Customers don’t pay much attention to the type of business you’re operating.
As long as your service or product solves one (or more) of their problems, shoppers are more than happy to buy from you. Whether you’re running a physical store, an online enterprise, or a street side stall, it won’t make much difference to your clients.
However, as a business owner, the differences between various types of companies couldn’t be more important. The structure of your business determines everything from how much you need to invest up-front to how you interact with your customers, store your inventory, and market your company.
Before launching your company, you have to decide what type of business is best for you. You can start by investigating the most common types of businesses. Here, we’ll take a look at brick and mortar retailers, eCommerce, and service-oriented companies.
- What the primary differences are between brick and mortar, eCommerce, and service-oriented companies
- What the pros and cons of each type of business are
- How to choose the best type of business based on your needs and goals
- Why more companies are deciding to move online
What Is Brick and Mortar?
Brick and mortar retailers are traditional businesses physically located in a building. They offer services and products on-site and interact with customers face-to-face. Grocery stores, pharmacies, banks, and movie theaters are all brick and mortar retailers.
Anytime you shop at a mall, plaza, or stand-alone building, you’re in a brick and mortar business. At one time, retailers in real-life buildings dominated the business landscape. But the internet has created a permanent shift in what’s possible for companies.
The growth of technology hasn’t drowned out brick and mortar retailers, yet. With an estimated 442,597 physical business locations active in the U.S. in 2019, it’s still a popular business model for startups and large corporations alike.
Let’s explore the advantages and disadvantages of brick and mortar retailers to help you determine whether this is the type of business is best-suited for you.
Advantages of Brick and Mortar Businesses
- Face-to-face interactions: You have the opportunity to create a personal connection with customers by interacting with them in-person rather than through a screen.
- Trustworthiness: Customers automatically associate brick and mortar retailers with greater legitimacy, trust, and professionalism.
- Customer satisfaction: Shoppers feel more confident when they’re able to see and test a product or speak with a representative about a service in-person.
Disadvantages of Brick and Mortar Businesses
- High initial investment costs: There are significant up-front costs involved in getting a brick and mortar business up and running.
- Slow startup: It can take years of planning, finding investors, applying for loans, scouting the right spot, filling out paperwork, and waiting to start a brick and mortar business.
What Are eCommerce Business Models?
eCommerce sites have received a disproportionate amount of attention since the advent of online shopping — for a good reason. The online business model comes with a host of benefits for business owners.
eCommerce models are especially popular for small businesses due to lower start-up costs.
While traditional brick and mortar retailers are in the real world, eCommerce services exist in the digital world of servers, computer screens, and hard drives.
But, you don’t have to be a computer whiz to get started with an online store. There are numerous services that can make building an online business easier than you may have imagined.
It may seem like eCommerce sites are all pros and no cons, but that’s not the case.
Advantages of eCommerce Businesses
- Low startup costs: You don’t have to spend much money to get an eCommerce website up and running.
- Scalability: eCommerce businesses are easy to scale up and down, depending on your business’s performance fluctuations.
- Enhanced tracking capabilities: When you operate your business entirely online, it’s easier to find the right tools to help you track important metrics such as customer retention, conversion rates, and bounce rates.
- Quick startup: For the most basic eCommerce business, you can learn, plan, and launch in as little as one day.
Disadvantages of eCommerce Businesses
- High competition: The internet is a crowded marketplace. It will take some time for your brand to break through and pick up steam.
- Privacy concerns: Many customers feel insecure about giving personal information to unfamiliar websites, including mailing addresses and credit card numbers.
What Are Service-Oriented Companies?
Service-oriented companies are businesses that provide services to clients. This is in contrast to product-oriented companies that focus on offering physical goods to customers.
Both brick and mortar retailers and eCommerce business models can be service-oriented. It boils down to what you’re offering consumers. There are unique upsides to focusing on services instead of actual products — there are also downsides.
Advantages of Service-Oriented Companies
- No inventory: There’s no up-front investment for physical products, and you don’t have to maintain and track inventory.
- Scalability: Service-oriented businesses have more flexibility when it comes to growing over time. You can expand operations to meet demand, and change your pricing structure as needed.
- Easier fulfillment: It’s much easier to deliver a service than a product to a customer. You don’t have to work around delivery times, international suppliers, and other product-related obstacles.
Disadvantages of Service-Oriented Companies
- Difficulty standing out: Since anyone can get started in this space quite easily, it takes some effort to set yourself apart from the competition.
- More complicated hiring: Depending on the service, this business model might require you to hire highly-specialized employees, who are harder to come by.
Choosing the Right Type of Business Model for You
Now that you understand the fundamental differences between brick and mortar, eCommerce, and service-oriented companies, you can start thinking about which works best for you.
There’s no right or wrong answer. Focus on what model will most effectively facilitate success.
Start by answering some basic questions about your business:
- Are you selling services, products, or both?
- How much capital do you have for initial startup costs?
- Do you have any investors taking an active interest in your business?
- Is it necessary for you to have a physical location?
- Does your target audience spend more time shopping in-person or online?
- Do you live in an area with an active shopping scene?
Your answers will give you a better idea of what type of company is right for you. Reference the strengths and weaknesses of each business model to make sure you find the perfect match.
Pro Tip: Never let your business outgrow your sales. Don’t spend too much at the beginning, or you may realize you don’t have the sales to support your store down the road. It’s much easier to build up than scale down.
Why Brick and Mortar Retailers Are Moving Online
You’ve probably noticed that some businesses are both brick and mortar and online. Walmart has stores all over the U.S., but they also have a way to order most of their products online. Many more brick and mortar retailers are starting to add virtual storefronts.
Why operate with two different business models?
The popularity of the internet means that businesses can grow online — without spending a lot of money. With 300 million online shoppers expected by 2023, it’s easy to understand this motivation.
As of 2017, brick and mortar retailers still beat out eCommerce business models in total sales — $3 trillion compared to $450 billion.
But the trends tell a different story.
While brick and mortar sales saw a 2% increase from 2016 to 2017, eCommerce sales skyrocketed by 16%. These changes point toward a not-so-far-away future where online shopping is at least as popular as in-person shopping (if not more). Even now, 64% of customers prefer the convenience of shopping online.
Affordability and simplicity are other key motivations for businesses to make the transition to virtual storefronts. Between rent, utilities, down payments, permits, licenses, and remodeling, brick and mortar retailers demand more investment.
There are some critical differences between brick and mortar retailers, eCommerce business models, and service-oriented companies. Each type of business comes with advantages and disadvantages which make the decision about how your company operates a personal choice.
You have to understand your business needs and goals to determine which business model suits you best. You may even choose a combination of each. Join businesses of all kinds in embracing the power, flexibility, and reach of the internet-based models.
Bluehost can help you get there with our array of website services, including design, domains, and hosting. Start building your online business today.