Brick and Mortar

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Updated August 22, 2020

What Is Brick and Mortar?

Brick and mortar is a term used to describe physical locations or outlets, typically in retail or other consumer facing businesses. The use of the term “brick and mortar” has evolved over the last two decades as the geometric proliferation of online shopping, or e-commerce, has changed the landscape of global consumerism.

A coffee shop, bank branch, or clothing boutique is a prime example of a brick and mortar business as they involve consumer contact. These businesses are both local and unique to their specific location or are part of a national chain such as Starbucks or Wells Fargo.

How Brick and Mortar Stores Work

The timeline of a brick and mortar store begins with the business owner or company selecting a physical location. Presumably this is in a strategic, commercial location such as a main thoroughfare with heavy traffic or in a prominent shopping center.

For local entities, the business owner will deal with either finding a suitable location to rent or build. Larger national chains usually have a dedicated real estate department which handles all aspects of opening a location.

Once the real estate is secured, it is built out to the standards of the store or business which will be located in the space. This will include lighting, HVAC, interior design and in-store marketing aesthetics, fixtures, security, and, last but not least, merchandising in the case of a retail store.

Staffing will be completed before merchandising. If local, this is up to the business owner or whomever they delegate the task to. On a national level, hiring staff will be handled by the chain’s HR department either on site, on line or with a combination of the two.

When the location is ready for business, some sort of advertising program will be launched. This is one of the most challenging aspects of the process for a local owner due to limited access to capital. For larger, multi-location companies, this is one of the easiest parts of the process in that they posses scale, superior cash flow, and established processes.

Example of a Successful Brick and Mortar Store

One of the best examples of a successful brick and mortar store is Dollar General (NYSE: DG). The dollar or discount store space is known for their razor thin margins and fierce competition. Dollar General traces its roots back to 1939 and is a chain of over 15,000 variety stores across the U.S. 

Competing nationally with the likes of Dollar Tree (NASDAQ: DLTR) and other regional players, Dollar General has gained market share through an aggressive strategy of location growth and offering a wide selection of basic and convenience items, often branded under their own private labels, at affordable prices. The company continues to expand and now offers grocery items.

Brick and Mortar Stores vs. Online Stores

As online shopping via Amazon (NASDAQ: AMZN) and other e-commerce hubs continues to penetrate consumer households, traditional brick and mortar retailers have adapted to the digital landscape with the “click and mortar” strategy, meaning they have incorporated both online and offline (or physical) operations. This hybrid model typically offers consumers faster service due to logistical efficiencies and also the option to be an in-person experience for those consumers who desire it.

Retail colossus Walmart (NYSE: WMT) has moved forcefully into the e-commerce space through a handful of strategic acquisitions as well as creating hybrid delivery systems such as ship to store and grocery pick up. Walmart’s stranglehold on the retail grocery business recently compelled Amazon’s purchase of Whole Foods. The combination of brick and mortar with digital commerce is also extremely pervasive in the chain restaurant space with the use of mobile apps for food delivery and advance ordering.

Certain sectors are under pressure due to changing consumer preferences, to include banking and shopping malls. This is largely due to the costs associated with operating brick and mortar locations, though is also reflective of improvements in technology. Some surmise that online banking will eventually shrink the brick and mortar banking system as consumers choose the ease and speed of digital and are increasingly able to do almost everything online.