Retail - Term Overview

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A retail sale occurs when a business sells a product or service to an individual for their personal use. The transaction can occur through a different number of channels, such as online, through direct selling or direct mail. The aspect of the sale that qualifies it as retail is that the final consumer is the one who makes the purchase.

Types of Retail Businesses

There are approximately 3.7 million established retail stores in the United States, from stores and restaurants to salons and gas stations, pest control providers and auto mechanics. These businesses employ nearly 42 million people. making retailers the largest employer sector in the nation.

There are four broad categories of retailers:

  • Hardline: Things that tend to last a long time like cars and furniture.
  • Soft and consumable goods: Things like clothes, shoes, and toiletries.
  • Food: Things like meat, cheese, things produced and baked.
  • Art: Things like fine art, also books and musical instruments.

With those categories you will also find different types of retail stores. Some of the most common include:

  • Department stores: The oldest, usually the largest. It's the place where the consumer can buy a wide variety of products under one roof. Target and Macy's are examples of department stores.
  • Big box stores: Major retailers that specialize in one type of product, such as electronics. Best Buy and Bed Bath and Beyond are examples of these types of stores.
  • Discount stores: Department stores that carry discount items and low-price brands. Examples of this type of store are Walmart and Kmart.
  • Warehouse stores: These no-frills warehouses sometimes require you to be a member to access their low prices. Bjs and Costco are examples.
  • Mom-and-pop stores: Smaller, niche stores are sometimes run by small business owners. This is your typical corner store.
  • E-retailers: Online retailers who sell through the internet and bring the products to your door. They don't have a physical store. Amazon and etsy are examples.

Retail Finance

A retailer's supply chain generally consists of four players: factories that produce the goods, warehouses or distributors that buy from factories and resell to retailers, and retailers that buy from warehouses and resell to consumers. At each stage of the chain there is a profit margin, built into the purchase.

Factories calculate the cost of producing a product and then add a profit percentage to it before selling it to warehouses. Stores do the same, adding a percentage of profit to what they already paid. And retailers add their own profit margin to the cost of the product before selling it to the end consumer.

So a product that costs $ 1 to make is sold to stores for $ 2. They buy it at that price and resell it to retailers for $ 4. Then retailers buy it at that price and sell it for $ 8 to the end consumer. This is how everyone wins.

Point of sale

To complete a sale, retailers traditionally had consumers take their purchases to a cash register, where a saleswoman would tell them the total to pay and ring the bell announcing a sale. Today, some supermarkets have a self-check system, where consumers can scan their products and pay using a credit card or cash.

Consumers shopping in online stores on their computers, select the product they want, enter their credit card details and thus complete the sale.

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