Click and Brick: Retailing Realities for the Future
Balasundram Maniam*, Sam Houston State University
Claudia S. Davis, Sam Houston State University
Gurinderjit B. Mehta, Sam Hosuton State University
Sanjay S. Mehta, Sam Hosuton State University
Department of General Business and Finance
Sam Houston State University
P.O. Box 2056, Huntsville
Texas 77341-2056, USA
Abstract: This article describes two approaches to selling, the “brick and mortar” type of retailing and the E-tailing
marketing approach on the Internet. The growth of the new companies on the Internet has newcomers and
established companies rushing to enter the “promised land” of the Internet. Companies and consumers use the
Internet to research their purchases, service, and competition. This article shows the similarities and the differences
of these two approaches, the pros and cons of marketing, and how many companies are successful and others fail. In
summary, this article shows the most effective ways to become successful and stay successful is to develop a
combination of each of these methods.
Key –Words:- E-Commerce, Internet, E-Tailing
2.
1.
Basic E-Tailing
Introduction
A fundamental idea about e-tailing (i.e.
electronic retailing) was that higher margins would be
the order of the day. Operating costs should have been
lower with the lack of needing to maintain a “brick and
mortar” store. The Internet retailer would be able to
operate out of a central location, require fewer
employees, and physical delivery would be outsourced.
Many of these employees would be either classified as
material distribution or clerical in nature removing the
need for a sales staff (Morganosky, 1997).
Distribution centers would be more efficient since
there would be no initial distribution to the “brick and
mortar” store but disseminated directly to the
consumer. Inventory could be controlled closer with
no stock out in retail outlets to worry about (Palmer,
1997).
Five years later, it is obvious now that these
things have not yet materialized. More distribution
centers are required to hold down shipping costs and
speed delivery. Customers not accustomed to dealing
with the manufacturers or wholesalers are requiring a
level of sales personnel to help them with their orders.
Consumers initially were using the Internet companies
as an electronic catalogue and pricing research tool.
Many savvy consumers use the on-line catalogues to
determine which product met their needs then
researched the consumer reviews for problems or
defects. The new dot-com companies experienced
many “hits” (persons reviewing their site-URL) but
sales would not consummated. The promises of higher
The sales potential of the Internet, will approach
$8 Trillion U.S. by the year 2004 (Davis, BuchananOliver, Brodie, 2000). Convenience is the key to the
Internet’s strength. It is available on demand 24 hours a
day, seven days a week. Surfing and browsing the
Internet has become in itself a popular form of
entertainment, recreation and education. The Internet is
like the Gold Rush in the 1800’s while others believe it
is like China, invest now for the future with not much or
any value today (Bloch, Pigneur, and Segev, 1996). A
survey as recent at 1996 indicated that of the top 100
retailers, 91 percent had an Internet “address” (called a
URL) but only 64 percent actually engaged in ecommerce on-line. The average business that did have
an Internet presence limited their focus to describe the
company and improve investor relations. Most of these
retailers used the Internet as a medium for
communicating information and for promotional
reasons rather than conducting sales transactions
(Morganosky, 1997). A review today of these same
top-100 retailers shows one can shop on-line, view the
product, view comments or reviews from other
purchasers, and compare pricing with other retailers.
Retailers are finding ways to add value to their sites by
running daily specials, issuing online coupons for repeat
orders, and offering special shipping for large orders.
Higher margins have never materialized and prices have
come under pressure, but traditional retailers are on the
brink of reaping big rewards from the Internet.
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profits have not been realized because consumers
would still purchase by more convenient methods.
3.
require service or technical expertise. These retailers
have a fixed market base with a specific customer
base. Micro Centers, Smith & Wesson firearms, and
Microsoft are examples of unique product companies
that may require a high level of expertise.
J. C. Penney Co., which has been selling online
since 1998, is seeing incremental sales growth per
customer by offering shoppers three ways to buy:
stores, catalogs, and online. Customers who shopped
all three channels spent $1,000 last year, about four
times more than people who shopped in just one
channel (Green, 2001).
Classification Of Internet Retail Stores
Internet retail stores have various types or styles
of outlets. The level of service and support to the
consumer classifies these basic types. The basic types
of retail classifications are:
 On-line store fronts – companies that have “brick
and mortar” stores and may sell items similar too
or the same as their physical outlets.
 Catalog sales – may be a company that does not
have a physical store but sells by catalog on-line
and by direct mail solicitation, such as a specialty
company that sells fine art or jewelry from the
Boston Fine Arts Museum to areas outside of
Boston.
 Content sites providing information and support –
may sell items but their main goal is to give
logistical or technical support of goods and
services, such as Microsoft technical support or
Hewlett Packard computer/hardware technical
support.
