Retail

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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.

A retail store in the UK

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").1 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

Inside a supermarket in Russia
Walnut Market in Katra, Jammu & Kashmir, India

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") — appliances, electronics, furniture, sporting goods, etc. Goods that do not quickly wear out and provide utility over time.
  • Soft goods or consumables — clothing, apparel, and other fabrics. Goods that are consumed after one use or have a limited period (typically under three years) in which you may use 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.

Warehouse store

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.2 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.2 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.2 They differ from department stores and supermarkets which carry a wide range of merchandise.3

Boutique

Boutique or concept stores — 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 is typically found in residential areas. They provide 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;

Hypermarkets

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 endow with products, food and entertainment under a roof.

"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

Worldwide Top Five Retailers4
Retail Sales Rank Company Country of Origin 2012 group revenue (US $mil)
1 Walmart US $469,162
2 Tesco UK $101,269
3 Costco US $99,137
4 Carrefour France $98,757
5 Kroger US $96,751

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.

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.5

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.which?
  • 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

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.6 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.7

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 250.8

U.S. Monthly Retail Sales, 1992–2010

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.9

CE region

In 2011 the grocery market in six Central Europeandisambiguation needed (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 201210

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.11 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 2006,12 the merger between Federated Department Stores Inc with May Department Stores valued at 16.5 bil. USD in 200513 - now Macy's, and the merger between Kmart Holding Corp and Sears Roebuck & Co with a value of 10.9 bil. USD in 2004.14

See also

Types of store or shop:

Further reading

  • Krafft, Manfred; Mantrala, Murali K. (eds.) (2006). Retailing in the 21st Century: Current and Future Trends. New York: Springer Verlag. ISBN 3-540-28399-4. 

References

  1. ^ Harper, Douglas. "retail". Online Etymology Dictionary. Retrieved 2008-03-16. 
  2. ^ a b c Charles Lamb, Joe Hair, Carl McDaniel (14 Jan 2008). Essentials of Marketing. Cengage Learning. p. 363. 
  3. ^ William M Pride, Robert James Hughes, Jack R. Kapoor (2011). Business. Cengage Learning. ISBN 978-0538478083. 
  4. ^ "2013 Top 250 Global Retailers". Retrieved March 2014. 
  5. ^ Steven Greenhouse (October 27, 2012). "A Part-Time Life, as Hours Shrink and Shift". The New York Times. Retrieved October 28, 2012. 
  6. ^ Philip H. Mitchell 2008, Discovery-Based Retail, Bascom Hill Publishing Group ISBN 978-0-9798467-9-3
  7. ^ How to provide excellent customer service in retailCustomer Service: Facts, Quotes and Statistics
  8. ^ Deloitte, Switching Channels: Global Powers of Retailing 2012, STORES, January 2012, G20.
  9. ^ US Census Bureau Retail sales Retail SalesRetail Sales Definition
  10. ^ Grocery retail in Central Europe 2012 Retail in Central Europe
  11. ^ full citation needed "Statistics on Mergers & Acquisitions (M&A) - M&A Courses | Company Valuation Courses | Mergers & Acquisitions Courses". Imaa-institute.org. Retrieved 2012-11-02. 
  12. ^ full citation needed dead link
  13. ^ full citation needed "Press Release - Investor Relations - Macy's Inc". Phx.corporate-ir.net. Retrieved 2012-11-02. 
  14. ^ full citation needed "Sears Holdings Press Releases". Searsholdings.com. Retrieved 2012-11-02. 

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