Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is the sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly from or through a wholesaler, and then sells in smaller quantities to consumers for a profit. Retailers are the final link in the supply chain from producers to consumers.
Retail markets and shops have a long history, dating back to antiquity. Some of the earliest retailers were itinerant peddlers. Over the centuries, retail shops were transformed from little more than "rude booths" to the sophisticated shopping malls of the modern era.
Retail operations center on obtaining goods in the needed quantities and placing them where customers will buy them, which makes purchasing and supply management core parts of retail strategy. Retail strategy is often supported by periodic environmental scanning and structured analysis of markets, customers, internal capabilities, and competition. Day-to-day decisions are often described using the retail marketing mix, commonly summarized as six "Ps": product, place, promotion, price, personnel, and presentation (physical evidence). Place decisions include location, operating hours, and access, and many retailers have expanded into multichannel models that combine physical and online retail. Pricing strategy and tactics can include discounts, everyday low pricing, high–low pricing, loss leaders, bundling, and psychological pricing, alongside planning for customer payment modes that carry handling costs. Retail labor needs often vary by time and season, which has supported flexible scheduling; one cited estimate is that in 2012, about 70% of United States retail workers were part-time. Over time, many retailers have emphasized longer-term customer relationships rather than one-time transactions, while also investing in store design (layout, lighting, music, signage, and "decompression" areas) to shape the shopping experience.
In the digital age, an increasing number of retailers are seeking to reach broader markets by selling through multiple channels, including both brick and mortar and online retailing. Digital technologies are also affecting the way that consumers pay for goods and services. Retailing support services may also include the provision of credit, delivery services, advisory services, stylist services and a range of other supporting services. Retail workers are the employees of such stores.
The retail sector is economically significant and employs large workforces. Most modern retailers typically make a variety of strategic level decisions including the type of store, the market to be served, the optimal product assortment, customer service, supporting services, and the store's overall market positioning. Retailers also expanded omnichannel capabilities, such as buy online and pick up in store, and some firms tested automation, such as cashierless store formats.
Etymology The word retail comes from the Old French verb , meaning "to shape by cutting" (). It was first recorded as a noun in 1433 with the meaning of "a sale in small quantities" from the Middle French verb retailler meaning "a piece cut off, shred, scrap, paring". At present, the meaning of the word retail (in English, French, Dutch, German and Spanish) refers to the sale of small quantities of items to consumers (as opposed to wholesale).
Legal definition and explanation Retail refers to the activity of selling goods or services directly to consumers or end-users. Some retailers may sell to business customers, and such sales are termed non-retail activity. In some jurisdictions or regions, legal definitions of retail specify that at least 80 percent of sales activity must be to end-users.Pride, W.M., Ferrell, O.C. Lukas, B.A., Schembri, S. Niininen, O. and Cassidy, R., Marketing Principles, 3rd Asia-Pacific ed., Cengage, 2018, pp. 449–50 In the banking industry "wholesale" usually refers to wholesale banking, providing tailored services to large customers, in contrast with retail banking, providing standardized services to large numbers of smaller customers. Retailing often occurs in retail stores or service establishments, but may also occur through direct selling, such as through vending machines, door-to-door sales or electronic channels.Pride, W.M., Ferrell, O.C. Lukas, B.A., Schembri, S. Niininen, O. and Cassidy, R., Marketing Principles, 3rd Asia-Pacific ed., Cengage, 2018, p. 451 Although the idea of retail is often associated with the purchase of goods, the term may be applied to service providers that sell to consumers. Retail service providers include retail banking, tourism, insurance, private healthcare, private education, private security firms, legal firms, publishers, public transport, and others. For example, a tourism provider might have a retail division that books travel and accommodation for consumers, plus a wholesale division that purchases blocks of accommodation, hospitality, transport, and sightseeing, which are subsequently packaged into a holiday tour for sale to retail travel agents.
Some retailers badge their stores as "wholesale outlets" offering "wholesale prices". While this practice may encourage consumers to imagine that they have access to lower prices, while being prepared to trade off reduced prices for cramped in-store environments, in a strictly legal sense, a store that sells the majority of its merchandise directly to consumers is defined as a retailer rather than a wholesaler. Different jurisdictions set parameters for the ratio of consumer to business sales that define a retail business. A common way to distinguish wholesale from retail is by the main customer:
Wholesale trade: mainly sells to organizations that will resell or use goods in operations (business-to-business). Retail trade: mainly sells to households/consumers.
