retail

Etymology

The word retail comes from the Old French verb retaillier, meaning "to shape by cutting" (c. 1365). It was first recorded as a noun in 1433 with the meaning of "a sale in small quantities" from the Middle French verb retailler meaning "a piece cut off, shred, scrap, paring". At present, the meaning of the word retail (in English, French, Dutch, German and Spanish) refers to the sale of small quantities of items to consumers (as opposed to wholesale).

Legal definition and explanation

Retail refers to the activity of selling goods or services directly to consumers or end-users. Some retailers may sell to business customers, and such sales are termed non-retail activity. In some jurisdictions or regions, legal definitions of retail specify that at least 80 percent of sales activity must be to end-users. In the banking industry "wholesale" usually refers to wholesale banking, providing tailored services to large customers, in contrast with retail banking, providing standardized services to large numbers of smaller customers. Retailing often occurs in retail stores or service establishments, but may also occur through direct selling, such as through vending machines, door-to-door sales or electronic channels. Although the idea of retail is often associated with the purchase of goods, the term may be applied to service providers that sell to consumers. Retail service providers include retail banking, tourism, insurance, private healthcare, private education, private security firms, legal firms, publishers, public transport, and others. For example, a tourism provider might have a retail division that books travel and accommodation for consumers, plus a wholesale division that purchases blocks of accommodation, hospitality, transport, and sightseeing, which are subsequently packaged into a holiday tour for sale to retail travel agents.

Some retailers badge their stores as "wholesale outlets" offering "wholesale prices". While this practice may encourage consumers to imagine that they have access to lower prices, while being prepared to trade off reduced prices for cramped in-store environments, in a strictly legal sense, a store that sells the majority of its merchandise directly to consumers is defined as a retailer rather than a wholesaler. Different jurisdictions set parameters for the ratio of consumer to business sales that define a retail business. A common way to distinguish wholesale from retail is by the main customer:

Wholesale trade: mainly sells to organizations that will resell or use goods in operations (business-to-business).

Retail trade: mainly sells to households/consumers.

Retail practices and operations

Retail procurement

Obtaining goods in the required quantities and locating them where consumers will purchase them are core retail activities, so purchasing and supply management are essential features of a retail strategy.

The distinction between "strategic" and "managerial" decision-making is commonly used to distinguish "two phases having different goals and based on different conceptual tools. Strategic planning concerns the choice of policies aiming at improving the competitive position of the firm, taking account of challenges and opportunities proposed by the competitive environment. On the other hand, managerial decision-making is focused on the implementation of specific targets."

In retailing, the strategic plan is designed to set out the vision and provide guidance for retail decision-makers and provide an outline of how the product and service mix will optimize customer satisfaction. As part of the strategic planning process, it is customary for strategic planners to carry out a detailed environmental scan, which seeks to identify trends and opportunities in the competitive environment, market environment, economic environment and statutory-political environment. The retail strategy is normally devised or reviewed every three to five years by the chief executive officer. The profit margins of retailers depend largely on their ability to achieve market-competitive transaction costs.

The strategic retail analysis typically includes the following elements:

Market analysis – Market size, stage of market, market competitiveness, market attractiveness, market trends

Customer analysis – Market segmentation, demographic, geographic, and psychographic profile, values and attitudes, shopping habits, brand preferences, analysis of needs and wants, and media habits

Internal analysis – Other capacities including human resource capability, technological capability, financial capability, ability to generate scale economies or economies of scope, trade relations, reputation, positioning, and past performance

Retail marketing

A retail mix is devised for the purpose of coordinating day-to-day tactical decisions. The retail marketing mix typically consists of six broad decision layers, including product decisions, place decisions, promotion, price, personnel and presentation (also known as physical evidence). The retail mix is loosely based on the marketing mix, but has been expanded and modified in line with the unique needs of the retail context. Several scholars have argued for an expanded marketing mix with the inclusion of two new Ps, namely, Personnel and Presentation since these contribute to the customer's unique retail experience and are the principal basis for retail differentiation. Yet other scholars argue that the Retail Format (i.e. retail formula) should be included. The modified retail marketing mix that is most commonly cited in textbooks is often called the 4 (place, price, product, and promotion) or 6 Ps of retailing (see diagram at right).The primary product-related decisions facing the retailer are the product assortment (what product lines, how many lines and which brands to carry); the type of customer service (high contact through to self-service) and the availability of support services (e.g. credit terms, delivery services, after sales care). These decisions depend on careful analysis of the market, demand, competition, as well as the retailer's skills and expertise.

