Retail is the sale of goods and services from
individuals or businesses to the end-user. Retailers are part of an integrated system called
the supply chain. A retailer purchases goods or products in large quantities from manufacturers
directly or through a wholesale, and then sells smaller quantities to the consumer for a
profit. Retailing can be done in either fixed locations like stores or markets,
door-to-door
or by delivery. In the 2000s, an increasing amount of
retailing is done using online websites, electronic payment, and then delivered
via a courier
or via other services.
Retailing includes subordinated services, such as delivery.
The term "retailer" is also applied where a service provider services
the needs of a large number of individuals, such as for the public. Shops may
be on residential streets, streets with few or no houses or in a shopping
mall. Shopping streets may be for pedestrians
only. Sometimes a shopping street has a partial or full roof to protect
customers from precipitation. Online retailing, a type
of electronic commerce used for
business-to-consumer (B2C) transactions and mail order,
are forms of non-shop retailing.
Shopping generally refers to the act of buying products.
Sometimes this is done to obtain necessities such as food and clothing;
sometimes it is done as a recreational activity. Recreational shopping often
involves window shopping (just looking, not buying) and browsing and does not
always result in a purchase.
Etymology
Retail comes from the Old French word tailler,which
means "to cut off, clip, pare, divide" in terms of tailoring (1365).
It was first recorded as a noun with the meaning of a "sale in small
quantities" in 1433 (from the Middle French retail, "piece cut
off, shred, scrap, paring"). Like in French, the word retail in
both Dutch and German also refers to the sale of small quantities of items.
Types of retail outlets
A marketplace is a location where goods and services are
exchanged. The traditional market square is a city square
where traders set up stalls and buyers browse the stores. This kind of market
is very old, and countless such markets are still in operation around the whole
world.
In some parts of the world, the retail business is still
dominated by small family-run stores, but this market is increasingly being
taken over by large retail chains.Most of these stores are called high
street stores. Gradually high street stores are being re-grouped at one
location called Malls. These are more defined and planned spaces for retail
stores and Brands.
Types by products
Retail is usually classified by type of products as follows:
- Food products — typically require cold storage facilities.
- Hard goods or durable goods ("hardline retailers") — automobiles, appliances, electronics, furniture, sporting goods, lumber, etc., and parts for them. Goods that do not quickly wear out and provide utility over time.
- Soft goods or consumables — clothing, other fabrics, footwear, cosmetics, medicines and stationery. Goods that are consumed after one use or have a limited period (typically under three years) in which you may use them.
- Arts — Contemporary art galleries, Bookstores, Handicrafts, Musical instruments, Gift shops, and supplies for them.
Types by marketing strategy
There are the following types of retailers by marketing
strategy:
Department store
Department stores are very large stores offering a
huge assortment of "soft" and "hard goods; often bear a
resemblance to a collection of specialty stores. A retailer of such store
carries variety of categories and has broad assortment at average price. They
offer considerable customer service.
Discount store
Discount stores tend to offer a wide array of
products and services, but they compete mainly on price offers extensive
assortment of merchandise at affordable and cut-rate prices. Normally,
retailers sell less fashion-oriented brands.
Warehouses that offer low-cost, often high-quantity goods
piled on pallets or steel shelves; warehouse
clubs charge a membership fee.
Variety store
Variety stores offer extremely low-cost goods, with
limited selection.
Demographic
Retailers that aim at one particular segment (e.g., high-end
retailers focusing on wealthy individuals).
Mom-And-Pop
A small retail outlet owned and operated by an individual or
family. Focuses on a relatively limited and selective set of products.
Specialty store
A specialty (BE:
speciality) store has a narrow marketing focus - either specializing on
specific merchandise, such as toys, shoes, or clothing, or on a target
audience, such as children, tourists, or oversize women. Size of store varies -
some specialty stores might be retail giants such as Toys
"R" Us, Foot Locker, and The
Body Shop, while others might be small, individual shops such as Nutters of Savile Row. Such stores,
regardless of size, tend to have a greater depth of the specialist stock than
general stores, and generally offer specialist product knowledge valued by the
consumer. Pricing is usually not the priority when consumers are deciding upon
a specialty store; factors such as branding image, selection choice, and
purchasing assistance are seen as important.They differ from department
stores and supermarkets which carry a wide range of merchandise.
Boutique
Boutique or concept stores are similar to specialty stores.
Concept stores are very small in size, and only ever stock one brand. They are
run by the brand that controls them. An example of brand that distributes
largely through their own widely distributed concept stores is L'OCCITANE en Provence. The limited size and
offering of L'OCCITANE's stores are too small to be considered a specialty
store proper.
General store
A general store is a rural store that supplies the main
needs for the local community;
Convenience store
A convenience store provides limited amount of
merchandise at more than average prices with a speedy checkout. This store is
ideal for emergency and immediate purchases as it often works with extended
hours, stocking everyday;
Provides variety and huge volumes of exclusive merchandise
at low margins. The operating cost is comparatively less than other retail
formats.
