What do Amazon, Walmart, and Target have in common? All three retailers were innovative disruptors of their industries. They completely changed how we shop, and they continue to innovate and provide value for their customers.
But what makes a retailer disruptive, and how does it create value for customers? Here we’ll look at the definition of retail trading—and show you how to apply this concept in your business.
What Is Retail Trade?
Retail trading is the buying and selling of goods and services to consumers. This can take place in stores, online marketplaces, or directly from company-owned outlets. Retail trading does not refer to wholesaling (where retailers purchase goods from manufacturers) or resale (where retailers buy previously owned items); it refers only to selling new goods.
For example, if a customer buys jeans from a store, that’s retail trade. If they buy those same jeans from the manufacturer or sell them somewhere else—even though they’ve never been worn—that would be wholesale or resale.
Retail and wholesale trading have a lot in common, but there are also quite a few differences between them.
Retail and wholesale traders buy and sell products, but how they do so is different. Retail traders generally deal with customers directly, while wholesalers—often manufacturers or distributors—sell to retailers.
Importance of Retail Trading in the Economy
Retail markets are a vital part of any economy. Without vibrant retail centers, manufacturers would be unable to sell their products—and without those products, we wouldn’t have many jobs or opportunities in other sectors.
Let’s have a look at some of the ways in which retail markets contribute to the economy:
Retail jobs help spur job growth
Retail workers can often advance in their careers, moving from the cashier or stock clerk up the chain of command at stores around the country and eventually even franchising new locations. And that’s good news for other businesses: those working in retail tend to do well—especially when they start spending more money outside their own company!
Retail markets increase competition among companies
If you’ve ever shopped at Walmart or Target and then walked across the street to an independent shop, you know how much better it feels to support small businesses! These smaller retailers often offer lower prices than big box stores because they have less overhead or capital expenses than buying large quantities of inventory all at once.
Retail markets are important for local communities
If you’ve ever lived in a small town or rural area, you know how hard it is to find good jobs. Retail stores give people an opportunity to work and be part of their community by providing goods and services that residents need every day—important economic benefits that can’t easily be replaced with online sales.
Retail markets are efficient
In a free market economy, when there is an oversupply of something, prices drop until that supply matches demand. If you’ve ever bought a home and seen prices go up in your neighborhood because there were more people looking than houses available, you know this to be true!
How Does Retail Trade Work?
Retail stores sell goods to consumers, but they also buy things from other companies—this is called retail trade. The process provides people with the daily goods and services (such as food or clothing) needed. Retailers sell products directly to buyers who visit their stores or websites. Retailers may use a wholesaler who buys products from manufacturers at a discount and then resells them to retailers for more money.
Let’s see how the retail trade process works.
Procurement and Inventory Management
Procurement and inventory management are the first steps in retail trading. This is where you source products from suppliers and manage inventory levels. You must purchase inventory from suppliers, arrange delivery, and store the goods in your warehouse or store. If you don’t have enough time or resources to manage this process yourself, consider hiring a third-party logistics (3PL) provider.
Marketing and Sales
The next step in the retail trading process is promotion and sales. This involves promoting products to potential customers, convincing them to buy, then fulfilling that order by shipping it out or making a delivery.
Retailers use a variety of strategies to promote their products and attract customers, including advertising in magazines and newspapers, placing displays near the checkouts at grocery stores, and running sales events such as two-for-one deals on batteries or three free months of Netflix if you buy an ultra HDTV. Those promotions are designed to help retailers sell more goods.
After-sales Services
The final step in the retail trading process is after-sales services. This includes things like returns and exchanges, repairs, and customer support. Good after-sales service is essential for building customer loyalty and maintaining a positive reputation.
Key Players in Retail Trading
Source – Credit
Retail trading involves retailers, wholesalers, and manufacturers, each playing a critical role in the process:
Manufacturers
Manufacturers are companies that design, develop and produce goods— often the first stop on everybody’s supply chain. However, they may also sell directly to retailers or other wholesalers. Most of the innovation in consumer goods comes from manufacturers, who are responsible for designing packaging and marketing materials as well as manufacturing and shipping their products.
