Retailing Definition — The Activity of Selling to Consumers

Retailing consists of the sale of goods and merchandise for personal or household consumption, either from a fixed location such as a department store or kiosk, or away from a fixed location, and related subordinated services. It is the activity that stands at the end of the supply chain: the process by which goods bought in large quantities from manufacturers, importers or wholesalers reach the public as individual purchases. Marketers see retailing as part of their overall distribution strategy — the final stage that turns supply into consumption.

Retailing consists of the sale of goods/merchandise for personal or household consumption either from a fixed location such as a department store or kiosk, or away from a fixed location and related subordinated services. 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 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. 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. Cheap versions of the latter are window shopping (just looking, not buying) and browsing.

Shops and stores

There are three major types of retailing, two of which have buildings that the customer can visit to do business with. The first is counter-service, once the only type of shop, but now rare except for selected items (see below). The second, and now more widely used method of retail, is self-service. Quickly increasing in importance are online shops, the third type, where products and services can be ordered for physical delivery, downloading or virtual delivery.

Even though most retailing is done through self-service, many shops offer counter-service items, e.g. controlled items like medicine and liquor, and small expensive items.

Shops used to deal with just one type of article. In the nineteenth century, in France, arcades were invented, which were a street of several different shops, roofed over. From this there soon developed, still in France, the notion of a large store of one ownership with many counters, each dealing with a different kind of article was invented; it was called a department store. In cities, these were multi-story buildings which pioneered the escalator. In the mid-twentieth century in the United States there developed the mall, midway between the arcade and the department store. A mall consists of several two-storey department stores linked by arcades (many of whose shops are owned by the same firm under different names). All the stores rent their space from the mall owner. Malls do not need to have shops where the customer enters a main entrance to enter specific shops, but there are strip malls which are 'outside' malls. These are often connected to supermarkets or big box stores. Also, in high traffic areas, other businesses may lease space from the supermarket or big box store to sell their goods or services from.

A recent development is a very large shop called a superstore. Local shops can be known as brick and mortar stores in the United States.

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.

Some shops sell second-hand goods. Often the public can also sell goods to such shops. In other cases, especially in the case of a nonprofit shop, the public donates goods to the shop to be sold. 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 with telephone or electric power.

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 suggested retail 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 a 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
a negotiation 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.

Retailers who are overstocked, or need to raise cash to renew stocks may resort to "Sales", where prices are "marked down", often by advertised percentages - "50% off" for example."Sales" are often held at fixed times of the year, for example January sales, or end-of-season sales, or Blue Cross Sale

An Activity Defined by Its Customer

Retailing names a process, not a business: the sale of goods and merchandise for personal or household consumption. That final phrase is the definition's working part. Selling the same goods to another business, for resale or production, belongs to wholesaling or distribution; retailing begins only when the buyer is the end user who will consume the goods. The activity can take place from a fixed location such as a department store or kiosk, or away from a fixed location altogether, and it includes related subordinated services — the wrapping, delivery, advice, fitting, credit and after-care that support the sale without being the sale itself. Framed this way, retailing is a function that many kinds of organizations perform, and it is the final stage of the distribution strategy by which marketers move goods from makers to households.

The formats through which retailing is done have changed in a clear sequence. There are three major types of retailing, two of which have buildings the customer can visit. Counter-service, once the only type of shop, is now rare except for selected items: the customer asks, and staff fetch and serve across a counter. Self-service, the second type, is now the more widely used method, putting the goods within the customer's own reach and letting shoppers select for themselves. Online shops, the third type and quickly increasing in importance, remove the building entirely: products and services are ordered for physical delivery, downloading or virtual delivery. Most real stores mix the first two — even in a self-service age, many shops offer counter-service for controlled items like medicine and liquor, and for small expensive items that cannot be left within reach.

Formats, Places and the Rhythm of Selling

Retailing's physical history is a history of gathering more selling under one roof. Shops used to deal with just one type of article. In nineteenth-century France, arcades were invented — a street of several different shops, roofed over — and from them developed the department store, a large store of one ownership with many counters each dealing with a different kind of article, in multi-story city buildings that pioneered the escalator. In the mid-twentieth-century United States came the mall, midway between the arcade and the department store, with several department stores linked by arcades and all stores renting space from the mall owner; strip malls are the outside form of the same idea, often connected to supermarkets or big box stores. The recent development is the very large shop called a superstore, while local shops in the United States are known as brick and mortar stores — a phrase that only became necessary once retailing could happen without bricks or mortar at all.

Finally, retailing has a rhythm of its own. Because stock must be bought before it can be sold, retailers who are overstocked, or who need to raise cash to renew stocks, resort to sales — prices marked down, often by advertised percentages — and sales are often held at fixed times of year, such as January sales or end-of-season sales, until the calendar itself teaches customers when to buy. Shopping, the customer's side of the activity, is buying things, sometimes as a recreational activity, whose cheap versions are window shopping and browsing: looking without buying, yet still part of the process that fills stores and streets. Retailing, in short, is the complete activity — location, format, service, price and season — by which goods for personal and household consumption complete their journey to the people who will use them.

Common Questions

What is retailing?

Retailing consists of the sale of goods or merchandise for personal or household consumption, either from a fixed location such as a department store or kiosk, or away from a fixed location, together with related subordinated services.

What are the three major types of retailing?

The three major types are counter-service, where staff serve customers across a counter; self-service, now the more widely used method; and online shops, where products and services are ordered for physical delivery, downloading or virtual delivery.

What are sales in retailing?

Retailers who are overstocked, or who need to raise cash to renew stocks, may resort to sales, where prices are marked down, often by advertised percentages. Sales are often held at fixed times of year, such as January sales or end-of-season sales.

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Retailing