The term “brick and mortar” (also sometimes used as “bricks and mortar”) was created in contrast to online shopping or ecommerce. Before the internet grew large enough for online retail to become convenient and profitable, storefronts were just that – retail stores, outlets, storefronts, or just shops.
Although there was a dip in in-person shopping in the United States for several years, many consumers have returned to going to brick-and-mortar establishments – in part because there is some convenience, but more because they want a specific experience while shopping. As a business owner looking to start a brick-and-mortar store, it is important to understand how in-person shopping and online shopping work together, and how you can keep your customers satisfied with their overall retail experience.
The Fall and Return of Brick-and-Mortar Establishments
During the 2009 recession, many brick-and-mortar stores suffered financially. As the economy has recovered, many economists have discussed the differences between online and brick-and-mortar stores. For many years, logic dictated that the lower operating costs, portable shopping, and ease of setup made ecommerce solutions the obvious choice for anyone starting a business.
However, with customers seeking out in-person shopping experiences as the economy started to recovery, brick-and-mortar stores found themselves with competitive advantages over online retail.
- Talking directly with a person when questions or concerns arise
- Seeing, holding, and trying items before purchase
- Options for having the item immediately
- Feeling that the business is more legitimate
- No shipping charges
- An overall sensory experience
A report from PricewaterhouseCoopers' Global Consumer Insights Survey states that, between 2015 and 2018, the number of shoppers in brick-and-mortar stores on a weekly basis has increased: from 40 percent to 44 percent. The International Council of Shopping Centers found that 73 percent of customers they surveyed reported that they preferred to shop in person so they could try items before buying them. While ecommerce may have the appeal of being new, 94 percent of all retail sales still occur in brick-and-mortar storefronts; this amounts to, on annual average, $3.9 trillion for brick-and-mortars stores and $294 billion for online sales.
There is a lot of crossover, since 2009, between online and brick-and-mortar retail. The two are beginning to work synchronously, so as a business owner, understanding how patrons view these new “click and mortars” or “bricks and clicks” is crucial.
While brick-and-mortar storefronts are still an important and thriving business model, one of the most important draws into stores – foot traffic – is declining 15 percent annually. Modern shoppers go into brick-and-mortar stores with specific intentions rather than just casual shopping. And, about three-quarters of U.S. adults reported regularly shopping online, half report casually looking at items in stores then purchasing online, and two-thirds report browsing online stores and then purchasing items in a store. With more potential customers doing both, you as a business owner must find ways to bring shoppers into your store and have them return. In part, this means understanding the costs to you as a business owner of starting a brick-and-mortar store and the now requisite integration of an online presence.
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The Basics of Creating a Modern Brick-and-Mortar Startup
When starting a new business, there are a few basics you need to consider regardless of whether you are a brick-and-mortar or ecommerce retailer.
- Business plan: A business plan is a formal document that outlines business costs, the purpose of your business, and how you plan to become profitable over several years. Mission statements, reports on your competition, and plans to bring in your target market are all part of the business plan. While you can start an ecommerce store without a business plan – indeed, you can start a website, get a payment service, and start selling any merchandise you have with very little upfront investment – creating a business plan helps you understand the larger structure of your company and how it can grow and change. This means your business will stick around longer. Brick-and-mortar retailers greatly benefit from clear business plans because you can show them to banks for loans, investors for capital, and potential board members for large donations.
- Location: Even your online location – whether you retail through an existing ecommerce platform like Etsy or Amazon, or through a website you created – is important. Different demographics are drawn to business names and approaches to online marketing. Location is even more important for brick-and-mortar stores, as they must now consider online presence as well as potential foot traffic. Google search results, targeted ads, hashtag campaigns, and selfies in the business posted by influencers can all show off your beautiful storefront and the neighborhood it is located in, which can draw customers to you. However, foot traffic is still important, so sidewalks, parking, and compliance with the Americans with Disabilities Act (ADA) are very important factors. Keeping an attractive storefront and creating an inviting interior are also essential parts of your location. Understanding where your competitors are located and deciding how close you want to be to your competition is also important. As always, cost is a major factor.
- Financing: Brick-and-mortar stores are much more expensive to start than online shops. While paying for a domain name and payment processing service are the basic steps to starting an online shop, starting a true storefront requires a business loan or startup capital. You must pay for the space by renting, leasing, or buying the property; you must pay for stock for your store; you must pay for payment processing equipment; you must pay for shelves and display furniture; you have to pay for utilities; and you have to pay employees. Paying for advertising is an important component of both brick-and-mortar and online retailers.
- Marketing: The simplicity of starting an online store means few people who open these shops consider the cost of marketing. As a brick-and-mortar business owner, you must think about the issue of marketing – in print, online, on the radio, or on TV – and how those costs will affect your business’s stability. Thinking about this problem early can give a brick-and-mortar store more longevity.
- Basic business operating license
- Federal employer identification number (EIN)
- Zoning and land use permits
- Health department permits
- Sales tax licenses
- Fire department permits
- Occupational or professional licenses
- Any state- and city-specific licenses or permits
While few small online businesses stop to consider these operating issues, brick-and-mortar retailers have the long-term benefit of needing to think about them. If you combine your storefront with a strong online presence – even if customers cannot make purchases through your website – you can create a lasting business.