 Web traffic control sites, such as malls and search
engines – example would be Yahoo.com that has
retail sales but only through other Dot Com
companies. Directing consumers to specific sites
that sell products or services generates their sales
and profits.
The retailer’s intention can be determined by the
focus of the Internet site. Each of these distinctive site
types has the ability to either generate sales or
advertising revenues (Spiller and Lohse, 1998).
4.
4.
Market Awareness
Market awareness is paramount for retailers on
the Internet. Finding a retailer on the Internet may be
the difference between success and failure. A savvy
computer oriented consumer may have the ability to
use a search engine to find the product or company in
which they are interested. Most consumers may use
the dot com method but this may limit accessibility of
newer companies entering the market as the .com
domain is full or the name of the company may be
already been purchased in that domain. Many retailers
wishing to improve exposure will add their Internet
site location in direct mail campaigns, catalogues, on
the sides of delivery vehicles, and inside of “brick and
mortar” places of business.
5.
Virtual Shopping
The more innovative concept, whether it is a
new idea, new product, or new promotion, the greater
the risk. Traditionally, companies use marketing
research to minimize the risk (Burke, 1996).
Technological advances into virtual reality and
alternate media have improved research techniques and
opened larger cross-sections of consumers. Virtual
shopping has the ability to limit the distribution of
products to “brick and mortar” stores before testing the
marketability of a product or service. Traditional
marketing in a “brick and mortar” business yields a
traditional purchase if it appeals to the consumer. The
limitations on this type of marketing are dependent on
the appropriate product being marketed to the
consumer and the sales are limited to inventory on
hand at that location. If the item appeals to the masses,
then the sales continue until the inventory is depleted
or reordered. A “brick and mortar” business with an
Internet marketing site can utilize the site to beta test
new items and serve as a backup to reallocate items
from one sector of the country to another when
products may sell better in one market or the other.
This business will be able to take advantage of the
Marketing Strategies On The Web
Some retailers wish to expand the overall
market penetration to markets in which they are not
currently active. These retailers typically do not intend
to offer a broad based discount strategy but instead rely
on their name recognition and status of the product.
Service to the consumer is important but is not directly
attributable to the price. Examples of these are
Neiman Marcus, Nordstrom, or Tiffany’s.
Another market strategy stresses volume
business and is heavy into discounts. These retailers
focus on pricing over product. Service is not their
main focus. Their product line tends to be very broad;
Sam’s Club or Best Buy are examples of this type of
retailer and may or may not have a “brick and mortar”
store but are tied directly to a store of another name.
The last marketing strategy focuses attention to
service and product with price being a fixed constant.
These businesses have a unique product that may
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Internet in testing products but also have a physical site
for marketing of the products. An Internet only
business must rely on curious consumers or piggy-back
marketing with other sites for new items. Sales are
limited by exposure and the consumers’ inability to
physically touch the product and may be at a
disadvantage. In reviewing each of these types of
businesses, it is apparent that the integration of the
Internet with a traditional “brick and mortar” business
has a marked advantage over the Internet only or
“brick and mortar” only businesses (Fig. 1).
Figure 1
Integration of Internet Business with a Brick & Mortar Business
“Brick &
Mortar”
Business with
Internet
presence
“Brick &
Mortar”
only
business
a.
Internet
Only
Business
Figure 1
Brick & Mortar only- no Internet presence
Retail
Purchase
Internet
Purchase
Internet only- example- Amazon.com
No retail presence.
Brick & Mortar with Internet presence- flexible with business
capabilities in all market arenas.
Brick & Mortar with Internet presence captures the best of all
benefits from two of the most popular arenas. Exposures and
awareness from the two arenas create more traffic and hits on
websites. This inturn creates possibilities of increased sales.
Routine
Purchases
Staple items
The above figure (Fig.1) indicates the advantages of
the integrated businesses. The flexibility of the
integrated Internet and “brick and mortar” business or
“click and brick” companies offers consumers more
accessibility to local markets and the larger Internet or
worldwide market. This is valuable to consumers in
small towns or remote areas without access to regional
malls or large cities. All consumers have equal
opportunities to purchase from the fashionable and
upscale retailers. The specialty stores and megaretailers can now offer, via the “click and brick” retail
combinations, to a larger market share without
expanding the very expensive physical outlets.
5.
across.
Marketing on the WWW requires the
consumer to actively seek out the site or be drawn to
the site by curiosity or by interactivity. The goal of the
new marketing paradigm is to seek out the consumer
using traditional communications and blend in with the
new Internet marketing tools to attract and excite the
consumer.
