What does retail mean?
Retail is the process of selling goods and services directly to consumers. It's done via multiple sale channels in a bid to make a profit.
And a retailer?
A retail transaction is usually complete once the buyer pays for the goods or services received. Big retailers such as Amazon, Walmart, Tesco, and Sainsbury's are designed to display goods from manufacturers or wholesalers. They are later sold to the consumers in line with the mark-up pricing technique.
There are specific commodities in the market which require a retailer to be duly registered. If for instance, I want to sell Apple products to the consumers in my store, I need proper documentation which ascertains that I'm an authorized dealer. Remember, I need to transfer the product guarantee from the manufacturer to my customers in good faith.
This supports the basic reason why it's highly advisable to buy electronics from certified retailers. In case the product has manufacturer defects, a buyer is protected by the warranty which contains an effective return policy. In most cases, retailers don't sell goods which they've manufactured on their own. Rather, they work as intermediaries between the manufacturer, distributor, or wholesaler and the end buyer.
At this point, you must be privy to the fact that notable retailers like Amazon or even Alibaba aren't the only players in the market. Interesting enough, a retailer could be that small store around your block which sells branded clothes. In the ordinary run of things, retailers often sell such kind products to their potential customers;
- furniture and other household goods
- automotive accessories
Retailers' major functions
A retailer is expected to deliver outstanding services to consumers.
Typically, the wholesalers get their products from manufacturers. A retailer will then source the products from the wholesaler. It's that simple. A manufacturer puts all efforts to look for raw materials, labor and produce a finished product. A retailer will then need to sell the goods to the consumer at a recommended retail price.
All the warehousing and storage task are left at the hands of retailers. It's part of the entire logistics process. But practically speaking, they can't do it alone. They will need to outsource the services of global order fulfillment platforms.
To maximize customer satisfaction, there are instances where a retailer has to offer goods to the buyer on credit. As a result, they need to include a risk management plan so as not to accumulate so many bad debts. Aside from that, the product quality needs to be at the forefront of a merchant's objectives.
And the logic is quite simple. To avoid returns or even chargebacks which ultimately reduce your profit margins. They introduce new products in the market and reach out to all potential customers to educate them on the same.
How do retailers promote their products?
There are so many marketing strategies open to retailers. At this day and age, social media has gained traction over traditional advertising methods. Sponsored Facebook and Instagram ads or even email marketing are some of the dominant strategies retailers use to advertise their products. In other words, being visible in the social network is a winning game plan which the merchants often count on.
What seems to work for most retailers is branding. Having a unique name, and logo makes the customers build confidence in your products. Retailers can source products from distributors and customize the packaging as a means to promote their business brand.
Flash sales are the new norm in the E-commerce industry. It's a means to catch the eyes of customers. After all, the merchant will sell products at a very low price which lures the customers into making a purchase.
Brick and Mortar Vs E-commerce Retail
It's beyond question that working without a tried and tested plan is a frightening dream for most retailers. These two avenues are the most dominant strategies for nearly all retailers. The latter is, however, gaining momentum in a number of ways. To begin with, there are exceptional e-commerce retail platforms which are proven to be highly productive for most retailers. Among them include;
- Shopify (full review here)
- BigCommerce (full review here)
- WooCommerce (full review here)
- Volusion (full review here)
- 3dcart (full review here)
Just to name a few.
It's quite evident that the drop-shipping business is here to stay. Unlike a brick and mortar store, a retailer doesn't need to have a storefront somewhere around the streets. They just need to upload their products on their online store account. It's undoubtedly cheaper for a retailer to sell their products online than going for a physical location.
On the other hand, you ought to consider the market needs. Things like consumables will definitely need a retailer to invest in a brick and mortar store to enhance quick service delivery.
This is a common marketing strategy which is currently taking center stage. Retailers understand how overwhelming it's to be a jack of all trades. Niche retailers are those merchants who deal with specific products in the market.
And that's not all.
To make the most out of such a venture, a retailer needs to be acquainted with the target market. In addition, they closely monitor where most customers come from. With the prevalence of Google Trends, one can easily know how a specific niche has garnered its popularity in a certain region.
Suppose I want to choose gym wear as my niche, I get to see the score which equates to the frequency at which the keyphrase and its related topics have been searched on Google. Retailers find it easier to focus on a specific niche since they can put all their energy on marketing the product.
Does a Retailer need a Point Of Sale?
A Point of Sale is quite essential for many retail store owners. What proves its significance is the capacity to handle payments from the customers. A mobile payment processor is a must have in the retail business. Also, the retailer needs to use a system which sorts the inventory in a systematic manner.
A retailer needs to work with accurate figures and this is where a powerful POS retail system comes in. If a retailer opts to sell items online, then the entire checkout process ought to be seamless.
In any retail business, a store owner needs to record all payment transactions. How else will they know the actual profit margins? Besides that, a proficient POS system helps a merchant get all stock level updates for all sales. While hunting for the most suitable POS system, retailers should be mindful of the customers who make payments via credit cards. They need to consider using a card reader which accepts major card brands and easily integrates with the POS system.
Here are a few basic terms in retail
- Stock keeping unit- It's more of an inventory coding system. Each product is given an SKU number to identify the variant, the price and the brand among other features.
- Cash flow- It refers to the liquidity aspect of the business. A retailer needs to keep track of how much money is coming in and the amount coming out of the business. The merchant needs to make a provision for all debts and operating expenses so as to run the business efficiently based on the cash flow.
- Depreciation– This is the decrease in value of the asset one uses to operate the retail business. The merchant sets aside some money to replace the assets once they deplete their lifespan.
- Gross Profit– It's the total amount of money a merchant makes after they deduct all costs attached to making and selling a product. This includes services which come as part of the sale such as shipping if at all it's the retailer who has to pay for it. It needs to reflect on the income statement and to calculate it, you need to subtract the cost of goods sold from the total sales.
- Inventory turnover- It's a ratio which indicates the total number of times which the inventory has been used or replaced over a stipulated period of time. This compares the stock levels over the total number of sales in a year. To calculate the Inventory turnover, one needs to divide the total cost of goods sold over the average inventory in a specific time which is usually one year.
- Profit & Loss Statement- It's a report which gives a clear depiction of all the revenues and expenses over a specific period. It's also referred to as an income statement. It helps to analyze how the business is making its sales, all expenses, and the total revenues.
- Selling expenses- These are all the costs which accrue while marketing and distributing a product. The marketing expenses come about due to the advertising fees on social media. If a retailer is selling via a third-party e-commerce channel like Shopify the need to pay for the plan on a monthly basis.
The term retailer can also be used to describe the less traditional sellers as well. An artist who sells carvings or paintings at markets or fairs is also a retailer. So is a food truck if they are selling to the public with the aim of making a profit.
In addition to selling products, retailers can also be service providers. For example, most appliance retailers also offer insurance on their products in the form of extended warranties, and some also offer delivery, set-up or repair services.