Supermarket
A supermarket is a self-service store consisting mainly of
grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can
be anywhere between 20,000 and 40,000 square feet (3,700 m2).
Example: SPAR supermarket.
Mall
A shopping mall has a range of retail shops at a single
outlet. They can include products, food and entertainment under one roof. Malls
provide 7% of retail revenue in India, 10% in Vietnam, 25% in China, 28% in
Indonesia, 39% in the Philippines, and 45% in Thailand.
"Category killer" or specialist
By supplying wide assortment in a single category for lower
prices a category killer retailer can "kill" that
category for other retailers. For few categories, such as electronics, the
products are displayed at the centre of the store and sales person will be
available to address customer queries and give suggestions when required. Other
retail format stores are forced to reduce the prices if a category specialist
retail store is present in the vicinity.
E-tailer
The customer can shop and order through the internet and the
merchandise is dropped at the customer's doorstep or an e-tailer. Here
the retailers use drop shipping technique. They accept the payment for the
product but the customer receives the product directly from the manufacturer or
a wholesaler. This format is ideal for customers who do not want to travel to
retail stores and are interested in home
shopping. However, it is important for the customer to be wary about
defective products and non secure credit card transaction. Examples include Amazon.com,
Pennyful, and eBay.
Vending machine
A vending machine is an automated piece of equipment
wherein customers can drop the money in the machine and acquire the products.
Some stores take a no frills approach, while others are
"mid-range" or "high end", depending on what income level
they target.
Other types
Other types of retail store include:
- Automated Retail stores — self-service, robotic kiosks located in airports, malls and grocery stores. The stores accept credit cards and are usually open 24/7. Examples include ZoomShops and Redbox.
- Big-box stores — encompass larger department, discount, general merchandise, and warehouse stores.
Retailers can opt for a format as each provides different
retail mix to its customers based on their customer demographics, lifestyle and
purchase behaviour. A good format will lend a hand to display products well and
entice the target customers to spawn sales.
Global top five retailers
Operations
Retail pricing
The pricing technique used by most retailers is cost-plus
pricing. This involves adding a markup amount (or percentage) to the retailer's
cost. Another common technique is suggested retail pricing. This simply
involves charging the amount suggested by the manufacturer and usually printed
on the product by the manufacturer.
In Western countries, retail prices are often
called psychological prices or odd prices. Often
prices are fixed and displayed on signs or labels. Alternatively, when prices
are not clearly displayed, there can be price discrimination, where the sale price is
dependent upon who the customer is. For example, a customer may have to pay
more if the seller determines that he or she is willing and/or able to. Another
example would be the practice of discounting for youths, students, or senior
citizens.
Competition
Retail stores may or may not have competitors close enough
to affect their pricing, product availability, and other operations. A 2006
survey found that only 38% of retail stores in India believed they faced more
than slight competition. Competition also affected less than half of retail
stores in Kazakhstan, Bulgaria, and Azerbaijan. In all countries the main
competition was domestic, not foreign.
Retail trade provides 9% of all jobs in India and 14% of
GDP.
Staffing
Because patronage at a retail outlet varies, flexibility in scheduling is desirable. Employee scheduling software is sold,
which, using known patterns of customer patronage, more or less reliably
predicts the need for staffing for various functions at times of the year, day
of the month or week, and time of day. Usually needs vary widely. Conforming
staff utilization to staffing needs requires a flexible workforce which is
available when needed but does not have to be paid when they are not, part-time workers; as
of 2012 70% of retail workers in the United States were part-time. This may
result in financial problems for the workers, who while they are required to be
available at all times if their work hours are to be maximized, may not have
sufficient income to meet their family and other obligations.
Transfer mechanisms
There are several ways in which consumers can receive goods
from a retailer:
- Counter service, where goods are out of reach of buyers and must be obtained from the seller. This type of retail is common for small expensive items (e.g. jewelry) and controlled items like medicine and liquor. It was common before the 1900s in the United States and is more common in certain countries like India.
- Delivery, where goods are shipped directly to consumer's homes or workplaces. Mail order from a printed catalog was invented in 1744 and was common in the late 19th and early 20th centuries. Ordering by telephone was common in the 20th century, either from a catalog, newspaper, television advertisement or a local restaurant menu, for immediate service (especially for pizza delivery), remaining in common use for food orders. Internet shopping - a form of delivery - has eclipsed phone-ordering, and, in several sectors - such as books and music - all other forms of buying. Direct marketing, including telemarketing and television shopping channels, are also used to generate telephone orders. started gaining significant market share in developed countries in the 2000s.
- Door-to-door sales, where the salesperson sometimes travels with the goods for sale.
- Self-service, where goods may be handled and examined prior to purchase.
- Digital delivery or Download, where intangible goods, such as music, film, and electronic books and subscriptions to magazines, are delivered directly to the consumer in the form of information transmitted either over wires or air-waves, and is reconstituted by a device which the consumer controls (such as an MP3 player; see digital rights management). The digital sale of models for 3D printing also fits here, as do the media leasing types of services, such as streaming.