The upfront operating costs of a brick-and-mortar establishment can look intimidating.
There are various things to factor into financial estimates on your initial spending.
- Business entity formation can cost between $150 and $300.
- Annual insurance coverage ranges from $500 to $2,000.
- Working with an attorney can cost $200 to $400 an hour.
- Basic accounting consultation can cost $500 to $1,000 per hour.
- Printing, promotion, and online marketing costs can start between $500 and $1,500.
- Cash register or payment processing setup starts around $100.
- Opening a business bank account requires minimum $50.
- Storefront rental costs vary wildly depending on location, from $87.55 per square foot in Des Moines, Iowa, to $3,400 per square foot in the heart of New York City.
- Average U.S. cost for electricity per square foot is $1.47, and the average retail space is around 1,000 square feet.
- Business owners’ packaged insurance policies, which protect you and your employees, average $1,500 a year.
- Workers’ compensation, which is legally required, is about $1,400 annually.
If you choose to open a traditional storefront because you strongly believe your business needs a physical presence, you may be shocked by some of the above estimates. Starting a business with a real-world location, whether a warehouse or retail front, can appear imposing at first glance. There are some other methods for creating a physical presence in the world that still require financial investment upfront, but may cost less.
Alternatives to Traditional Brick-and-Mortar Startups
- Kiosks, which can be placed in areas with high foot traffic, increasing the chance that a passerby will make an impulse buy.
- Farmers market stalls, which can even benefit non-food businesses like jewelry or pottery artisans.
- Food trucks, which are portable.
- Mobile rental units, which can house a small amount of merchandise and park in a different location for greater visibility.
- Popup shops, allowing groups of small business owners to sell their wares together for much lower rent.
These options are lower cost than classic storefronts, but they must still be professional in appearance and customer experience. That requires investing in the creation of an appealing space, which can bring customers in and make them want to come back.
One recommendation for brick-and-mortar business owners involves creating an experience-rich environment for customers. The intention of any retail establishment, whether online or in-person, is to convert browsing into buying. Brick-and-mortar storefronts have a unique opportunity to create a calming or exciting environment for shoppers through architecture, interior design, lighting, and even sound and scent, to encourage casual shoppers to buy the items. Some larger retailers are adding cafes, bars, complimentary workshops, and fitness classes to their storefront to build loyalty.
Other options include hosting events or popup shops, working with other nearby retailers for discounts, and adding corresponding products or discounts to customers’ purchases.
These recommendations are all great, but if you are just starting out, there are some smaller, more consistent methods you can use to improve shoppers’ mood and experience.
Creating an Inviting Space
When you begin thinking of your customers’ sensory experience in your store or creating an experience-rich environment, you may worry that you’re pulling focus from your merchandise. You may be concerned about the cost of adding a café or performance space to your storefront, hiring people to run that business, and managing the times those experiences are available. There are small improvements you can make to your brick-and-mortar store that are much easier to manage. Music is one of the most overlooked yet most psychologically enhancing sensory additions you can bring to your store.
Research conducted by PPL, a music licensing company in the United Kingdom, reported that 51 percent of customers said they would spend more time browsing in a store that played music, and 76 percent stated that they were more relaxed in stores that played music.
Much of the research conducted on psychological associations with music, especially in commercial establishments, concludes that:
- Humans have emotional reactions to music.
- Time/tempo, pitch, and texture can all elicit specific emotional responses, which shoppers will associate with your items and your brand.
- Personal preference in music can moderate different individuals’ emotional experiences, so carefully chosen music can appeal to your business’s target demographic.
The tempo of a song – whether it is fast or slow – can influence the speed at which shoppers move through your store. Higher-pitched music tends to sound happier while lower pitches are associated with negative emotions. Familiarity with the music could influence a specific shopper’s trust and enjoyment of the establishment.
Even brand-new brick-and-mortar stores can use music to create a vibrant ambiance that draws in repeat customers. However, the use of music is a cost that few retailers stop to think about. Did you know that using a personal streaming service, like Pandora or Spotify, or even playing your personal CDs, is illegal in a brick-and-mortar store without specific licenses?
Music Licensing for Startups
When you purchase an album or pay a subscription price for ad-free music streaming on your personal devices, you have a specific license to play those songs privately. You can listen to them as much as you want, but you cannot play them for other people if there is any potential profit involved, even if the music is in the background. When a large enough group of people are in one location and can hear a specific composition, regardless of whether the music is prerecorded, this is considered a public performance of the work. To legally play a song, you must register with the performing rights organization (PRO) that manages the copyright and licensing distribution for the artist or negotiate directly with the copyright holder – the artist of their estate.
PROs license catalogues of music – often hundreds of thousands of compositions – so that when you, as a business owner, purchase a license, you can play any group of songs in that catalogue to create the specific atmosphere you want in your brick-and-mortar store.
The largest PROs in the U.S. include:
While it is very easy to obtain a music license online with these organizations, each PRO manages a different catalogue. Many brick-and-mortar business owners find that they purchase licenses with more than one PRO, so they can have access to a combination of songs that creates the best possible atmosphere in their establishment.
One easy way for a new brick-and-mortar establishment to reduce costs for music is to work with a music licenser. This gives you access to more songs in more catalogues.
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