What Is Retail?
The above question is a very basic one, though there remains some confusion regarding the exact nature, purpose and function of retail. One of the pillars of the supply chain, retail is of immense importance.
Succinctly, retail is the sale of goods or services directly to the end-user for consumption. Retail comprises the final step in the supply chain, and hence plays the important role of disseminating the finished products to the actual consumers.
In retail, the goods that are sold are not meant for further sales or business purposes. In general, retail sales are involved in moving individual or small quantities of items to the consumers. Goods are transferred from a single point of purchase, such as a store, directly to the customer.
At this point, two relevant and related terms must be discussed.
What is Retailer
Retailer is any business entity who is responsible for the final sale of goods to the consumer. A retailer can be a single person, a brick-and-mortar store or even an online seller. By definition, retailers are usually not involved in the manufacture of goods and services. They procure the goods from a supplier and are responsible for selling the same to the end-user.
What is Retailing
Retailing is the act or process of sourcing goods and/or services from a manufacturer, supplier or distributor and selling them to the end user. In a way, retailing forms a direct link between the customer and the rest of the supply chain.
With the above knowledge under our belt, we are now ready to look into the differences between the two interrelated but separate processes of retail and wholesale.
Difference between Retail and Wholesale
The most well understood difference between retail and wholesale lies in the fact that while retail is involved in selling small quantities of goods to individual customers, wholesale is more concerned with moving large quantities of product. So, while retail focuses on the sales of individual items, wholesale deals in bulk.
Also, must be understood that while end-users form the customer base of retail, for wholesale its other businesses, such as the retailers, who form the buyers. Wholesalers do not typically sell goods directly to the end users. As a result, they do not have to concern themselves with the nitty-gritty of retail sales. Instead they can focus their efforts on selling bulk merchandise to a limited number of retailers.
Finally, the most striking difference between retail and wholesale lies in the price. Wholesale price is always less than the retail price. The cause for this is that while retailers have to deal with additional costs such as display merchandising and advertising, wholesalers do not have to spend on these activities. As a result, they can move large quantities of goods at relatively lower prices.
How Retail Supply Chain Works
Here we are going to take a look at how the entire retail supply chain functions from start to finish. We have already understood two of the important players in this process: the retailer and the wholesaler. Now let’s understand how they are tied to the manufacturer, and where the entire chain ultimately culminates.
- The Manufacturer forms the first link in the retail supply chain. Manufacturers are the ones responsible for producing the finished goods using raw materials, labor, and technology.
- The Wholesaler comes in next. They purchase the goods from the manufacturers and sell them to the retailers in bulk.
- The Retailer, as we already know, is responsible for selling the final goods to the last link in the chain, the consumer.
- The Consumer is the end-user who purchases the goods from the retailers. Thus, movement of the goods stops with the consumer.
Function of Retailing
Now, let us take a look at some of the key functions of retailing.
Warehousing and Storing of goods are one of the key functions of retail. After procurement of goods from the wholesalers these must be stored properly in warehouses before being sold to the consumer.
Buying and Assembling of finished goods forms another important function performed by the retailers. Together with warehousing and storing, these two stands as the first and foremost operations.
Providing Information to the customers about the products on sale also falls under the purview of retailers. Further, such information must also be shared with the wholesalers to ensure proper supply of goods as per demand.
Demand Estimation for goods on sale must be done by the retailers. Appropriate demand estimation is the key to understanding the quantity of inventory required to fulfill consumers’ needs at any given time.
Marketing of course, is yet another necessary function of retailing. Proper retail marketing efforts, both traditional and digital, are of vital importance to the success of retail.
Types of Retailing
By now it’s clear that retail plays a very central function in distributing services and products. However, retail too comes in various avatars. Some of these are discussed below with examples.
Store Retailing is by far the most common form of retailing. As the name suggests, the items are sold at physical stores in this case. Examples include departmental stores, supermarkets and the like.
Non-store Retailing involves the sales of goods to consumers from non-store sources such as automatic vending machines.
Corporate Retailing is done through retail structures such as franchises or chain stores, which are more efficient and have a larger reach.
Mobile Retailers transact their business through mobile phone-based platforms, such as smartphone apps. The product is then shipped physically to the consumer.
Internet Retailers rely on websites for sale of goods, such as amazon.com. As they do not incur the usual overheads of brick-and-mortar stores they can sell items at relatively lower prices.
Service Retailing focuses on providing services rather than tangible goods. This can be done through offline as well as online platforms, such as software downloads and house maintenance work.
Retail has played a vital role in the supply chain for a long time. With the introduction of disruptive technologies and newer modes of retail, one can only expect the sector to make greater strides and bring better innovations to market for the benefit of consumers.
Image by Megan Rexazin