January 29th, 2012 Bricks and Clicks Model
Bricks-and-clicks is a business model by which a company integrates both offline (bricks) and online (clicks) presences. It is also known as click-and-mortar or clicks-and-bricks, as well as bricks, clicks and flips, flips referring to catalogs.
For example, an electronics store may allow the user to order online, but pick up their order immediately at a local store, which the user finds using locator software. 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 model has typically been used by traditional retailers who have extensive logistics 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 for an online retailer to establish a traditional presence (including a strong brand).
The success of the model in many sectors has destroyed the credibility of analysts who argued that the Internet would render traditional retailers obsolete through disintermediation.
Advantages of the Bricks and Clicks model
Click and mortar firms have the advantage in areas of existing products and services. In these cases there are major advantages in retaining ties to a physical company. This is because they are able to use their competencies and assets, which include:
- 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.
- 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.
- Existing distribution channels. As with supplier networks, existing distribution channels can ensure problem free delivery, price discounts, and preferential treatments.
- 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.
- 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.
- 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.
- 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.
- 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 industry's best practices and leap frog existing firms.
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 tend to spend substantially more on customer acquisition.
Bricks and Clicks Model