cost and performance.

However, ecommerce comes with hidden expenses, namely in the form of fulfillment and delivery. Online shoppers have come to expect delivery at a dizzying pace spurred on by the “Amazon Effect”. No matter how expensive, though, speedy fulfillment can actually become a revenue driver for businesses who optimize their fulfillment network for 1- to 2-day ground shipping and leverage fulfillment technology that enables them to measure the profitability of their sales at the sku level.

Walmart and Target Leverage Brick and Mortar to Support Online Shopping

On September 15, Walmart launched its new subscription service, Walmart+, as a direct competitor to Amazon Prime. At $98 per year, the membership includes free unlimited delivery (with many items available for 1-day delivery), fuel discounts at Walmart and Murphy gas stations, and a contactless mobile checkout option for in-store purchases. Although Amazon Prime offers additional benefits like streaming content, the one major advantage Walmart has over Amazon is its 4,700 brick and mortar stores, 2,700 of which offer same-day delivery. 90% of the US population lives within 10 miles of one of those 2,700 stores, which immediately gives Walmart the upper hand in terms of delivery footprint and effectively transforms its retail locations into Walmart+ fulfillment centers. 

This move, combined with Walmart’s Shopify integration, which allows customers to make in-store returns on items bought through third-party sellers on Walmart Marketplace, completes Walmart’s brick and mortar to online ecosystem and creates a true omnichannel retail strategy. This strategy is allowing Walmart to restructure its supply chain to meet the demands of the new digital-first economy without having to start from scratch. Its existing stores continue to make sales while also standing in as a nationwide fulfillment network for online orders.

Target, on a somewhat smaller scale, is taking the same approach, and by fulfilling 90% of their digital orders directly from stores, has cut their ecommerce order fulfillment costs by 30%. They began investing in more efficient ecommerce fulfillment long before the pandemic but were planning for growth another three years in the future. 

Instead, COVID-19 generated those three years’ worth of ecommerce growth in a matter of weeks. They’ve seen so much success with in-store fulfillment that they plan to test smaller fulfillment centers — stores about the size of a convenience store — located closer to end customers to cut down on transit times and expand their BOPIS offerings. Additionally, Target is expanding its third-party seller program, Target+, in which sellers fulfill and ship the products themselves, but customers have the option to return the items in-store.

Grocery: A New Frontier for Brick and Mortar vs. Online Retail

Amazon’s grocery subsidiary and largest brick and mortar sales channel, Whole Foods, recently opened an online-only store. The brand converted 6 of their locations to “dark stores” during Coronavirus lockdowns and saw an opportunity to better serve Prime members in Brooklyn with free delivery through a permanent grocery fulfillment center. However, Walmart+ may have the upper hand in the grocery delivery market.

Shoppers who might balk at Whole Foods notoriously high prices can shop Walmart’s low-cost grocery selection and even have a broad selection of home goods, office supplies, and more– all with a similar same-day delivery promise to Whole Foods. Whichever service comes out on top, one thing is clear, with three fold growth in grocery delivery demand year-over-year in the second quarter, even grocery shopping has undergone a digital transformation.

The New Power Dynamic for Brick and Mortar vs. Online Retail

In the past, ecommerce was seen as an alternative sales channel, a necessary add-on, and ultimately a growth lever that served to expand brick and mortar sales. However, these trends show a direct reversal of that long-accepted model, leaving brick and mortar stores playing support roles to ecommerce in the form of stores turned fulfillment centers and return drop-off locations.

The distinct advantage of small to mid-sized businesses in this new retail model is speed and flexibility. Many SMB  brands are digital natives or are at least nimble enough to pivot quickly in response to market shifts. Our recent merchant survey revealed that 77% of merchants made a pivot in their selling strategy in response to COVID-19, and that actually 35% of merchants opened an online store for the first time. While some large retailers like Walmart and Target seem to be changing course in time to meet the increased demand for online offerings head-on, other retailers are floundering as their legacy sales channels and fulfillment models are upended. 

SMB’s are able to launch new sales channels quickly in order to compete, and as big box retailers recognize the importance of adding 3rd party retailers to their online marketplaces, smaller merchants can borrow the brand equity and marketing prowess of enterprise brands to expand their sales channels even further. Listing on these marketplaces gives merchants the added advantage of in-store returns and ship-to-store options that are a growing expectation for many online shoppers. At a time when consumers are hungry for more online shopping options, merchants’ greatest challenge is tailoring their fulfillment strategy to meet the demands of their digital sales channels.

The Importance of Brick and Mortar + Online

Implementing a multichannel selling strategy may seem intimidating for many SMB’s that understand the complexities of inventory management and fulfillment across multiple channels. However, as online marketplaces and ecommerce platforms innovate to meet the needs of today’s digital economies, warehouse and inventory management technologies are keeping pace to digitize the day-to-day of supply chain operations. The omnichannel sales strategy is not the sole domain of enterprises like Walmart and Amazon, but through constant innovation and the democratization of ecommerce sales tools can be realized by merchants of all sizes.

To learn more about how Ware2Go is implementing fulfillment technology to level the playing for merchants of all sizes, reach out to one of our supply chain experts.

Our Newsletter

Get our latest insights on how to make your supply chain your competitive advantage

1-2 insight per month
Thanks for subscribing!