Bricks and clicks business modelBricks and clicks
is a business strategy or business model
by which a company attempts to integrate both online and physical presences. It is also known as Click-and-mortar
For example, an electronics store may allow the user to order online, but pick up their order immediately at a local store. Conversely, a furniture store may have displays at a local store from which a customer can order an item electronically for delivery.
The bricks and clicks strategy has typically been used by traditional retailers who have extensive logistical and supply chains. Part of the reason for its success is that it is far easier for a traditional retailer to establish an online presence than it is for a start-up company to employ a successful pure dot.com strategy, or an online retailer to establish a traditional presence. This strategy has contradicted analysts who believed that the internet would render traditional retailers obsolete through disintermediation.
Advantages of the model
Click and mortar firms have the advantage in areas of existing business models and products. In these cases it is better to retain ties to your physical company. This is because they are able to leverage their competencies and assets, including:
Pure dot.coms, on the other hand, have the advantage in areas of new e-business models that stress cost efficiency. They are not burdened with brick and mortar costs and can offer products at very low marginal cost. However, they do tend to spend substantially more on customer acquisition.
- 1) Leveraging their core competency. Successful firms tend to have one or two core competencies that they can do better than their competitors. It may be anything from new product development to customer service. When a bricks and mortar firm goes online it is able to use this core competency more intensively and extensively.
- 2) Leveraging existing supplier networks. Existing firms have established relationships of trust with suppliers. This usually ensures problem free delivery and an assured supply. It can also entail price discounts and other preferential treatment.
- 3) Levering existing distribution channels. As with supplier networks, existing distribution channels can ensure problem free delivery, price discounts, and preferential treatments.
- 4) Leveraging brand equity. Often existing firms have invested large sums of money in brand advertising over the years. This equity can be leveraged on-line by using recognized brand names. An example is Disney.
- 5) Leveraging stability. Existing firms that have been in business for many years appear more stable. People trust them more than pure on-line firms. This is particularly true in financial services.
- 6) Leveraging existing customer base. Because existing firms already have a base of sales, they can more easily obtain economies of scale in promotion, purchasing and production; economies of scope in distribution and promotion; reduced overhead allocation per unit; and shorter break even times.
- 7) Leveraging a lower cost of capital. Established firms will have a lower cost of capital. Bond issues may be available to existing firms that are not available to dot coms. The underwriting cost of a dot com IPO is higher than an equivalent brick and click equity offering.
- 8) Leveraging learning curve advantages. Every industry has a set of best practices that are more or less known to established firms. New dot coms will be at a disadvantage unless they can redefine the industries best practices and leap frog existing firms.
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