Customer service is the "sum of acts and elements that allow consumers to receive what they need or desire from [the] retail establishment." Retailers must decide whether to provide a full service outlet or a minimal service outlet, such as no service in the case of vending machines; self-service with only basic sales assistance or a full service operation as in many boutiques and speciality stores. In addition, the retailer needs to make decisions about sales support, such as customer delivery and after-sales customer care.

Place decisions are primarily concerned with consumer access and may involve location, space utilisation and operating hours. Retailers may consider a range of both qualitative and quantitative factors to evaluate the potential sites under consideration. Macro factors include market characteristics (demographic, economic and socio-cultural), demand, competition and infrastructure (e.g. the availability of power, roads, public transport systems). Micro factors include the size of the site (e.g. availability of parking), access for delivery vehicles. A major retail trend has been the shift to multi-channel retailing. To counter the disruption caused by online retail, many brick-and-mortar retailers have entered the online retail space by setting up online catalogue sales and e-commerce websites. However, many retailers have noticed that consumers behave differently when shopping online. For instance, in terms of choice of online platform, shoppers tend to choose the online site of their preferred retailer initially, but as they gain more experience in online shopping, they become less loyal and more likely to switch to other retail sites. Online stores are usually available 24 hours a day, and many consumers across the globe have Internet access both at work and at home.

Pricing

The broad pricing strategy is normally established in the company's overall strategic plan. In the case of chain stores, the pricing strategy would be set by the head office. Broadly, there are six approaches to pricing strategy mentioned in the marketing literature: operations-oriented, revenue-oriented, customer-oriented, value-based, relationship-oriented, and socially-oriented. When decision-makers have determined the broad approach to pricing (i.e., the pricing strategy), they turn their attention to pricing tactics. Tactical pricing decisions are shorter-term prices, designed to accomplish specific short-term goals. Pricing tactics that are commonly used in retail include discount pricing, everyday low prices, high-low pricing, loss leaders, product bundling, promotional pricing, and psychological pricing. Two strategies to entice the buyer, money back guarantee and buy one get one free, were devised by 18th-century retail entrepreneur Josiah Wedgwood. Retailers must also plan for customer preferred payment modes – e.g. cash, credit, lay-by, Electronic Funds Transfer at Point-of-Sale (EFTPOS). All payment options require some type of handling and attract costs. Contrary to common misconception, price is not the most important factor for consumers when deciding to buy a product.

Retailers can employ different techniques to enhance sales volume and to improve the customer experience, such as Add-on, Upsell or Cross-sell; Selling on value; and knowing when to close the sale.

Cost for the real-estate and theft tend to increase retail prices, while zoning can reduce competition.

Types of retail formats

Retail formats (also known as retail formulas) influence the consumer's store choice and address the consumer's expectations. At its most basic level, a retail format is a simple marketplace, that is; a location where goods and services are exchanged. In some parts of the world, the retail sector is still dominated by small family-run stores, but large retail chains are increasingly dominating the sector, because they can exert considerable buying power and pass on the savings in the form of lower prices. Many of these large retail chains also produce their own private labels, which compete alongside manufacturer brands. Considerable consolidation of retail stores has changed the retail landscape, transferring power away from wholesalers and into the hands of the large retail chains. In Britain and Europe, the retail sale of goods is designated as a service activity. The European Service Directive applies to all retail trade, including periodic markets, street traders and peddlers.

