Considering Opening a Retail Store? The Pros and Cons of Brick-and-Mortar Locations

Whether you’re a new business or an e-commerce brand seeking to enter the physical world, opening a brick-and-mortar location has benefits and drawbacks. Traditional brick-and-mortar sales are still higher than online sales overall; yet, many customers report browsing an online store beforevisiting a store’s physical location.

Here are some of the pros and cons small business owners should consider when opening a brick-and-mortar store.

Pro: Customers prefer to buy in store.

In 2018, the U.S. Department of Commerce estimated that only 14.3% of total retail sales occurred online. E-commerce sales have been growing year after year, and yet they remain only a relatively small portion of all sales.

The customer experience is one aspect that can’t be replicated by an online-only retailer. A recent survey by Retail Dive discovered that “the ability to see, touch and feel products ranks highest among the reasons consumers choose to shop in stores versus online.” Customers seek the opportunity to interact with a product and to ask you and your team questions before completing a purchase. There’s a level of trust a brick-and-mortar location achieves that an online store can’t quite reproduce.

Con: Selling online is cheaper.

A physical storefront is expensive to open and operate. Entrepreneur lists the cost of starting a retail store somewhere between $2,000 and $100,000, depending on your vertical. Your costs will depend on the size and location of your business, but here’s a rough example of what you can expect to pay to operate a retail store:

• Rent, which includes securing at least two years’ worth of financing.
• Licenses and permits, including an Employer Identification Number (EIN) needed for taxes, any state and local licenses required by the SBA, a resale certificate, a seller’s permit, and a certificate of occupancy. Depending on your business and state regulations, budget between $200 - $2,000 for licensing fees.
• Store fixtures and equipment, including display racks, POS systems, computers, and security equipment. This category can add up fast — POS systems can run you $2,000 easily.
• Business insurance, such as property insurance, workers’ compensation, and liability insurance. There are several types of insurance policies that are worth exploring as a small business owner.
• Marketing and advertising, including in-store signage, local marketing, and online ads. Expect to spend between $500 to $10,000 per month on spreading the word about your location.
• Renovations and design, especially when starting as a blank slate. It’s up to the renter or owner to make the space aesthetically inviting. Contractors generally charge between $50 to $100 per hour, depending on the type of work required, in addition to the cost of materials and cleaning supplies.
• Partner services, such as professional legal or financial advice. Work with a lawyer or accountant to keep your business running smoothly. These third-party partners can cost $1,000 to $10,000 or more.
• Ongoing operating expenses, including salaries, benefits, utilities bills, rent, vendor agreements and more.

Some of these costs, such as those related to your website, will also apply to running an online shop. Overall, however, the operating costs for running an online store are significantly lower than those of a brick-and-mortar location.

Pro: Offline may be a less crowded space.

Online-only retailers must compete for attention constantly. Amazon and Google have dominated the online space, requiring small businesses to pay a premium just to be noticed. Social media influencers and YouTube can thwart a business’s marketing efforts, and many small merchants spend an inordinate amount of time simply trying to be visible. Find the right real estate, and a brick-and-mortar location can take advantage of being physically present to close a sale.

Con: You still need an online store.

Unfortunately, a brick-and-mortar storefront does not negate the necessity of having an online presence for your small business. Locale limitations can prevent customers from finding you. Stores that rely on word of mouth and nearby foot traffic to make a sale are limiting their growth potential. Your online presence is integral to supporting your physical location. One study found that three out of four shoppers who find helpful, local information online are more likely to visit the store in person.Social media, or even just a listing on Yelp, can make a big difference in your retail store’s success.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.