Second-hand retail
Some shops sell second-hand goods. In the case of a nonprofit shop, the public donates goods to
the shop to be sold. In give-away shops goods can be taken for free.
Another form is the pawnshop,
in which goods are sold that were used as collateral for loans. There are also
"consignment"
shops, which are where a person can place an item in a store and if it sells,
the person gives the shop owner a percentage of the sale price. The advantage
of selling an item this way is that the established shop gives the item
exposure to more potential buyers.
Challenges
To achieve and maintain a foothold in an existing market, a
prospective retail establishment must overcome
the following hurdles:
- Regulatory barriers including
- Restrictions on real estate purchases, especially as imposed by local governments and against "big-box" chain retailers;
- Restrictions on foreign investment in retailers, in terms of both absolute amount of financing provided and percentage share of voting stock (e.g., common stock) purchased;
- Unfavorable taxation structures, especially those designed to penalize or keep out "big box" retailers (see "Regulatory" above);
- Absence of developed supply chain and integrated IT management;
- High competitiveness among existing market participants and resulting low profit margins, caused in part by
- Constant advances in product design resulting in constant threat of product obsolescence and price declines for existing inventory; and
- Lack of properly educated and/or trained work force, often including management, caused in part by
- Lack of educational infrastructure enabling prospective market entrants to respond to the above challenges.
Sales techniques
Behind the scenes at retail, there is another factor at
work. Corporations and independent store owners alike are always trying to get
the edge on their competitors. One way to do this is to hire a merchandising
solutions company to design custom store displays that will attract more
customers in a certain demographic. The nation's largest retailers spend
millions every year on in-store marketing programs that correspond to seasonal and
promotional changes. As products change, so will a retail landscape. Retailers
can also use facing techniques to create the look of a perfectly
stocked store, even when it is not.
A destination store is one that customers will initiate a
trip specifically to visit, sometimes over a large area. These stores are often
used to "anchor" a shopping mall or plaza, generating foot
traffic, which is capitalized upon by smaller retailers.
Customer service
Customer service is the "sum of acts and
elements that allow consumers to receive what they need or desire from your
retail establishment." It is important for a sales associate to greet the
customer and make himself available to help the customer find whatever he
needs. When a customer enters the store, it is important that the sales
associate does everything in his power to make the customer feel welcomed,
important, and make sure he leaves the store satisfied. Giving the customer
full, undivided attention and helping him find what he is looking for will
contribute to the customer's satisfaction. For retail store owners, it is
extremely important to train yourself and your staff to provide excellent
customer service skills. By providing excellent customer service, you build a
good relationship with the customer and eventually will attract more new
customers and turn them into regular customers. Looking at long term
perspectives, excellent customer skills give your retail business a good
ongoing reputation
and competitive advantage.
Statistics for national retail sales
United States
The United States retail sector features the largest number
of large, lucrative retailers in the world. A 2012 Deloitte report published in
STORES magazine indicated that of the world's top 250 largest retailers
by retail sales revenue in fiscal year 2010, 32% of those retailers were based
in the United States, and those 32% accounted for 41% of the total retail sales
revenue of the top 250.
Since 1951, the U.S. Census Bureau has published the Retail
Sales report every month. It is a measure of consumer
spending, an important indicator of the US GDP. Retail firms provide data on the dollar
value of their retail sales and inventories. A sample of 12,000 firms is included in the
final survey and 5,000 in the advanced one. The
advanced estimated data is based on a subsample from the US CB complete retail
& food
services sample.
CE region
In 2011 the grocery market in six Central
European (CE) countries was worth nearly €107bn, 2.8% more than the
previous year when expressed in local currencies. The increase was generated
foremost by the discount stores and supermarket segments, and was driven by the
skyrocketing prices of foodstuffs. This information is based on the latest PMR
report entitled Grocery retail in Central Europe 2012
World
National accounts show a combined total of retail and
wholesale trade, with hotels and restaurants. in 2012 the sector provides over
a fifth of GDP in tourist-oriented island economies, as well as in other major
countries such as Brazil, Pakistan, Russia, and Spain. In all four of the
latter countries, this fraction is an increase over 1970, but there are other
countries where the sector has declined since 1970, sometimes in absolute
terms, where other sectors have replaced its role in the economy. In the United
States the sector has declined from 19% of GDP to 14%, though it has risen in
absolute terms from $4,500 to $7,400 per capita per year. In China the sector
has grown from 7.3% to 11.5%, and in India even more, from 8.4% to 18.7%.
Consolidation
Among retailers and retails chains a lot of consolidation
has appeared over the last couple of decades. Between 1988 and 2010, worldwide
40,788 mergers & acquisitions with a total
known value of 2.255 trillion USD have been announced. The largest transactions
with involvement of retailers in/from the United States have been: the
acquisition of Albertson's Inc. for 17 bil. USD in 2006,
the merger between Federated Department Stores Inc with May Department Stores valued at
16.5 bil. USD in 2005 - now Macy's,
and the merger between Kmart Holding Corp and Sears Roebuck & Co
with a value of 10.9 bil. USD in 2004.
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