A combination of these marketing
techniques, “click and bricks”, will yield a superior
marketing package. Using the Internet site to promote
the locations of the “brick and mortar” businesses have
also shown to increase in traditional business with
consumers that want a product immediately (Green,
2001). The “click and bricks” business has an
advantage in the beta marketing of products and the
ability to react to shifting market share of products.
Further, they may move items around to focus on
regional demand and fill in gaps in their marketing
strategy. The most important aspect of the “click and
bricks” technique from a marketing perspective is the
manner in which the Internet transforms these
New Marketing Paradigm
Traditional mass marketing communications
exists in the form of direct mail, billboards, newspaper,
radio, and television advertising. The key to this type
of marketing is to inform, persuade, and retain the
actual or potential customers and get the message
3
market researcher Jupiter Communications estimates”
(Businessweek, 5-2000). E-tailers fall into poor pricing
practices such as rampant discounts, free shipping, and
the desire to sell anything. Success is measured in
terms of sales rather than profits. Many e-tailers sell
things below cost and try making up the difference by
selling advertising space. The space is normally
purchased by other e-tailers and that will cause the
overall e-tailing market to show poor returns on
investment dollars. Jupiter Communications found
that 41% of online buyers were happy with dot-com
customer service. Improving service by calls to online
shoppers on customer service lines has improved sales
of some retailers by more than 60%. Repeat customers
account for 76% of some e-tailers orders
(Businessweek, 5-2000). The Internet creates a more
price-sensitive shopper. The free flow of information
enables people to be more price conscience. The
important point, though, is that this price pressure does
not only have an effect online – it also affects realworld prices and margins (Green,2001).
When
networking is so prevalent all profit margins will come
under attack. Companies cannot avoid this attack by
not selling their wares online.
marketing functions. Informational and the image of
having an “Internet presence site” drives the new
marketing paradigm and ultimately the consumer
(Hoffman, 1996).
6.
Wakeup Call To Dot Com Industry
Basic marketing indicates that if the marketers
cannot provide the time and place utility to customers
that they may lose interest in the purchase. Some
Internet sites are very “busy” and require long periods
to load. This delay may be exacerbated by the
browser’s limitations and timeout function. This
function interprets the long period required for loading
as a problem and will disconnect from the site being
loaded. The creativity of a Web site may contribute to
the long loading and make it difficult for the browser
to navigate through the Web site. Internet marketers
must remember the old saying, “Keep it simple.” The
navigation throughout the web site is also a key.
Software upgrades have improved searches and
chopped 10 seconds off the time it takes for some
pages to appear (Brown, 2000).
Long periods of
loading and difficulty in using common Internet
computer functions, such as the back, reload, stop, and
refresh buttons, may cause fatal errors and conflicts
with the consumers computer program. The average
Internet access provider still uses dial-up serves and
the availability and affordability of cable modems and
DSL access is still very limiting. America on-line still
boasts to be the largest Internet access provider with
Microsoft (MSN) rapidly closing the gap between
these dial-up servers (Hillis, 2001). This competition
has kept the growth and viability of dial-up providers
strong. Web site administrators and constructors must
deal with these issues to insure a smooth transition and
ease of use of the web site.
Profitability of Internet only marketers has been
a big disappointment for many start-up companies.
The Internet only basis of these start-ups was doomed
from the beginning mainly due to the lack of exposure
or heavy requirements for initial capital outlay left
these types of companies with a large debt that many
could not overcome. Even for the big companies that
started out with a large amount of venture capital, such
as Amazon.com, the road has been very rocky. The
combination of “click and brick” business ventures has
proven to be the optimal type of marketing platform.
8.
Disaster Turns The Corner
The 1999 holiday season was a disaster for Toys
‘R’ Us, with its online services turning Scrooge and
leaving kids crying by the empty Christmas tree. Gifts
did not turn up in time and this was an example of an
e-tailer unable to keep up with delivery or demand.
Toys ‘R’ Us formed an alliance with Amazon.com to
sell its toys online via Amazon.com networks. Toys
‘R’ Us one year later is basking in the glow of strong
earnings – up 21% in the Christmas, 2000, quarter and
16% for the full year (Newborne,2001). Toys ‘R’ Us
were humbled by the fact that they were not able to
master e-tailing on their own but in turn healed their
wounds with profits. Not only has Toys ‘R’ Us posted
a strong season, but it has also had the last laugh over
eToys, which filed for bankruptcy on March 7, 2001
(Neuborne, 2001). Strategic alliances of this type are
new to retailing and exemplify the impact of the
Internet. In the new arena of the Internet, rivalries
have developed but alliances look more attractive all
the time.
9.
7.
