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Click and Mortar

A business model that integrates a retailer's online and offline operations

What is Click and Mortar?

Click and Mortar is an omnichannel eCommerce business model that integrates online and offline operations. Customers can shop over the internet on the retailer’s website, and still be able to shop at the retailer’s brick and mortar shop. The business model provides customers with the efficiency of online transactions where goods purchased online are shipped to the customer within a short time, as well as enjoy face-to-face interactions with the retailer. The term “click and mortar” is derived from “bricks and mortars,” which refers to traditional companies with offline operations only.

 

Click and Mortar - Omnichannel eCommerce Strategy

Learn more in CFI’s e-commerce financial modeling course.

With the success of internet companies like Amazon, most traditional companies are turning to click and mortar models to reach more customers. Companies such as Nordstrom and Best Buy are benefiting from the click and mortar model due to the ability to provide customers with an enhanced shopping experience.

Customers gain the advantage of choosing whether to physical buy the products or enjoy the seamless online shopping experience. Either way, customers enjoy great flexibility, convenience, and more choices. The company also benefits from increased revenues since it can target online buyers using search engine ads and other marketing efforts.

 

From Bricks to Clicks

With the growth of the e-commerce industry, most brick and mortar businesses are setting up an online store where customers can browse and order products. Customers can then order the products and get them shipped to their home or at a specific pickup location near their workplaces or homes. Alternatively, retailers can provide an in-store Wi-Fi to allow customers to view offers while they shop at physical stores. The retailer can then use the customer data to make recommendations and provide discounts on specific products depending on their purchase history.

Retailers who sell high-end products like designer clothing, perfumes, jewelry and electronic products also prefer the click and mortar business model as an omnichannel way of reaching their customers. People who buy these products sometimes want to physically feel of the products before they can purchase them online. For example, a customer who wants a designer suit wants to know the type of fabric and size before making an order online. If customers do not want to wait for shipping, they can buy the item at the physical shop or order it online and get the product delivered to a physical drop location near their home or place of work.

 

From Clicks to Bricks

While traditional businesses are integrating online stores into their model, some online-only retailers are setting up physical stores to increase their customer experience. The main reason for integrating offline operations into their model is to provide the customers with an opportunity to see, touch and test the products before making an order. Some customers lack the confidence to purchase certain products online either because the items may become too big, too small or be different from what they were looking for. A physical store acts a showroom where customers can come and experience the products they see online.

Online retailers also benefit from reduced marketing expenses when they go offline. An online-only business incurs a lot of costs on marketing to bring traffic to their website. However, if the business wants to scale down its marketing costs, a physical store can bring additional customers without spending too much on advertising. A physical store also helps companies to establish themselves as the market leaders in specific industries since most customers tend to recognize a brand with its physical location.

 

Modeling an eCommerce Business

Building a financial model for an eCommerce business (with both bricks and clicks) is just like any other retail business. The model usually begins with website traffic, then conversion rate, order value, variable costs, fixed costs etc., until arriving at the profit and cash flow.

 

e commerce financial model example

 

Advantages of Click and Mortar (Omnichannel) Business Model

Lower costs

A click and mortar business helps reduce internal and external inefficiencies like labor, delivery costs, and inventory. Operating a physical store often involves hiring a high number of personnel to serve customers. Running an online store will mean that the business will need to automate some of the processes and only need a few in-house staff to manage the physical shop and operate the online store. It is also less expensive to set up an online store compared to setting up a physical shop.

 

Access to wider market

Operating both online and offline business provides access to a broader market. Operating a physical store limits the business to the geographical location in which it is located. Integrating an online store into the business gives the business access to a broad market outside its geographic area of operations. Plus, customers can access product information and make orders 24/7 without necessarily going to the physical stores. Customers who find the products online and want to try them first can visit the physical stores rather than going to another retailer.

 

Improve customer trust

Click and mortar businesses can earn the trust of their customers more than an online-only store since customers can visit the physical shops to try items first or to return damaged products. Buying from a web-based business comes with a lot of risks since customers may be afraid of buying products from a business without a physical address. Also, face-to-face interactions help restore confidence among buyers who are skeptical about online transactions.

 

Value-added services

A click and mortar business can provide an added value to the customers through loyalty programs, logistics integration, and buyer guides. Selling products online allows the business access to customer’s information like emails and buying behavior that the business can use to offer discounts and direct offers. Logistics integration allows customers to choose the most convenient channel to pick up their products, either physically, at the pickup locations and get the product delivered to their doorstep. Buying guides provide pre-purchase information about a product that will help buyers make a sound decision.

 

Challenges of Click and Mortar (Omnichannel) Businesses

Channel conflict is likely to arise when a business undertakes both online and offline operations (aka adopts an omnichannel strategy). When the online store reports better revenues than the physical store, the business may focus its attention on the online business and neglect the physical store. This may lead to the loss of the business’s loyal customers who are more comfortable with the physical shop than the online store.

 

More Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

  • Guide to e-Commerce
  • Startup Valuation Metrics (for internet companies)
  • Financial Modeling for e-Commerce Businesses
  • Valuation Methods

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