Retail

• 1. Introduction

  ›

  Retail is the sale of goods and services to consumers, and the word itself begins with a cut. It comes from the Old French verb retaillier, meaning "to shape by cutting", recorded around 1365. By 1433 it had become a noun meaning "a sale in small quantities". That small idea, breaking down large stocks into pieces a household can carry home, has run from itinerant peddlers to glass-roofed arcades to cashierless stores. A retailer buys in bulk from manufacturers or wholesalers and sells in smaller portions to consumers for a profit. That makes the retailer the final link in the supply chain from producers to consumers. How did a word for cutting cloth come to organize so much of modern economic life? Who decided where the goods should sit, how the lights should glow, and what music should play while you browse? And why does the source insist that price, contrary to common belief, is not the most important factor when consumers decide to buy?

• 2. The Line Between Wholesale And Retail

  ›

  Eighty percent is the number that can decide what kind of business you are running. In some jurisdictions, legal definitions of retail specify that at least 80 percent of sales activity must be to end-users. Sales to business customers are termed non-retail activity. A common way to distinguish the two rests on the main customer. Wholesale trade mainly sells to organizations that will resell goods or use them in operations, a business-to-business arrangement. Retail trade mainly sells to households and consumers.

  Banking shows how the same words split along customer lines. Wholesale banking provides tailored services to large customers, while retail banking provides standardized services to large numbers of smaller customers. The pattern repeats across tourism, insurance, private healthcare, private education, private security firms, legal firms, publishers, and public transport. A tourism provider might run a retail division that books travel and accommodation for consumers, alongside a wholesale division that buys blocks of accommodation, hospitality, transport, and sightseeing to package into a holiday tour.

  Some retailers badge their stores as "wholesale outlets" offering "wholesale prices". The label invites shoppers to imagine lower prices, often in exchange for cramped in-store environments. In a strictly legal sense, a store that sells the majority of its merchandise directly to consumers is a retailer, whatever the sign says. Different jurisdictions set their own parameters for the ratio of consumer to business sales, which is why the dividing line shifts from one region to the next.

• 3. The Strategist's Long View

  ›

  Every three to five years, the chief executive officer normally devises or reviews the retail strategy. Strategic planning concerns the choice of policies aiming to improve the competitive position of the firm. It is separated from managerial decision-making, which focuses on the implementation of specific targets. The two phases have different goals and rest on different conceptual tools. Profit margins depend largely on a retailer's ability to achieve market-competitive transaction costs.

  A detailed environmental scan opens the strategic process. It seeks trends and opportunities across the competitive, market, economic, and statutory-political environments. The full retail analysis runs through market analysis, customer analysis, internal analysis, competition analysis, a review of product mix, and a review of distribution channels. Market analysis weighs market size, stage, competitiveness, attractiveness, and trends. Customer analysis profiles segments by demographic, geographic, and psychographic traits, plus values, shopping habits, brand preferences, and media habits.

  Internal analysis looks inward at human resource capability, technological capability, financial capability, and the ability to generate economies of scale or scope. It also weighs trade relations, reputation, positioning, and past performance. The review of product mix tracks sales per square foot, stock-turnover rates, and profitability per product line. A review of distribution channels measures lead-times between order and delivery against the cost and efficiency of intermediaries.

  Research points to a strong relationship between a store's positioning and the socio-economic status of its customers. The retail strategy, including service quality, carries a significant and positive association with customer loyalty. When the analysis ends, retail marketers should know which groups of customers their activities will target.

• 4. The Six Ps

  ›

  Six broad decision layers make up the retail marketing mix: product, place, promotion, price, personnel, and presentation, the last also known as physical evidence. The mix is loosely based on the marketing mix but expanded for the retail context. Scholars argued for adding Personnel and Presentation because they shape the customer's unique retail experience and form the principal basis for retail differentiation. Textbooks most often cite the 4 Ps or 6 Ps of retailing.

  Product decisions cover the assortment, meaning which product lines, how many, and which brands to carry. They extend to the type of customer service, ranging from high-contact help to self-service, and to support services such as credit terms, delivery, and after-sales care. Customer service is described as the sum of acts and elements that allow consumers to receive what they need or desire from a retail establishment. A retailer must choose between a full-service outlet and a minimal-service one, from no service at a vending machine to the attentive staffing of many boutiques and speciality stores.

  The pricing strategy is normally set in the overall strategic plan, and in chain stores the head office sets it. The marketing literature describes six approaches: operations-oriented, revenue-oriented, customer-oriented, value-based, relationship-oriented, and socially-oriented. Once the broad approach is chosen, attention turns to shorter-term tactics. Common tactics include discount pricing, everyday low prices, high-low pricing, loss leaders, product bundling, promotional pricing, and psychological pricing.

  Money back guarantee and buy one get one free both came from the 18th-century retail entrepreneur Josiah Wedgwood. Retailers must also plan for preferred payment modes, including cash, credit, lay-by, and Electronic Funds Transfer at Point-of-Sale. Every payment option carries handling costs. Flexible scheduling has long suited retail labor needs that vary by time and season. One cited estimate holds that in 2012, about 70% of United States retail workers were part-time.

• 5. Selling Without A Transaction

  ›

  Transactional marketing identifies target consumers, then negotiates, trades, and ends the relationship once the deal is done. In that one-time process, both parties try to maximize their own interests. The drawbacks pile up: poor after-sales service quality, a lack of feedback channels, high marketing costs, and low customer retention, because client relationships must be rebuilt for every transaction.

