Should Your E-Commerce Store Have a Physical Location?

By: Aries Payne

Since the COVID-19 pandemic, the retail industry has significantly evolved, quickly shifting to the digital space to meet more consumer needs. In fact, Forbes predicts that 20.1% of all retail purchases will occur online in 2024 and expects this number to grow to 23% by 2027. So, what does this mean for e-commerce stores that may now be considering a physical location? 

Although online shopping has grown exponentially—leaving some to believe brick-and-mortar stores are becoming obsolete—many retailers still succeed with storefronts. According to the National Retail Federation, nine of the top ten e-commerce websites are run by brick-and-mortar retailers. 

That said, if you’re unsure whether opening a physical location is the right move for your e-commerce business, here are some things to consider: 

Advantages of Brick-and-Mortar Stores

E-commerce businesses may decide to open a storefront for various reasons, the primary being that there are multiple benefits: 

• Increased Brand Awareness – A physical store can attract new customers who have not yet discovered you online. 

• Enhanced Customer Experience – With a physical location, people can see, touch, and try your products before purchasing them. A storefront also allows you to offer in-person customer service, which can help build a relationship between you and your customers. 

• Improved Fulfillment Options – A brick-and-mortar offers the convenience of quickly picking up online orders or making returns and exchanges. This can help save costs on packaging and shipping. 

• Boost Online Sales – The National Retail Federation says that a new physical store increases traffic to its website by an average of 37%. Customers who visit a storefront often convert to online shopping later. 

Disadvantages of Brick-and-Mortar Stores

Of course, opening a storefront also comes with its share of disadvantages: 

• Increased Overhead Costs – With a storefront comes the cost of managing it, such as rent, utilities, staff, and inventory management. 

• Operational Challenges – With an online and physical store, you’ll need to ensure your products, pricing, and promotions are consistent across channels. 

• Success Dependent on Location – Your storefront’s success will heavily depend on the foot traffic you get. If you pick the wrong location to set up shop, your sales and business could suffer. 

Other Considerations for E-Commerce Storefronts

The following are additional factors to consider when deciding if a brick-and-mortar could benefit your business: 

• Customer Base – Who’s your target consumer? Do they value an in-person shopping experience? 

• Product Type – Are your products better suited for online browsing or in-person interaction? 

• Budget – Based on your current cash flow, can you afford the additional costs of a physical store? 

• Order Volume – If you still have low order volume, opening a storefront may not be ideal until your business has more time to generate more customers and sales to support it.

• Pop-Up Shops – Rather than fully investing in a location, you could consider contracting with another business or commercial site to set up a limited-time pop-up shop. This could be a way to generate buzz around your online store while testing out the possibility of a physical retail space. 

Opening a location to support your e-commerce business could be the strategic move you need to increase your customer base and sales. However, if you’re still unsure if you should establish a brick-and-mortar, contact your nearest SBDC. Our business advisors can help you assess the state of your online store to determine whether a physical location is feasible for business growth.