Attracting And Keeping The Customer
Price Of A Customer
Some brick and mortar companies are relying on
their brand names to attract new customers. Other
large retailers are offering low-cost or free Internet
services to attract first time online customers (Hillis,
2001). The attraction of the Internet still remains
convenience and low prices. Straying off this course
All marketers must conduct a cost-benefit
analysis of the cost of acquiring one customer and
must be weighed against the potential for those
customers’ sales. “The cost of gaining each customer
is around $6 for e-mail, a third the cost of direct mail,
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will tend to discourage the consumer and miss the
opportunity for the sale.
Electronic payment ability appears to be key to
the success of the individual company. Many of the
companies were “grounded” by their own limitations
and tended to have slow sales or no sales (O’Keefe,
O’Conner, Kung 1998). An e-tailer that required
payment by methods other than electronic tended to
slow the sale to the point of losing the sale. Secure
transactions across the Internet are a prime concern for
many potential customers.
Secure credit card
transactions over the Internet require cooperation
between the credit card company, the e-tailer, and the
consumer. Encryption of data is required but the
success of encryption relays on the ability of the
parties to exchange information, interpret the
information, and keep the information secure. “In
particular, by often making it necessary to separate the
settlement from the informational and contracting steps
in an acquisition, the security concern is a serious
obstacle to consumer-oriented E-commerce” (Zwass,
2000).
10
benefit both entities. The ability to establish your etailing business can only be enhanced with strong
partnerships. A web-based business could market the
goods online and handle customer service. A leading
“bricks and mortar” company would select
merchandise and negotiate volume discounts with
vendors then place those items in a strong
technological platform that is capable of handling
millions of customers. This would expand the strong
points of each company allowing for a strong
partnership.
A “brick and mortar” company with online
services, storefronts, and catalog sales has the greatest
chance for retail survival in the emerging e-commerce.
The theory that retailers should identify the 20% of
customers who provide 80% of the profits and market
specifically to them would have to be altered to a
specific marketing focus. The ability of technology
will allow for the 20% of each of the 3 types of sales
strategies- online, storefront, and catalog sales to be
identified and change the marketing strategy to focus
on these customers. For example, why send a catalog
to someone that has never bought from a catalog and
instead visits the store. Why not send out a small flyer
or post card with specials listed and the Internet site to
be visited. There are many ways to limit the use of the
advertising dollar and focus on your primary audience.
Offering previously unknown services and items
can help to improve margins and make customers more
brand loyal. The hard to find item or advanced orders
for upcoming products is a way of increasing loyalty of
the consumer. Franchise businesses may offer specials
and sole source items to customers to improve
margins.
Finally, the use of all three types of marketing
tools will insure the success of the marketer:
 Online – a Dot Com presence with various
facilities, such as product sales, new items,
services, technical support, and a gate way to a
separate URL that focuses on investor relations
and review of the company.
 Storefront – the “brick and mortar” outlet where
the consumer can look, touch, and test a product
prior to purchasing. Very useful for immediate
sales or if out of stock at that location, then the
consumer may purchase on-line.
 Catalog – the ability to combine on-line sales with
direct-mail advertising.
The stand-alone e-tailer that has but one outlet,
the Internet, will not be able to hold their margins and
will follow the path of so many others that have come
before them, bankruptcy. Advise from Robert Labatt,
research director at Gartner Group, a tech consulting
firm, the reality for pure-play retailer’s (Internet only
businesses) is “Investigate a brick and mortar partner.”
Customer Relationship Management
Use of the “click and brick” approach to
customer relationships allows for the business to react
to changes in consumer focus more rapidly. The use of
an Internet based business sector will allow for the
shopping and interest levels of a consumer to be
actively measured. This can be done by the use of
“cookies” which is an electronic data collector between
the on-line visitor and the “site” or URL. The
“cookie” collects data from the visitor on where in the
site the visitor reviews, how long at that site, and
communicates between the URL and the visitor. These
“cookies” can be used to compile the data and
popularity of a specific sector and how in-depth the
visitor checked the site. This can be used to review the
attractiveness of the items or how a beta test item is
received. Also help in the ability of the company to
enhance the site to visitors’ satisfaction and keep the
“click and brick” on track with their customer. It will
assist the “click and brick” with strategic planning and
help build the relationships and create a value with the
consumer, thus helping further assisting the company
with discovering what the buyer wants and providing
that consumer with the objectives desired. Buyer and
seller focus will be enhanced to the point of mutually
satisfying exchanges and yield higher sales and profits.
11
Conclusion
Strategic partnerships between web-based
businesses and “bricks and mortar” companies will
5
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Kung, Hsiang-Jui, Early adopters of the
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(Brown, 2001). Every retailer can take advantage of
the Internet and forming alliances can be very
beneficial to all parties. Integration of businesses is
the wave of the future and the e-tailer needs to
consider all its options.
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