What is retail? If we define retail in its simplest form; It is a form of sales based on selling goods one by one or in a few pieces rather than in bulk. A retailer is a merchant or company that consumers are buying goods from.
Retailers are traders that ensure the delivery of all kinds of goods and services to the end consumer. Since it mentioned all types of goods and services, it’s clear that retailing has a role in all sectors. This situation once again reveals the importance of retail sales and the extent of employment.
Today, the growth trendy of trade, which has accelerated with the industrial revolution, has experienced its second major evolution with the birth of digital sales channels. Today’s retailers have begun to take a share of international trade, which, until a quarter-century ago, was only monopolized by large wholesalers. Now a Norwegian retailer can receive orders from a consumer in Australia via its online shopping channel. Online trade (e-commerce) is changing the actors and rules of commerce faster than ever.
The retail sector has a considerable part of total income share and employs a big part of society. So the retail sector impact economy its stability.
Functions Of Retailers
Retail business does not need to have a sale point address such as a shop or store. For many years, selling products by going door to door has been a standard method. Some of the companies only using the selling strategy through catalogues they sent to target customers via post. Many companies that made sales by phone via T.V. sales channels. Online shopping sites selling over the Internet became the last link of the chain. We can say that digital commerce rapidly defeats all other sales channels.
Retailers are as a link between producer and consumer. The only function of retailing is not the sale of products to the final consumer, but also the first address of feedback from buyers.
For example, it is a typical case that clients generally notice their requests or complaints about the product directly to retailers. Most people request replacement or payback directly from retailers. Retail stores meet these demands, especially in sectors such as fast-moving consumer goods, food and garment industries. In sectors such as electronic equipment and automotive, we see that technical services represent the manufacturers.
Retail is the sale of goods and services to the consumer in limited quantities through a business. The retail industry consists of companies of different sizes that function as sellers. A grocery store established with minimal capital and a supermarket chain selling thousands of products is struggling in the same market.
As a field where many traders and companies of different sizes sell similar products, it is seen that competition is very intense in the retail sector. Therefore, many factors will determine the choice of the retailer by the consumers. The variety of products, quality, price, presentation of the products, location of the store, customer relations, advertising, marketing and P.R. studies are the main factors affecting the success of retailers.
Retail companies should try to increase demand to achieve their sales targets on the one hand, and reduce their costs to increase their profit share on the other hand. The retailer must choose the right supplier and balance the purchasing costs and operating expenses without reducing the quality of service.
Difference Between Retailer & Wholesaler
In explaining the difference between a wholesaler and retail companies, the quantity of goods sold is mentioned; However, the primary actor is the end customer. Retailers’ customers are consumers, while the wholesaler’s customers are companies and merchants. So retailers dealt with the selling of goods on a limited scale and focused on consumers.
Generally, retailers don’t manufacture their own goods; exceptionally, it could be. They purchase goods from a manufacturer or a wholesaler and sell these goods to consumers in small quantities.
For example, a tailor who makes clothes such as trousers and jackets can sell these products in his own shop. A farmer can sell his products to consumers by establishing a sale-point within his farm. A fisherman can sell the fish he hunted. We can list many similar examples. These companies are selling their own products to consumers without being involved in a supply chain, that is, without using an intermediary firm.
In some sectors, we see that manufacturers who sell wholesale to other companies, open sales stores with their brand, diversifying their sales strategies. In most cases, companies turn their sales outlets into a separate commercial enterprise by establishing a new company outside of their manufacturing company. In other words, although the consumer perceives it as a single brand, actually the commercial titles of the manufacturer and retail companies are different.
Retail companies, as a link in the supply chain, cover the process from the production or processing of a product as a raw material until it reaches the consumer’s home. In short, a product is grown, processed, or a new product is created by combining different materials. After this stage, the manufacturer ship the product to a wholesaler. Sometimes retailers directly purchase the goods from the manufacturers.
The Story Of Retail Business
The first wholesalers were the aristocrats who ruled the city-states, but over time a merchant class grew up. Some of the early retailers, start trading surplus products, then began buying goods produced by others, expanding their capacity with stored goods, and doing wholesale.
To establish a retail business; It is not necessary to have a sale point such as a shop or store address classically on streets or at the bazaar. For many years, there were those who market their products by going door-to-door through personal marketing. Some of the companies expanded their business by sending catalogues by mail.
Some of the companies started calling to reach to potential customers and make telemarketing. When T.V. channels were activated, the marketing and presentation part started to be made with T.V. programs, while the persuasion and sales phase continued by phone.
Online shopping sites selling over the Internet became the last link of the chain. We can say that digital commerce rapidly equalizes all other sales channels.
What’s the Retail Price?
The retail price is the final price. We mean, retailer decide the final price for the product depending on the market conditions and sales strategies. The price that the consumer sees on the product label is the initiative of the retailer. Retail price is differentiated from manufacturer price and distributor price. In the supply chain process, manufacturers, transporters and intermediary companies add their profits and expense prices, causing the initial cost to change.
