Choosing a Location for Your Retail Business: Pros and Cons of Brick and Mortar vs. Online

By Emerson De Oliveira,
business.com writer
|
Apr 08, 2020
Image Credit: vavlt / Getty Images

Online shops are great, but there are also plenty of reasons to choose a brick-and-mortar store.

The internet has forever changed the way we shop. Many people turn to online shopping whether they're buying clothing, groceries, or anything else they want or need. But is online always the way to go? Though online shops are great, there are also plenty of great reasons to choose a brick-and-mortar store!

If you're about to open a retail business, you should make this decision carefully. When deciding whether to go online or go with brick-and-mortar, you'll need to consider factors such as:

  • How you'll build customer relationships
  • The amount of time and money you can dedicate to hiring employees
  • The cost you're willing to pay for overhead
  • The expense of shipping

Weighing all these factors and others will help you make the best choice for your business's future. To find out more about all these factors, keep reading.

Brick-and-mortar retail

Pro: Customer relationships lead to customer loyalty.

A lot of people choose to shop at brick-and-mortar locations because they like to have a personalized experience. Shopping at a physical location allows them to build relationships with the staff and with other patrons. This is great for you as a business owner! It means that people feel a connection to you. Because of that, they're likely to keep coming back to your business for more.

Having a physical retail location can also make it easier for people to find your business because they'll see it every time they pass by. People won't necessarily hear if you've just started an e-commerce business. But as soon as your brick-and-mortar store opens, people will see and notice. They'll come in to check it out – and you can start building customer loyalty!

Con: Consumers are limited to shopping based on the store's hours.

Physical retail locations are limited by their business hours. For some people, those hours will be convenient. But there are plenty of others who may not be able to stop by during your store hours. That, in turn, could limit your income.

You might find it stressful to have an operation that's open 24/7, i.e. an e-commerce business. But this will be so much better for revenue. Customers will know they have constant access to your products whenever they want them.

Pro: Brick-and-mortar locations simplify exchanges and returns for customers.

Just about everyone has fallen victim to an impulse buy at least once in their life. Making a return can be a little stressful. But it's significantly easier with a brick-and-mortar store than it is with an online retail location. There's no shipping involved. Usually, customers can just go into the store with their purchase and the receipt and quickly make an exchange or get a refund. This can be a huge advantage to customers.

Returns and exchanges are also a headache for the business owner. For example, sometimes a customer might claim they've received a damaged item. But that can be difficult to verify when the item isn't physically in front of you. There's a lot less guesswork a customer can come in and show you their purchase.

Con: You'll have to spend more time and money on hiring.

Hiring and managing employees can be one of the most stressful parts of owning a business. It's true that whether or not your business is in a brick-and-mortar location you'll have to hire at some point. But hiring for your brick-and-mortar location is typically more expensive and time-consuming than an online store. Physical locations need more upkeep and employees to continue operating at top condition.

Pro: Taxes are more straightforward.

Contending with state and local taxes as a small business owner is always stressful. As a brick-and-mortar seller, you only have to worry about one tax rate. On the other hand, if you're an online seller, you have to deal with multiple tax rates. This is a clear advantage that brick-and-mortar retail locations have over online stores.

Online retail

Pro: Online stores come with minimal overhead.

Opening an online business is more cost-effective. You don't have to pay for overhead and there are fewer operating costs. You can often pass these savings along to the consumer, which can be another thing that attracts customers. This is different from physical retail locations where you'll have to pay for rent and utilities. These kinds of costs are some of the most expensive for business owners.

Con: Customers may be deterred by the inability to see items in person.

Being able to see an item in person and touch it can have a big impact on a consumer's purchasing decisions. This is especially true when it comes to clothing. If you're selling clothing online, customers won't have the opportunity to try it on. This could lead to more returns, which is a serious consideration.

Pro: Online Shopping is usually more convenient.

Online shopping appeals to consumers because it's convenient. They can do it from the comfort of their own home. It takes less time and effort, and it allows consumers to compare prices and features of products with ease.

When consumers know it takes little effort to do something, they are more likely to do it. This is especially true of the 21st-century consumer. People can shop online anytime, anywhere which makes it exceptionally popular.

Con: Shipping is expensive.

Some customers may be quick to purchase online if there's a great sale. But sometimes customers forget about the additional cost that will be applied at checkout: shipping. Shipping can add a significant expense to online orders. Sometimes the cost of shipping is enough to deter customers from making a purchase. This can make your online business less lucrative than you'd hope.

It's not just the cost of shipping that's problematic. Sometimes it's also the time that it takes a package to arrive at a customer's house that deters them from making a purchase. People love instant gratification, especially in our modern world. They get impatient easily. And sometimes they simply may not be able to afford to wait 2-5 business days before getting a product. This is something else you'll have to consider when deciding on what type of retail business to start.

Pro: You don't have to worry about zoning laws.

Another advantage of owning an online-only business is you don't have to worry about following your local zoning laws. You have a lot more flexibility about where you can run your business, as long as you have an Internet connection. Many e-commerce sellers choose to run their businesses from the comfort of their own homes! It's one less regulation your business will have to worry about adhering to.

Summary

There are pros and cons to both types of retail. With a brick-and-mortar location, you can create customer loyalty by building relationships and simplifying the return process. Taxes are also less of a headache. But your sales will be limited to your operating hours. You'll also have to go through more extensive hiring, which is an additional expense.

On the flip side, an online store has minimal operating costs and is usually more convenient for the customers. You can work from anywhere without having to worry about zoning laws. But you could also lose sales by not making items physically available to customers and forcing them to pay for shipping.

Remember that you also don't necessarily have to choose between an online and brick-and-mortar retail location. You can do both! There isn't one correct choice for your store. Both retail and online have their advantages and disadvantages. The choice that's right for you will also depend on what kind of products you're selling.

I am an entrepreneur and writer focusing on startups and small business development. I share hard-won experiences as a successful business leader on my entrepreneurial resources blog, where I also regularly post business development tips, ideas, and suggestions, as well as product reviews for aspiring and established entrepreneurs. With a decade of entrepreneurial experience, I believe in leveraging on strategic partnerships and technology to help aspiring and established entrepreneurs discover, launch, and scale businesses digitally. I am the Founder and President of Negotium Concepts, LLC. a business consulting and development firm located in Indiana.
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