Retail stores may be classified by the type of product carried. Softline retailers sell goods that are consumed after a single-use, or have a limited life (typically under three years), as they are normally consumed. Soft goods include clothing, other fabrics, footwear, toiletries, cosmetics, medicines and stationery. Grocery stores, including supermarkets and hypermarkets, along with convenience stores carry a mix of food products and consumable household items such as detergents, cleansers, personal hygiene products. Retailers selling consumer durables are sometimes known as hardline retailers – automobiles, appliances, electronics, furniture, sporting goods, lumber, etc., and parts for them. Specialist retailers operate in many industries such as the arts, e.g. green grocers, contemporary art galleries, bookstores, handicrafts, musical instruments, gift shops.

A special retail format is home shopping. There are three main types of it: mail or telephone ordering from catalogs; telephone ordering in response to advertisements in print and electronic media (such as periodicals, TV shopping channels and radio); and online shopping.

Impact of technology

When discussing the impact of technology on shopping and retail, e-commerce is often the first thing that comes to mind for retailers. However, technologies such as big data, artificial intelligence, computer vision, and the Internet of Things use data to transform every part of the shopping experience, from browsing to checkout.

It is important for organizations to embrace digital disruption in order to gain a competitive advantage. When an industry experiences digital disruption, it typically signals that consumer needs are shifting. Retailers enhance their analytics process and make better-informed decisions thanks to big data, artificial intelligence, computer vision, and the Internet of Things. The use of data by retailers is mostly evident in the following aspects, based on the above-mentioned new technologies:

Enhance marketing by Personalizing customer experience

Optimize supply chain management

Adjust prices to maximize profits

Many leading brands actively target tourists who travel specifically to shop or allocate a significant portion of their spending to retail while on vacation. According to the Global Retail Tourism Market Report 2019–2023, the global shopping tourism market was valued at approximately $1.2 trillion in 2018. The report projected steady growth, with a compound annual growth rate (CAGR) of 6.7% between 2019 and 2023. Building on this trend, Kogan Page published the book Leading Travel and Tourism Retail in 2023, offering an in-depth analysis of the travel retail sector and its evolution in the post-COVID era.

Retail industry

History

Retail markets have existed since ancient times. Archaeological evidence for trade, probably involving barter systems, dates back more than 10,000 years. As civilizations grew, barter was replaced with retail trade involving coinage. Selling and buying are thought to have emerged in Asia Minor (modern Turkey) around the 7th-millennium BCE. In ancient Greece, markets operated within the agora, an open space where, on market days, goods were displayed on mats or temporary stalls. In ancient Rome, trade took place in the forum. The Roman forum was arguably the earliest example of a permanent retail shop-front.

Research from July 2008 suggests that China exhibited a rich history of early retail systems. From as early as 200 BCE, Chinese packaging and branding were used to signal family, place names and product quality, and the use of government imposed product branding was used between 600 and 900 CE. Eckhart and Bengtsson have argued that during the Song dynasty (960–1127), Chinese society developed a consumerist culture, where a high level of consumption was attainable for a wide variety of ordinary consumers rather than just the elite.

In Medieval England and Europe, relatively few permanent shops were to be found; instead, customers walked into the tradesman's workshops where they discussed purchasing options directly with tradesmen. In the more populous cities, a small number of shops were beginning to emerge by the 13th century. Outside the major cities, most consumable purchases were made through markets or fairs. Market-places appear to have emerged independently outside Europe. The Grand Bazaar in Istanbul is often cited as the world's oldest continuously operating market; its construction began in 1455. The Spanish conquistadors wrote glowingly of markets in the Americas. In the 15th century, the Mexica (Aztec) market of Tlatelolco was the largest in all the Americas.

By the 17th century, permanent shops with more regular trading hours were beginning to supplant markets and fairs as the main retail outlet. Provincial shopkeepers were active in almost every English market town. As the number of shops grew, they transformed. The trappings of a modern shop, which had been absent from the 16th- and early 17th-century store, gradually made way for store interiors and shopfronts that are more familiar to modern shoppers. Before the 18th century, the typical retail store had no counter, display cases, chairs, mirrors, changing rooms, etc. However, the opportunity for the customer to browse merchandise, touch and feel products began to be available, with retail innovations from the late 17th and early 18th centuries.

Global top ten retailers

As of 2016, China was the largest retail market in the world.