Retailer Definition — The Business at the End of the Supply Chain

In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells individual items or small quantities to the general public or end user customers, usually in a shop, also called a store. Retailers are at the end of the supply chain, and marketers see the retailer as part of their overall distribution strategy. The retailer's defining acts are buying in bulk and breaking that bulk into the single items a household actually wants.

In commerce, a retailer buys goods or products in large quantities from manufacturers (Manufacturer Definition) or importers, either directly or through a wholesaler (Wholesaler Definition), and then sells individual items or small quantities to the general public or end user customers, usually in a shop, also called store. Retailers are at the end of the supply chain. Marketers see retailing as part of their overall distribution strategy.

Shops may be on residential streets, or in shopping streets with little or no houses, or in a shopping center or shopping mall. Shopping streets may or may not be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation.

Shopping is buying things, sometimes as a recreational activity. A cheap version of the latter is window shopping (just looking, not buying).

Kinds of retailers

A large shop is called a superstore or megastore. A shop with many different kinds of articles is called a department store.

Many shops are part of a chain: a number of similar shops with the same name selling the same products in different locations. The shops may be owned by one company, or there may be a franchising company that has franchising agreements with the shop owners (see also restaurant chain).

Some shops sell second-hand goods. Often the public can also sell goods to such shops. In other cases, especially in the caseof a nonprofit shop, the public donates goods to the shop to be sold (see also thrift store). In give-away shops goods can be taken for free.

The term retailer is also applied where a service provider services the needs of a large number of individuals, such as withtelephone or electric power.

For details on the various types of retailers see:

Army-navy_stores

Bookstore

Convenience store

Department store

Dollar store

Electronic commerce, B2C

Online shops have both advantages and disadvantages over traditional off-line retaiers. One of the advantages is the vast collection of goods that can be sold at the site. In the case of selling goods like books and wine bottles, this is the significant advantage.

General store

Hardware store

Hobby store

Hypermarket

Mail order

Pet store

Pharmacy

Supermarket, grocery - food and commodities

Surplus store

Thrift store

Retail pricing

The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or percentage) to the retailers cost. Another common technique is manufacturers suggested list pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer.

In Western countries, retail prices are often so-called psychological prices or odd prices: a little less than a round number, e.g. $ 6.95. In Chinese societies, prices are generally either a round number or sometimes some lucky number. This creates price points.

Often prices are fixed and displayed on signs or labels. Alternatively, there can be price discrimination for a variety of reasons. The retailer charges higher prices to some customers and lower prices to others. For example, a customer may have to pay more if the seller determines that he or she is willing to. The retailer may conclude this due to the customer's wealth, carelessness, lack of knowledge, or eagerness to buy. Price discrimination can lead to a bargaining situation often called haggling an argument about the price. Economists see this as determining how the transaction's total surplus will be divided into consumer and producer surplus. Neither party has a clear advantage, because the threat of no sale exists, whence the surplus vanishes for both.

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The Business That Buys in Bulk and Sells One at a Time

A retailer is best understood as a business defined by two opposite transactions. On the buying side, the retailer commits money in advance, purchasing goods in large quantities from manufacturers or importers, either directly or through a wholesaler, and accepting the risk that some of what was bought will not sell. On the selling side, the retailer reverses the scale completely, selling individual items or small quantities to the general public — one shirt, one pair of shoes, one household purchase at a time. Between those two transactions sits everything that makes retailing a business rather than a pass-through: selecting what to stock, holding inventory, presenting it in a shop, staffing the sale and absorbing the difference between what customers want and what was forecast months earlier. The retailer is the supply chain's final risk-taker, the business that converts a manufacturer's production run into a public offer.

Margin is where that risk is paid for. The pricing technique used by most retailers is cost-plus pricing, adding a markup amount or percentage to the retailer's cost, and the spread between cost and price must cover rent, wages, unsold stock, markdowns and profit all at once. A second common technique, manufacturer suggested list pricing, charges the amount the manufacturer suggests and usually prints on the product, keeping the retailer's price aligned with the brand's own positioning. Around those structures, retailers manage price presentation: in Western countries retail prices are often psychological prices, a little less than a round number, while in Chinese societies prices are generally a round number or sometimes a lucky number. Price discrimination — charging higher prices to some customers and lower to others — and its rougher cousin haggling belong to the retailer's world too, because the person setting the final price at the point of sale is the retailer.

Kinds of Retailers and Where They Sell

Retailers take forms at every scale. A large shop is called a superstore or megastore; a shop with many different kinds of articles is a department store. The trade's own lists run from bookstores, convenience stores, dollar stores and pharmacies to supermarkets, hardware and hobby stores, hypermarkets, mail order and online shops, plus second-hand and thrift stores where the public may sell or donate goods, and give-away shops where goods are free. Many shops are part of a chain — similar shops with the same name selling the same products in different locations — owned by one company or operated under franchising agreements with individual owners. Location is part of the business model: shops may stand on residential streets, on shopping streets that may be for pedestrians only and sometimes partly roofed against the weather, or in a shopping center or mall where the retailer rents an audience as much as a space.

The term stretches beyond goods. Retailer is also applied where a service provider services the needs of a large number of individuals, as with telephone or electric power — businesses that, like the shopkeeper, buy or produce in bulk and serve customers one account at a time. Online shops add their own advantages and disadvantages against traditional offline retailers, notably the vast collection of goods a site can offer, which for goods like books is a significant advantage. In every form, the identity is constant: the retailer stands at the end of the supply chain, closest to the end user, translating manufacturers' and importers' output into the individual purchases households actually make — and answering for the result when the buying was wrong.

Common Questions

What is a retailer?

A retailer is a business that buys goods in large quantities from manufacturers or importers, directly or through a wholesaler, and sells individual items or small quantities to the general public or end user customers, usually in a shop or store.

Where does the retailer stand in the supply chain?

Retailers are at the end of the supply chain. Manufacturers and importers supply them, wholesalers may stand between, and the retailer's sale to the end user is the final transaction in the chain.

How do most retailers set prices?

The pricing technique used by most retailers is cost-plus pricing, adding a markup amount or percentage to the retailer's cost. Another common technique is manufacturer suggested list pricing, charging the amount suggested by the manufacturer and usually printed on the product.

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Retailer