Retail – Definition and Meaning

Before understanding the concept of retail, let us first understand few terms.

Market

Any system or place where parties are engaged in exchange of either goods or services is called as market. The parties are often called as buyers and sellers. The seller offers his goods or services to the buyer who in return purchases it in exchange of money.

Goods

Tangible (things which can be seen and touched) physical products which are transferred from a seller to the buyer (consumer) to fulfill the latter’s need are called as goods.

 

The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middleman—the retailer, who links the producers and the ultimate consumers. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. The word ‘retail’ is derived from the French work retailer, meaning ‘to cut a piece off’ or ‘to break bulk’.

Retail involves the sale of goods from a single point (malls, markets, department stores etc…) directly to the consumer in small quantities for his end use. In a layman’s language, retailing is nothing but transaction of goods between the seller and the end user as a single unit (piece) or in small quantities to satisfy the needs of the individual and for his direct consumption.

A retailer is a business that sells products and/or services to consumers for their personal or family use. Retailers are a key component in a supply chain that links manufacturers to consumers. Retailers perform specific activities such as anticipating customer’s wants, developing assortments of products, acquiring market information, and financing. A common assumption is that retailing involves only the sale of products in stores. However, it also includes the sale of services like those offered at a restaurant, parlour, or by car rental agencies. The selling need not necessarily take place through a store. Retailing encompasses selling through the mail, the Internet, door-to-door visits—any channel that could be used to approach the consumer. When manufacturers like Dell computers sell directly to the consumer, they also perform the retailing function.

Retailing is the set of business activities that adds value to the products and services sold to consumers for their personal or family use. Often people think of retailing only as the sale of products in stores, but retailing also involves the sale of services such as overnight lodging in a motel, a doctor’s exam, a haircut, a DVD rental, or a home-delivered pizza.

The Supply Chain

Manufacturers are the ones who are involved in production of goods with the help of machines, labour and raw materials.

The wholesaler is the one who purchases the goods from the manufacturers and sells to the retailers in large numbers but at a lower price. A wholesaler never sells goods directly to the end users.

A retailer comes at the end of the supply chain who sells the products in small quantities to the end users as per their requirement and need.

The end user goes to the retailer to buy the goods (products) in small quantities to satisfy his needs and demands. The complete process is also called as Shopping.

Below diagram shows the position of the retailer in the supply chain

Retailing has become such an intrinsic part of our everyday lives that it is often taken for granted. The nations that have enjoyed the greatest economic and social progress have been those with a strong retail sector. Why has retailing become such a popular method of conducting business? The answer lies in the benefits a vibrant retailing sector has to offer—an easier access to a variety of products, freedom of choice and higher levels of customer service.

As we all know, the ease of entry into retail business results in fierce competition and better value for customer. To enter retailing is easy and to fail is even easier. Therefore, in order to survive in retailing, a firm must do a satisfactory job in its primary role i.e., catering to customers. Retailers’ cost and profit vary depending on their type of operation and major product line. Their profit is usually a small fraction of sales and is generally about 9-10%. Retail stores of different sizes face distinct challenges and their sales volume influences business opportunities, merchandise purchase policies, nature or promotion and expense control measures.

Over the last decade there have been sweeping changes in the general retailing business. For instance, what was once a strictly made-to-order market for clothing has now changed into a ready-to-wear market. Flipping through a catalogue, picking the right colour, size, and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was the standard practice in the earlier days. By the turn of the century some retailers set up a store front where people could browse, while new pieces were being sewn or customized in the back rooms. Almost all retail businesses have undergone a similar transition over the years.

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