What is Retail? The Complete Definition and Guide

What is retail, what are the components of a retail store, and how exactly does the retail industry work? Most people, whether you’re a store owner or an everyday consumer, are familiar with the term “retail”. The retail industry powers a huge part of our economy, and ensures we all have access to the goods and services we need.

However, while “retail” might be a familiar turn, few people truly understand the ins and outs of a retail business. This is particularly true now that the retail landscape is growing at such a rapid pace.

Over the years, we’ve seen the rise of various new forms of retail, from online retail (ecommerce) to mobile and social media sales.

Today, we’re going to dissect the basics of the retail space, and explore the different types of retail, the components of a retail store, and more.

What is Retail? The Basics

In the modern world, retail transactions occur through a “point of purchase” in the form of physical brick and mortar stores, websites, catalogs, and direct sales. Running a retail company is a little different than becoming a wholesaler. Wholesale transactions focus on the B2B landscape, while the retail space usually focuses on sales to the end-user, or customer.

While it’s possible for retailers to manufacture their own products, most take a different approach. Commonly, retailers purchase products from wholesalers in large quantities, to sell to the public in individual units, either through a physical store or online store.

This generally means the “retailer” often acts as the middle man in the commercial supply chain, ensuring goods reach their intended customer.

How Does Retail Work?

As the commercial world has evolved, the retail landscape has transformed with it. The exact stages involved in retail sales can vary depending on your business plan. However, there are various components of the retail process to consider in almost every case:

Internal planning and operations

Running any kind of retail store requires careful planning and strategy. Entrepreneurs need to set objectives and plan every detail to run a successful business, and deliver a great customer experience. Some key points to consider include:

• Market research: Crucial for retail marketing and sales, businesses must conduct in-depth research into their target audience. This helps with pinpointing customer preferences, and ensuring retailers choose the right variety of products to sell through the correct channels.
• Staffing: Even a small business in the retail world will usually require qualified staff members. Hiring the right professionals helps to preserve customer satisfaction, and ensure the retail company can run smoothly.
• Logistics: The logistics process in retail looks at how companies ensure their products can reach stores and customers. The logistics process may include planning how goods are ordered, stored, and transported to end users.
• Finances: Retailers need to determine how they’re going to fund their activities, from stocking their shelves, to paying for shipping and fulfilment. Financial data also needs to be monitored carefully to ensure retailers can pay the right taxes.
• Location: Retailers need to determine where they’re going to interact with customers. This could mean investing in physical in-store experiences, online shopping portals, and ecommerce websites.

Procurement

As mentioned above, most retailers sell a variety of products, but don’t create those items themselves. Instead, they work with specialty manufacturers and wholesalers to order large volumes of products at low prices, and sell them to end users.

The procurement process involves seeking out the correct vendors to work with, based on the price of the base products, the quality of services offered by suppliers, and their credit and payment policies. Some partners in the procurement world can also offer additional services.

For instance, dropshipping companies can handle both inventory and fulfilment, while print on demand providers can customize products according to the needs of your ecommerce business.

Fulfillment

Retailers must constantly work to fulfill the demands of their customers. Often, this starts with ensuring products can be delivered from a supplier to a customer. It can also include various other processes, such as:

• Storing and managing inventory: Business owners can store goods in warehouses to help bridge the gap between supply and demand. Effective warehouse management ensures storage facilities are positioned close to the end-customer or stores, to boost accessibility.
• Developing processes: Retailers often create comprehensive processes to facilitate the secure and efficient movement of goods from vendors to customers and stores. They also use tracking tools to monitor the movement of critical products.
• Delivery: Retailers need to work with logistical partners to ensure they can deliver items to customers. This could mean working with vendors to move products directly to customers, or having items shipped to a store for sale.

Marketing and promotion

Just like most business leaders, retailers need to invest heavily in promotional and marketing strategies to ensure they can reach their target audience. A strong marketing strategy ensures retail outlets, big box, and online stores alike can all connect with the right buyers.

Some types of retailers focus heavily on offline promotion, displaying their products in stores in ways designed to attract foot traffic. Many modern retailers also invest heavily in online promotion, using SEO, social media marketing, email advertising and other strategies.

Promotional tactics can also involve running regular sales, to entice customers with discount prices for their favorite products.

Sales, Service and Support

Both large and small businesses in the retail world need to ensure they’re constantly working to provide customers with an excellent experience. This involves leveraging a variety of tactics to streamline the sale of goods, provide a robust checkout experience, and delight consumers.

Retailers use point of sale (POS) solutions to process transactions quickly and efficiently in a range of environments. These systems can include hardware like a cash register or payment terminal for self-service, as well as software solutions for managing inventory and orders.

Many types of retail business also implement comprehensive strategies for customer support and guidance. They employ trained professionals to answer customer questions, deal with returns and refunds, and address technical issues on the behalf of consumers.

