About Retail

Retail: Definition & Glossary

Retail is the sale of goods to the public in relatively small quantities for use or consumption rather than for resale.

Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser.[1] Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy.

Retail Price is the total price charged for a product sold to a customer, which includes the manufacturer’s cost plus a retail markup.

Shops may be on residential streets, shopping streets with few or no houses, or in a shopping center or mall, but are mostly found in the central business district. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Retailers often provided boardwalks in front of their stores to protect customers from the mud. Online retailing, also known as e-commerce is the latest form of non-shop retailing (cf. mail order).

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.

Most retailers have employees learn facing, a hyperreal tool used to create the look of a perfectly-stocked store even when it is not.

What Does Retail Price Mean?

Anyone who has ever bought anything is familiar with the term retail price even if he has never really thought about its meaning. Retail price is a concept that we hear and see nearly everyday but probably don’t think that much about. Here is an overview of what it means and how it affects you.

Retail price simply means the price at which goods or services are sold by a retailer to a consumer. This is the purchase price that you pay whenever you buy a product from a retail store. Retail sales are designed for consumption and not for resale of goods or services rendered.

In order for a retailer to make a profit on a product, there is a mark-up on the item being sold. Mark-up is the difference in price between the wholesale unit price that the retailer purchases the item for in bulk and the retail price that he sells it to the consumer for. Often times there is a 100 percent mark-up between wholesale and suggested retail price. In other words the retailer sells the goods for double what he bought them for. This creates some room for dropping the price in sales, discounts and negotiations. Obviously, the retailer must sell the product for more than what he paid in order to make a profit on it. Other considerations like overhead costs go into formulating retail prices; a retailer can’t make a profit if he is spending more on items like rent, heating, electricity and employee wages. In this way, retailers with low overhead, like websites with no physical storefront, are able to provide very low prices. This is why you’ll often find deals online that are much better than what you find in stores.

Other types of prices that contrast to retail price are sale prices like those found during Christmas sales, blowouts or liquidation sales, wholesale, which is the price that the retailer pays for a bulk of product from the manufacturer or other agent intended for resale, and list price, which is the manufacturer’s suggested retail price (MSRP).

MSRP is determined by a manufacturer of goods as a guideline for the price that should be used by retailers in selling a product to the consumer. This price is usually the highest price that you’ll see the goods sold for, but retailers may choose to adjust their retail price below MSRP in order to compete with other vendors and attract business.

Often times retail prices and MSRPs are designed to be much higher than they need to be to make a profit. This allows the retailer to offer discounts and sales that look like a great deal but actually just reflect the considerably high mark-up. This is something that consumers should be aware of when shopping. It helps to study prices for an intended purchase item over a number of retailers to help determine the best deal.

Various Retail Format

Retailers sell in many different formats with some requiring consumers visit a physical location while others sell to customers in a virtual space. It should be noted that many retailers are not tied to a single distribution method but operate using multiple methods.

• Store-Based Sellers » By far the predominant method consumers use to obtain products is to acquire these by physically visiting retail outlets (a.k.a. brick-and-mortar). Store outlets can be further divided into several categories. One key characteristic that distinguishes categories is whether retail outlets are physically connected to one or more others stores:
  • Stand-Alone » These are retail outlets that do not have other retail outlets connected.
  • Strip-Shopping Center » A retail arrangement with two or more outlets physically connected or that share physical resources (e.g., share parking lot).
  • Shopping Area » A local center of retail operations containing many retail outlets that may or may not be physically connected but are in close proximity to each other such as a city shopping district.
  • Regional Shopping Mall » Consists of a large self-contained shopping area with many connected outlets.
• Non-Store Sellers » A fast growing method used by retailers to sell products is through methods that do not have customers physically visiting a retail outlet. In fact, in many cases customers make their purchase from within their own homes.
  • Online Sellers » The fastest growing retail distribution method allows consumer to purchase products via the Internet. In most cases delivery is then handled by a third-party shipping service.
  • Direct Marketers » Retailers that are principally selling via direct methods may have a primary location that receives orders but does not host shopping visits. Rather, orders are received via mail or phone.
  • Vending » While purchasing through vending machines does require the consumer to physically visit a location, this type of retailing is considered as non-store retailing as the vending operations are not located at the vending company’s place of business.

Non-Store Retail Format

Nonstore retailing is a form of retailing in which sales are made to consumers without using physical stores. The non-store retailers are known by medium they use to communicate with their customers, such as direct marketing, direct selling and vending machines or e-tailing. Non store retailing is patronised to time conscious consumers and consumers who can’t easily go to stores, or compulsive buyers. Most non-store retailers offer consumers the convenience of buying 24 hours a day seven days a week and delivery at location and time of their choice. Nonstore sales are now growing at a higher rate than sales in retail stores. Non-store retailing now accounts for more than 15% of all consumer purchases, and it may account for over 1/3 of all sales by the end of the century. The high growth rate is primarily due to the growth of electronic retailing. The growth of catalogue retail sales and sales in other nonstore retailing formats such as TV home shopping, direct selling, and vending machines are slower.

Customer Behaviour in Non-Store Retailing

Retailers approach their customers via many different formats. While many of those retail formats are store-based and require consumers to visit a physical location, there is a rising relevance of alternative retail formats. The most prominent non-store retail format is certainly Internet shopping but other formats also exist, including conventional catalogue retailing as well as teleshopping.

Non-store retailing does not take place in physical retail outlets but relies on different media such as television, the Internet or even virtual worlds such as Second Life. Thus, traditional means of instigating buying decisions and retaining customers (e.g., store atmospherics and scents) are not feasible. On the other hand, information and communication technologies may also provide additional opportunities of engaging with customers. As an increasing number of customers make their purchase from within their own homes, non-store retailing is becoming an increasingly important part of the retail industry. With different types of non-store retailing being firmly established in many countries, the concomitant consumer behaviour should be of interest to marketers.

Some important considerations regarding consumer behaviour in NSR:

• Understanding consumer information search and decision-making processes in non-store retailing contexts
• Psychological aspects of non-store buying behaviour (e.g., perceived risk, parasocial relationships)
• The impact of convenience on consumer behaviour
• The impact of the virtual store atmosphere on consumer behaviour
• Benefits and limits of interactivity in non-store retailing
• The association of non-store retail formats with store-based retail formats in the case of multi-channel retail systems
• New types of non-store retail formats
• Consumer service in non-store transactions, managing service quality and the impact of service on loyalty and profitability
• Aberrant consumer behaviours, such as fraudulent returns

WFDSA International Statistics, 2008