RETAIL: CHARACTERISTICS, ADVANTAGES, DISADVANTAGES AND EXAMPLES - ECONOMY - 2025

The retail is the process of selling products or services to consumer customers through multiple distribution channels, to obtain profits. Retail meets the identified demand through a supply chain.

Retail refers to reselling activity. A retailer is any person or organization that is a reseller and sells products or services directly to consumers or end users.

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It is the most direct original form of a business. It is a clear exchange between the merchant who sells a product and the customer who buys it.

Some retailers may sell to business customers, and such sales are called non-retail activities. The legal definition of retailers specifies that at least 80% of sales activity must be for end consumers.

The term retail is often applied when a supplier places small orders from a large number of end consumers, rather than placing large orders from a small number of wholesale, corporate or government customers.

characteristics

Retail often occurs in retail stores, but it can also occur through direct selling, such as through vending machines, door-to-door sales, or electronic channels.

Retailers buy items directly from a manufacturer or wholesaler, and then distribute them in small quantities to end consumers, who are in need of those items.

Retail can be done in stores and warehouses. Includes department stores, shopping centers, and markets.

Retail reports

Retail reports are a key economic indicator and reflect statistics obtained from thousands of retail outlets and food service entities.

Consumer spending can represent two-thirds of GDP; therefore, retail is seen as a major driver of a nation's economic health.

Assortment and depth

For a retailer, finding the right balance between assortment and depth can be the key to success. An average supermarket may have 30,000 to 60,000 different product lines (product assortment), but may have up to 100 different types of toothpaste (product depth).

Specialty retailers typically have fewer product lines, but will typically have greater depth.

Online retail

With the growth of online businesses, retail does not have to be a face-to-face transaction, but it has to be done without intermediaries. This one-on-one aspect introduces a degree of transparency and accountability into retail.

As a customer, you don't have to go through a third party to express your needs or comments. As a merchant, you can promote your offers on your own terms and respond to customers first-hand.

Advantage

Price

Since retailers sell their items directly to end customers, for those same products they can earn more than wholesalers, because they must leave enough space in their pricing structures for retailers to be able to sell these same items at a profit.

A merchant who sells a shirt directly to his customers may demand the full price. However, a wholesaler supplying the same shirt must sell it at a discount to retailers, so those retailers can earn a piece of the cake as well.

Marketing

Retail provides many marketing opportunities, from offering sample food products to dressing rooms to try on clothing with personal recommendations.

These marketing strategies based on personal interaction help to sell items at retail and develop relationships that can lead to repeat business.

Relationships are the foundation for future sales and an important factor in a customer's decision to select a company's products or services over the competition.

Online retail

Online retail offers the advantage of a retail pricing structure with the added boost of drop shipping, if this model makes business sense.

By ordering directly from manufacturers and wholesalers only when customers order, you avoid the need to dedicate capital and space to inventory waiting to be sold.

Disadvantages

Economy of scale

Retailers are inclined to operate smaller companies than wholesalers, thus handling less volume. As a consequence, there are fewer opportunities to obtain an economy of scale.

Marketing options

Marketing options can be expensive and require both additional labor and infrastructure. For example, staff to give advice and hand out samples, or additional floor space to set up changing rooms.

A certain amount of staff training and selective hiring is required to ensure the kind of personal interaction that maximizes the company's retail potential.

Some retailers may have an unnatural feel for personal marketing. They may also struggle to reach customers and use marketing resources profitably.

Online retail

Online retailers don't enjoy the marketing benefits of meeting customers face-to-face and building strong symbiotic relationships.

Examples

Department stores

They sell a wide range of merchandise organized by category in different sections of the physical retail space.

Some department store categories include footwear, clothing, beauty products, jewelry, household items, etc. Some of the department store retailers include Macy's, Nordstrom, and JCPenney, among others.

Grocery stores and supermarkets

They sell all kinds of food and beverage products, and sometimes also household products, clothing, and electronics.

Retail warehouses

They are large, low-cost warehouse-style facilities with a wide variety of products packaged in bulk and sold at lower prices than retailers.

Specialty Retailers

They specialize in a specific category of products. Toys 'R' Us, Victoria's Secret, and Nike are examples of specialty stores.

Convenience store

Typically, it is part of a retail store that sells primarily gasoline, but also sells a limited range of self-service products and car care products at a "convenience" price, higher than a physical store.

Discount retailer

It sells a wide variety of products that are often generic brands, at prices below the retail price.

Discount retailers such as Family Dollar and Big Lots frequently get clearance and discontinued products at prices lower than wholesale prices, passing these savings on to their customers.

Online retailer

Sell ​​from an online shopping website and ship purchases directly to customers at their homes or workplaces, without all the expense of a traditional retailer.

References

1. Wikipedia, the free encyclopedia (2018). Retail. Taken from: en.wikipedia.org.
2. Investopedia (2018). Retail Sales. Taken from: investopedia.com.
3. Devra Gartenstein (2018). Advantages & Disadvantages of Retailing. Bizfluent. Taken from: bizfluent.com.
4. Robert Morello (2018). The Advantages of Retail Marketing. Small Business - Chron. Taken from: smallbusiness.chron.com.
5. Barbara Farfan (2018). Definition, Types, and Examples of Retail. The Balance Small Business. Taken from: thebalancesmb.com.