  Those costs pushed the industry toward relational marketing. Retail enterprises came to value long-term relationships with previous customers, not just the pursuit of new ones. Customer relationships help maintain stability in a competitive market and are described as the future of retail enterprises. The shift means added value, customer satisfaction, and positioning that appeals to targeted groups rather than a string of isolated sales.

• 6. Designing The Servicescape

  ›

  Aromas, lighting, air temperature, and music all do quiet work the moment a shopper steps inside. Presentation, the physical evidence that signals the retail image, gathers the store premises, exterior facade, interior layout, websites, delivery vans, warehouses, and staff uniforms. The environment where the service encounter happens is sometimes called the retail servicescape. It runs on furnishings, layout, functionality, ambient conditions, and the signs, symbols, and artifacts that fill a floor.

  The decompression zone is the name retail designers give to the front of the store. Designers want customers to spend more time inside, since more time means more selling opportunities, but that pull must be balanced against expectations of convenience, access, and realistic waiting times. Where a product sits on the shelves changes its purchase likelihood through visibility and access. It is common for a store to play music that relates to its target market.

  Shopper motivations sort into two broad types first investigated by Babin and colleagues: utilitarian and hedonic. Utilitarian motivations are task-related and rational, treating purchase as work to be done efficiently. Hedonic motives refer to pleasure, where shopping becomes a form of escapism and the shopper indulges in fantasy and freedom.

  Sproles and Kendall built one of the most widely cited shopper typologies in the mid-1980s, relatively consistent across time and cultures. Their eight styles range from the quality-conscious perfectionist who shops systematically to the brand-conscious buyer who reads high prices as a sign of quality. They include the recreation-conscious shopper who treats shopping as enjoyment, the price-conscious shopper hunting value, the novelty and fashion-conscious seeker of new experiences, the impulsive buyer acting on the spur of the moment, the consumer confused by overchoice, and the habitual, brand-loyal shopper who follows a routine. Because these styles stay relatively stable over time, they are useful for market segmentation.

• 7. Formats And Formulas

  ›

  Three years is the rough dividing line between two kinds of merchandise. Softline retailers sell goods consumed after a single use or with a limited life, typically under three years, such as clothing, fabrics, footwear, toiletries, cosmetics, medicines, and stationery. Hardline retailers sell consumer durables, including automobiles, appliances, electronics, furniture, sporting goods, and lumber, along with parts for them. Grocery stores, supermarkets, hypermarkets, and convenience stores carry food and consumable household items, while specialist retailers serve narrow fields like green grocers, contemporary art galleries, bookstores, and musical instrument shops.

  Large retail chains increasingly dominate a sector that, in some parts of the world, is still ruled by small family-run stores. Chains wield considerable buying power and pass the savings on as lower prices. Many also produce private labels that compete alongside manufacturer brands. Consolidation has transferred power away from wholesalers and into the hands of the large chains. In Britain and Europe, the retail sale of goods counts as a service activity, and the European Service Directive covers all retail trade, including periodic markets, street traders, and peddlers.

  Home shopping forms a special format with three main types. The first is mail or telephone ordering from catalogs. The second is telephone ordering in response to advertisements in periodicals, TV shopping channels, and radio. The third is online shopping, where stores are usually available 24 hours a day. Shoppers tend to begin with the online site of their preferred retailer, then grow less loyal and more likely to switch as their online experience deepens.

• 8. From Antiquity To The Apocalypse

  ›

  More than 10,000 years ago, archaeological evidence points to trade, probably through barter, long before coinage replaced it. Selling and buying are thought to have emerged in Asia Minor, modern Turkey, around the 7th-millennium BCE. In ancient Greece, goods were displayed on mats or temporary stalls in the agora on market days. In ancient Rome, trade filled the forum, arguably the earliest example of a permanent retail shop-front. China showed a rich early history too: from as early as 200 BCE, packaging and branding signaled family, place names, and product quality, and during the Song dynasty of 960 to 1127, a consumerist culture put high consumption within reach of ordinary people.

  Construction on the Grand Bazaar in Istanbul began in 1455, and it is often cited as the world's oldest continuously operating market. In the 15th century, the Mexica market of Tlatelolco was the largest in all the Americas, praised by Spanish conquistadors. In medieval England and Europe, customers more often walked into a tradesman's workshop to discuss options directly, with permanent shops emerging slowly by the 13th century. By the 17th century, shops with regular trading hours began to supplant markets and fairs, and provincial shopkeepers worked in almost every English market town.

  By the late 18th century, grand shopping arcades spread across Europe and the Antipodes, multiple-vendor spaces under glass roofs that let in natural light. Some of the earliest appeared in Paris, where pavement for pedestrians was lacking. John Stuart Mill wrote about the co-operative retail store he witnessed firsthand in the mid-19th century, a venture serving the working poor while arcades served the bourgeoisie. The department store emerged in the mid- to late 19th century and reshaped shopping habits, often serving as a venue for leisure and entertainment as much as a place to buy.

  Victor Gruen, an American architect, developed the shopping mall concept after the war, a self-contained complex with an indoor plaza, statues, planting schemes, piped music, and car-parking. The first opened at Northland Mall near Detroit in 1954. Stores kept growing; the average U.S. supermarket expanded from 31,000 square feet in 1991 to 44,000 square feet in 2000, and the United States reached nearly a 2-fold difference in square footage per capita compared to Europe. As of 2016, China was the largest retail market in the world. Now the pressure runs the other way. Under online competition and business debt, the disruption called the retail apocalypse has pushed many North American retailers to cut stores sharply or close entirely, while survivors test omnichannel buy-online-pick-up-in-store and even cashierless formats.