Retail price is simply the consumer price. Finally, the retailer adds its own profit share to the product cost, which constitutes the profits and costs of the manufacturer, wholesaler, transporters and other intermediaries, if any. The most important factor that will make the end consumer demand a product that has a large number of equivalents or is less demanded is the price.
In short, purchasing behaviour occurs depending on the customer’s desire to buy a product in proportion to his purchasing power; that is, his budget. At this point, retailers have created marketing strategies according to the supply-demand balance to increase demand. In sectors with high competition, effective price should be calculated considering other variables.
Variables determining customer demand
- Product Price
- Consumer’s purchasing power (periodic budget)
- Prices of equivalent goods
- Prices of substitute goods
- Complementary goods prices
- Consumer’s taste and preferences
- Consumer’s expectations that the price of the product will change
- Expected change in the consumer’s income
How To Calculate Product Price
It is up to the company managers to determine the price of a product, however pricing the product subjectively and disproportionately causes you either to lose money or not to sell your products. The optimal price of a product is based on objective data, especially the balance of supply and demand.
The amount of good X demanded by the consumer varies inversely with the price of good X, assuming everything else is constant.
qdx = f (Px); (Px ↑ → ↓ qdx)
Total retail sales worldwide from 2018 to 2022
The global retail market had sales of 24,7 trillion U.S. dollars in 2019
The pandemic process experienced in 2020 negatively affected the retail industry, together with all its sub-sectors, except food and hygiene products. Many companies and stores have been closed due to epidemic measures.
Combined with people who could not go to their jobs or open their stores and the resulting loss of income, uncertainty of the future and other concerns, people’s purchasing power and desire to shop decreased.
The increase in e-commerce does not meet the demand shrinkage in the retail industry. Check the above table. We see a chart containing the numbers for 2021 and 2022 together with the data obtained during the 2018-2020 period. However, the course of the pandemic process can change all sales forecasts.
As we mentioned before, retail-related with the commerce activity about the sale of goods and services to consumers. Transactions take place many different channels across the supply chain, such as F.M.G. (fast-moving consumer goods) food and beverage industry, home appliances, electronic goods, apparel, automotive etc …
Physical retail markets and shops are the main area of the retail sector for many years. However, the demand for physical stores has been decreasing in recent years. Online shopping is becoming more and more popular. In addition to saving time and transportation costs, online shopping has increased even more due to the pandemic. In order not to be affected by the epidemic, people chose not to go to crowded shopping malls and to enter shops and grocery stores.
In the first six months of 2020, the sales volume of the e-commerce sector increased by 88% the number of orders increased by 77% compared to the same period of the previous year. E-commerce carving out a share of the retail sector in all global markets.
The U.S. retailers worldwide
When the world’s largest retail companies are listed, the top 2 retail giants from the U.S.A. are Walmart and Amazon. The three hypermarkets and two discount grocery in the list. So F.M.C.G. and food sales still the leader of the retail market.
As a result of the widespread use of e-commerce, decreasing international shipping costs and globalization, the international retail market is spreading rapidly. E-commerce giants such as Amazon and Alibaba, where hundreds of thousands of products are listed and hosting e-stores of thousands of different companies, are the leading companies of the online retail industry.
The Internet paved the way for companies with limited budgets and organizational structures. If you trust your products, it is possible to compete in the virtual world and overgrow. Domestic retailers are capable of doing business on a national market, and many of them worldwide scale. Many of the world’s leading retailers are The U.S. companies. Walmart and Amazon are examples of such The U.S. retailers. The success of U.S. retailers can also be seen through their performance in online retail.
Retail Sector in The U.S.
The domestic retail market in the United States is a lucrative market, in which many companies compete. Walmart, a retail chain offering low prices and a wide selection of products, is the leading retailer in the United States. Amazon, The Kroger Co., Costco, and Target are a selection of other leading U.S. retailers.
Walmart is the world’s largest retail company. It operates in 27 countries with 55 different brands. 2.2 million people work in Walmart stores. Walmart’s 11,500 stores and e-commerce websites in 27 countries are visited by 265 million customers every week. The markets closely watch the competition between Walmart and Amazon. While Walmart rivals Amazon’s market share by increasing its investments in e-commerce, Amazon is threatening Walmart’s dominance in this area by opening physical stores.
Walmart’s core strength is being a cost leader, its supply chain works flawlessly, and company resources are used efficiently. However, the size of the company brings with it clumsiness; it is difficult to enter new markets and integrate its innovations into its existing system. Amazon, lead its technology power and flexibility of being an e-commerce store. As a company known for Amazon disruptive innovation, it continues to surprise us with projects such as robot warehouse employees, cashier-less stores, and delivery with drones. Amazon and Walmart competition will continue to drive the dynamism of the retail industry.