Types of Retail Businesses: Examples of Retail

As mentioned above, the retail landscape is extremely diverse. There are millions of retailers located throughout the world today, each focused on their own target audience. Retail is even the largest employment sector in the United States, with around 10 million employees.

The four main categories of retailer include:

• Art vendors: Creative vendors selling solutions like musical instruments, books, fine art, and other similar solutions to end customers.
• Food and beverages: Retailers who sell perishable and consumable products like produce, baked goods, and drinks.
• Soft goods: Soft goods include everything from clothing and shoes, to toiletries and self-care products.
• Hardlines: Hardline retail stores sell products which last a long time, such as cars, furniture, appliances, and technology.

Within these categories, there are also many different types of retail stores. Some of the most common examples of retail business types include:

• Department stores: Perhaps the most traditional form of retail store in the brick and mortar world, department stores like Target, and Macy’s allow customers to purchase a wide variety of products in person, in one environment.
• Discount stores: Discount stores stock discounted items, alongside lower-priced branded products to appeal to those with a limited budget. They specialize in the sale of goods from various industries. Kmart and Walmart are good examples.
• Big Box stores: A big box store specializes in a specific type of product, such as home décor, or electronics. Best Buy is a good example of a “big box” store, along with “Bed, Bath and Beyond”.
• Warehouse stores: Intended for higher volume purchases, warehouse stores generally require users to be members to access lower cost prices. Costco is perhaps one of the best-known warehouse stores in the world.
• Online retailers: Online retailers, or e-tailers sell products via the internet, and have them delivered directly to the customer. They usually don’t have a physical presence in the offline world, Common examples include Etsy and Amazon.
• Mom and pop stores: Otherwise known as niche or boutique stores, mom-and-pop stores sell small quantities of products, usually from a specific location. Local storefronts and corner shops are common examples of this type of retailer.
• Grocery store: Grocery stores or supermarkets focus primarily on selling consumable goods for everyday living, such as food, beverages, toiletries, and similar products. Some specialize in a specific type of product, like Whole Foods with its organic foods.

The Financial Elements of Retail Businesses

The average retail supply chain is made up of a number of crucial players. First, there are manufacturers, who are responsible for creating the goods retailers sell. Wholesalers or distributors work with these manufacturers to resell their products to retailers. Finally, retailers purchase products at a discount price, and sell them to customers for a higher price.

At each step in this comprehensive supply chain, there’s a profit margin, or markup included within the purchase. Usually, manufacturers choose their profit margin based on the cost of creating a product. The profit percentage is added to the price of the goods before they’re sold to wholesalers.

Next, wholesalers add a profit percentage to the cost of whatever they paid for the products initially. Then, before retailers sell products to customers, they add their own profit margin. This means even if a product cost $1 to make, it might be sold to wholesalers for $2, then retailers for $4 and finally to end-consumers for $8.

Quick Tips for Running a Successful Retail Store

Retail isn’t just essential in the American and English landscape, it’s a crucial part of the worldwide economy. Retail stores play a significant role in our everyday life, ensuring consumers can access products and services for their own use.

However, not every retail store is guaranteed to be successful. Business leaders need to ensure they’re delivering a convenient experience to their customers in the direct selling landscape. The best retailers stay one step ahead of their customer’s needs.

Here are some quick tips for running a successful retail store:

• Find a suitable location: Choosing the right location for your retail store, whether it’s offline, or online, is crucial to reaching the largest number of customers. Many retailers sell products through a range of channels today to increase their sales.
• Merchandise correctly: Merchandising is how your company displays its products. Both online and offline, drawing the right attention to the key benefits of your products and engaging your customers will help you sell products for a higher price.
• Choose the right price: Ensure you’re choosing a price that makes your products competitive and appealing. While it’s important to ensure you’re making a profit, you’ll also need to avoid pricing products too high if you want to retain customers.
• Listen to customers: Collecting customer feedback and responding to their needs and expectations will boost your chances of running a successful business. Happier customers lead to more sales, and higher revenue.

What is Retail FAQ?

What does retail mean?

The term “retail” simply refers to the sale of goods or services from businesses or individuals to an end user. Retailers buy products from wholesalers and manufacturers to sell them to consumers for a profit. This ensures everyone can access goods and services.

What are examples of retail?

Retailers sell products directly to end customers for their own use. Examples of retail can include everything from supermarkets, to a convenience store, speciality store, department store, online store, or a simple niche boutique.

What are the 3 types of retailing?

The three most common types of retailing include brick-and-mortar retailing, which involves traditional offline selling, online retailing, which involves selling products through online platforms, and mobile retailing. Mobile retailing involves buying and selling goods through mobile devices and apps, and it’s growing increasingly popular.