Retail markets have existed since ancient times and the concept of retailing hasn’t changed for centuries.
It’s just the methods of trade have evolved from primitive barter systems to the seamless digital payments we use today.
Historians believe Romans introduced the concept of a permanent retail shop-front, forever altering the landscape of commerce. Since those early days, the art of selling goods and services to consumers has undergone a remarkable metamorphosis. Once humble booths, retail establishments have now evolved into sophisticated shopping malls.
In this era of digital marvels, all types of retailing are at our disposal, with distinct pros and cons accompanying each avenue. From the classic bricks and mortar retailing experience to the convenience of online shopping, the options available are abundant, making it a difficult task to choose the most suitable one.
That’s why we have compiled a comprehensive guide to sail you through the rough waters of retailing and select the best type of retailing suitable for you with a detailed overview of the same.
Let’s start by answering the most basic question.
What Is Retailing?
Retailing is a distribution process, which encompasses all activities involved in selling goods directly to the end consumer, who intends to use the product. It involves the sale of goods and services from the point of purchase to the user of the product.
In simple terms, retailing refers to the transaction of small quantities of goods between a retailer and a customer, where the intention is to buy the goods for personal use.
On the other hand, a retailer can be defined as any person/organization whose primary source of revenue comes from retailing. Within the supply chain, retailers serve as the final link between manufacturers to the end consumer.
- In 2022 Indian retail market touched the $836 billion mark.
What are the Types of Retailing?
Retailing is available in a variety of avatars. Some of these are discussed below with examples:
In this digital age, the charm of brick-and-mortar stores still holds its importance. Store retailing involves the operation of physical outlets where customers can explore and purchase products firsthand. It encompasses a wide range of businesses, from department stores to boutique shops. Here are a few examples:
- Department Stores: They offer a one-stop shopping experience by housing multiple departments, including fashion, cosmetics, home goods, and more.
- Speciality Stores: These stores offer specific product categories or niches. For instance, Apple stores exclusively sell Apple products, while Lakme focuses on cosmetics and beauty products.
- Convenience Stores: Places like Spenser’s and Jio Mart provide quick and convenient shopping options, often open 24/7, and stock a range of items like snacks, beverages, and everyday essentials.
Non-store retailing is a type of retailing where the transaction happens outside conventional shops or stores. As technology reshapes our lives, non-store retailing has gained significant momentum. This category encompasses businesses without a physical storefront, leveraging digital platforms to reach their customers. Let’s explore some popular examples:
- E-commerce sites: Companies like Amazon and Flipkart have revolutionized the retail industry in the country by offering almost every product at competitive prices, and the convenience of doorstep delivery is like the cherry on top.
- Direct Selling: This retailing method enables individuals to become independent distributors of company products and sell them directly to consumers. Famous direct-selling companies in India include Vestige, Forever and Oriflame.
Corporate retailing involves retail structures such as franchises or chain stores by large companies that own multiple outlets across various locations. These brands often have a recognizable presence and a significant impact on the retail industry. The primary focus of corporate retailing is to sell goods exclusively from the parent or partner brand.
- Franchise: A franchise involves an established business plan that includes a trademarked name, a predefined range of products, and well-defined business concepts. Retailers who wish to join a franchise are granted permission to utilize all the aforementioned elements. However, there are certain rules and processes that must be followed in order to maintain the rights to the franchise, along with fees that must be paid to the franchise owner.
Interested to own a franchise in India, read this: Top 10 Franchise Business in India
- Dealership: A dealership is a hybrid between a franchise and an independent retailer. A retailer that works with a dealership gets the license to sell the products of that particular brand. Unlike franchises, dealerships generally do not involve fees paid to the brand owner in order to use their products or services.
While products dominate the retail world, service retailing also plays a crucial role in consumers’ daily life. From salons and spas to travel agencies and entertainment venues, service retailers focus on delivering experiences rather than physical goods. Here are a few examples:
- Restaurant chains: Be it coffee houses or renowned restaurant chains, both are an integral part of the service retailing sector, offering a distinct dining experience to consumers. Some of these chains operate on a large scale, encompassing multiple locations and a standardized approach to service.
- Theatres: Cinema chains play a vital role in service retailing by providing a complete entertainment experience, with comfortable seating, and a range of food and beverage options.
- Hotels & Resorts: Offering a range of hospitality services to guests, hotels and resorts are another key player in the service retailing industry. By focusing on creating a welcoming and immersive environment, hotels and resorts contribute significantly to the service retailing landscape, enabling travellers to relax and rejuvenate during their journeys.
Working Model of Retailing
In simple terms, retailing working model involves the process of purchasing merchandise in bulk from wholesalers or manufacturers at a lower price and then selling it in smaller quantities to the general public at a higher price. Retailers benefit from the difference in price, known as the gross profit.
In order to distribute products to end users, a supply chain is established by companies and suppliers. The supply chain represents the journey of a product or service from its creation to its delivery to consumers. It is essential for retailers to understand their supply chain to ensure they receive the right products at an affordable price within a reasonable timeframe. Any disruptions or issues in the supply chain can result in increased product costs or delays in delivery.
Here is a simplified overview of a basic supply chain:
Manufacturers and Wholesalers:
Manufacturers produce goods by utilising raw materials, machines, and labour. Once the production is complete, wholesalers purchase these goods in large quantities from the manufacturers and then sell them to retailers. Wholesalers offer lower prices to retailers due to the bulk nature of their transactions.
Retailers acquire goods either from wholesalers or directly from the manufacturers. They purchase these goods in larger quantities and subsequently sell them in smaller quantities to consumers.
Consumers (End Users):
Consumers are the final participants in the supply chain. They purchase goods from retailers in smaller quantities based on their demands or needs.
Importance Of Retailing
Retailers play an important role besides facilitating the sale of products. Here are some key reasons why retailing is important:
Manufacturers produce large quantities of similar goods and prefer selling their inventories to a limited number of buyers who purchase in bulk. However, customers desire a wide variety of goods from different manufacturers to choose from. Retailers bridge this gap by collecting and sorting goods from multiple brands and organising them according to customers’ needs. By offering a diverse range of products, retailers cater to the preferences and demands of customers.
Retailers purchase goods from manufacturers and wholesalers in large quantities, but they sell them to customers in smaller quantities. Without the process of retailing, it would not be possible to sell large quantities of goods consistently. Retailers break down bulk shipments into smaller units that are more manageable and suitable for individual customers.
Channel Of Communication
Retailing involves direct interaction with end consumers, making it a valuable communication channel for companies and manufacturers to connect with their customer base. Manufacturers need retailers to convey the advantages of their products, as well as any promotional offers and discounts.
Additionally, retailers act as intermediaries between the company and the customer, providing valuable feedback from customers to the manufacturer or wholesaler.
Retail stores serve as the final channels where purchase decisions are made. Therefore, they play a pivotal role as marketing channels for brands. Manufacturers implement various marketing strategies within retail stores, such as strategic product placements, eye-catching banners, engaging advertisements, and attractive offers. These efforts aim to increase sales and create brand awareness among consumers who visit retail stores.
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 the market for the benefit of consumers.