Retail practices and operations
Retail procurement
Obtaining goods in the required quantities and locating them where consumers will purchase them are core retail activities, so purchasing and supply management are essential features of a retail strategy.Chartered Institute of Procurement & Supply, "Linking Strategy and Purchasing", CIPS Positions on Practice, n.d., page 3
The distinction between "strategic" and "managerial" decision-making is commonly used to distinguish "two phases having different goals and based on different conceptual tools. Strategic planning concerns the choice of policies aiming at improving the competitive position of the firm, taking account of challenges and opportunities proposed by the competitive environment. On the other hand, managerial decision-making is focused on the implementation of specific targets."
The strategic retail analysis typically includes the following elements:Lambda, A.J., The Art Of Retailing, McGraw-Hill, (2003), 2008, pp. 315–26
Market analysis – Market size, stage of market, market competitiveness, market attractiveness, market trends Customer analysis – Market segmentation, demographic, geographic, and psychographic profile, values and attitudes, shopping habits, brand preferences, analysis of needs and wants, and media habits Internal analysis – Other capacities including human resource capability, technological capability, financial capability, ability to generate scale economies or economies of scope, trade relations, reputation, positioning, and past performance Competition analysis – Availability of substitutes, competitors' strengths and weaknesses, perceptual mapping, competitive trends Review of product mix –:: Sales per square foot, stock-turnover rates, profitability per product line Review of distribution channels – Lead-times between placing an order and delivery, cost of distribution, cost efficiency of intermediaries Evaluation of the economics of the strategy – Cost-benefit analysis of planned activities
At the conclusion of the retail analysis, retail marketers should have a clear idea of which groups of customers are to be the target of marketing activities. Not all elements are, however, equal, often with demographics, shopping motivations, and spending directing consumer activities. Retail research studies suggest that there is a strong relationship between a store's positioning and the socio-economic status of customers.Fill, C., Marketing Communications: Framework, Theories and Application, London, Prentice Hall, 1995, p. 70 In addition, the retail strategy, including service quality, has a significant and positive association with customer loyalty. A marketing strategy effectively outlines all key aspects of firms' targeted audience, demographics, and preferences. In a highly competitive market, the retail strategy sets up long-term sustainability. It focuses on customer relationships, stressing the importance of added value, customer satisfaction and highlights how the store's market positioning appeals to targeted groups of customers.
Retail marketing
A retail mix is devised for the purpose of coordinating day-to-day tactical decisions. The retail marketing mix typically consists of six broad decision layers, including product decisions, place decisions, promotion, price, personnel and presentation (also known as physical evidence). The retail mix is loosely based on the marketing mix, but has been expanded and modified in line with the unique needs of the retail context. Several scholars have argued for an expanded marketing mix with the inclusion of two new Ps, namely, Personnel and Presentation since these contribute to the customer's unique retail experience and are the principal basis for retail differentiation. Yet other scholars argue that the Retail Format (i.e. retail formula) should be included. The modified retail marketing mix that is most commonly cited in textbooks is often called the 4 (place, price, product, and promotion) or 6 Ps of retailing (see diagram at right).Lamb, C.W., Hair, J.F. and McDaniel, C., MKTG 2010 [or MKTG 4?], Mason, OH, Cengage, pp. 193–94 / The primary product-related decisions facing the retailer are the product assortment (what product lines, how many lines and which brands to carry); the type of customer service (high contact through to self-service) and the availability of support services (e.g. credit terms, delivery services, after sales care). These decisions depend on careful analysis of the market, demand, competition, as well as the retailer's skills and expertise.
Customer service is the "sum of acts and elements that allow consumers to receive what they need or desire from [the] retail establishment." Retailers must decide whether to provide a full service outlet or a minimal service outlet, such as no service in the case of vending machines; self-service with only basic sales assistance or a full service operation as in many boutiques and speciality stores. In addition, the retailer needs to make decisions about sales support, such as customer delivery and after-sales customer care.