"If concepts did not exist in physical reality as water exists in physical reality then the physical form of a wooden chair would be no different to any other wood. "
Exactly. A chair is both "chair" and not-chair. Without the concept of chair, you could still sit on the thing we call a chair. Chair is made up of not-chair. Wood, screws, or perhaps glue even. You could even call the thing we call as "chair" a flumble, and nothing would change at all.