According to 2024 data from the U.S. Bureau of Labor Statistics, 20.4% of businesses fail in their first year after opening, 49.4% fail in their first 5 years, and 65.3% fail in their first 10 years. These numbers are not meant to deter entrepreneurs, but they should be examined in-depth based on various factors. For example, factors that need to be considered include industry type, product type (fad, trend, stable, growing), market demand (current and forecasted), location, management team, financing, etc. In addition to these items, brick-and-mortar businesses face other variables that online businesses do not such as the below.

  • Competition from online shopping: Many customers prefer to shop online due to pricing and convenience.
  • High costs: Brick-and-mortar retailers have overhead expenses such as rent, utilities, and property insurance, which can be costly.
  • Market changes: Evolving consumer behavior, changing markets, and economic factors can be easier for online businesses to adapt to.
  • Innovation and technology: Online retailers have to adapt and focus on using technology and innovative business models to attract customers. Sometimes brick-and-mortars fail to do the same.

However, despite issues like the above, the trend towards shopping online began growing before the pandemic and then skyrocketed as a result of it, there is still a place for shopping in person. Customers, having had their fill of being at home after more than a year of social distancing, were ready to return to physical storefronts. A significant number of shoppers have always preferred to see, touch, and feel products before purchasing them. Yet considering that e-commerce sales show no signs of weakening, businesses are left trying to determine how to best balance their efforts in both buying environments. 

Online Competition

For those that prefer shopping online due to convenience and/or pricing, brick-and-mortar stores can counter this issue by offering much than just goods. Shoppers want engaging and personalized experiences that go beyond the traditional retail shopping. For example, more and more major retailers have started offering classes and/or complimentary workshops to their customers as Lululemon and Nike do with their running, yoga, and fitness classes at certain locations. Additionally stores like Tommy Bahama and Urban Outfitters added bars and restaurants to some of their locations, while Sur la Table offers cooking classes. These are experiences that allow shoppers another way to interact with their brand and help build brand awareness and loyalty.

High Costs

When it comes to high operating costs, online retailers have the advantage. However, as mentioned in What’s Popping Up?, pop-up shops are another way to attract customers for an experience they wouldn’t find online or at any other retailer. Temporary, short-term retail events have been a growing industry with even major companies hosting pop-ups as a way to increase brand awareness and draw customers into the store.

In addition to pop-up shops, retailers can make arrangements with certain artisans or artists, whose products complement the store offerings, to regularly rent a portion of the store where they can feature their products. Complementary product and/or service offerings, such as dog grooming once a week in a high-end pet boutique, create multiple draws to the location. It is important that businesses with a physical location regularly intrigue the customers to keep them interested, and being innovative is key.

Market Changes

It is important for all businesses to stay up to date on what the trends or forecasts are for their particular markets. For example, sustainable products show no signs of slowing in growth. There are many products, such as the ones mentioned here, that entrepreneurs can offer to benefit from this growing market. Vintage products, which happen to be a subset of the sustainable market, is in and of itself close to a $14 billion industry. Furthermore, while a vintage shop is already tapping into the growth in this segment, even within a particular segment, the demand for some products are higher than others. Therefore, knowing that it is important to have aviators or psychedelic print items in stock can make a difference in meeting monthly sales targets.

Innovation and Technology

Because technology continues to evolve, it is important that retailers use it to the best of its ability in order to gain and retain customers. Personalized products and services are very popular. Therefore, by using technology to personalize them, a retailer can tap into the segment that is drawn to personalization. For example, within the bridal industry, personalizing everything from tote bags to clothing items, is very popular. Also, offering in store pickup for online purchases, having scannable discount codes, and strategically sending coupons and discounts via text or email are ways stores can leverage technology to increase sales. For further ideas, read Fortune’s 15 Ways Brick-And-Mortar Stores Can Leverage Tech To Boost The Shopping Experience.

Having a physical location can be a wonderful dream come true for many business owners. However, it can be overwhelming when there are so many factors to consider, other than offering quality products and services. Therefore, it is vital to adopt a perceptive and responsive management approach that utilizes market research on established retail store practices (decompression area, traffic patterns, etc.), combined with innovative ideas that increase revenue and reduce costs. Ultimately, brick-and-mortar stores have the opportunity to grow and remain profitable if management does its research, is innovative, collaborates, and remains agile in its tactical and strategic plans.

If you would like to discuss in detail your particular business needs, please feel free to reach out to us.

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