Wholesalers
Wholesalers are the middlemen between manufacturers and retailers. They purchase large quantities of products directly from manufacturers, then resell them to smaller retailers or other wholesalers. For example, a wholesaler might buy 10,000 pairs of shoes from a manufacturer, then sell 500 pairs to a retailer and 496 pairs to another wholesaler.
Retailers
Retailers are the most visible players in the retail trading ecosystem—they sell goods directly to consumers. Retailers can be brick-and-mortar stores or online storefronts, such as Amazon and eBay. Retailers must price products correctly and ensure that they are competitive with other retailers in the market. This is so they can turn a profit on each item sold—their primary goal as businesses. Retailers serve as a connection between the product and its end user. They can also add value to products by offering expertise, customer service, or marketing savvy that manufacturers may lack.
Types of Retail Business
There are a variety of different kinds of retail businesses. These include:
Brick-and-Mortar Stores
These are physical stores that can be found in malls, outdoor shopping centers, or standalone buildings. They sell goods to the public directly and often offer a wide selection of products. Brick-and-mortar retailers include big box stores like Target and Walmart and local shops like bookstores, clothing boutiques, supermarkets, etc. Brick-and-mortar stores are often more expensive to run than online businesses because they require a large amount of upfront investment, including buying inventory and renting or building a physical location.
Online Retailers
These businesses sell products through an online platform, such as a website or mobile app. Online retailers can sell various products, from clothing and electronics to groceries and household goods. Online retailers don’t have to worry about staffing, maintaining, or securing a physical location so they can operate more efficiently than brick-and-mortar businesses. However, they have higher overhead costs associated with running a website and digital marketing campaigns.
Mail Order
A mail-order retailer is a type of online business that sells products through direct-mail marketing campaigns. Mail-order retailers often specialize in selling niche or hard-to-find items, such as custom clothing, home décor, and specialty electronics.
Mail-order retailers pose a different model than online retailers. Unlike websites, mail-order businesses rely on direct marketing campaigns to attract customers.
Teleshopping
Teleshopping is a form of electronic commerce in which products and information are offered through live streams, television broadcasts, or online. Teleshoppers exist on all forms of media—they offer information about products, allowing viewers to purchase items directly without visiting a store.
Social Commerce
Social commerce is the online purchase and sale of products or services through social media channels. It is also a type of e-commerce that connects consumers through social network platforms such as Twitter, Facebook, LinkedIn, etc.
Retail Trading Strategies
Retail businesses need consistent and effective strategies for pricing, product mix, promotion, store design—and several other factors. Let’s have a look:
Pricing Strategies
Price strategies refer to the methods that retailers use to set their product prices. Generally, the price of a product is determined by its cost, the retailer’s desired profit margin, and competition. Some companies have a policy of matching or beating competitors’ prices; others set their prices based on what they think consumers will pay.
Pricing strategies can be categorized into three groups:
- Penetration pricing: This strategy involves setting an initial low price to attract new customers; once they become loyal shoppers, the company increases prices to make a larger profit.
- Skimming pricing: This strategy involves setting an initial high price for products or services that are unique in some way—such as being technologically advanced or fashionable —and then lowering the price as competitors enter the market.
- Price lining: This strategy involves setting prices based on a competitor’s prices or the cost of producing and delivering products or services.
Retail pricing strategies are based on several factors, including the cost to produce an item, what competitors charge for similar products, and how much consumers are willing to spend.
Product Mix Strategies
Product mix strategies are ways that retailers decide which products they will carry in their stores. There are three main product mix strategies:
- Dedicated strategy: This is a retail strategy in which retailers only carry one type of product, such as selling only computers or clothing.
- Assortment strategy: An assortment strategy is when retailers carry various products under one roof so customers can find what they are looking for without going to multiple stores altogether.
- Specialization strategy: A specialization strategy is when retailers focus on selling only one product type but are experts in this category. For example, a shoe store could sell only designer shoes, or a bookstore could specialize in children’s books.
A well-crafted product mix strategy can help retailers meet the needs and preferences of their customers by offering a range of products and attracting a broader customer base.
Promotion Strategies
Promotion strategies include anything a retailer does to increase sales and drive product demand.
Advertising, sales promotions, and public relations are all different types of marketing strategies. A well-crafted strategy can help retailers create brand awareness—making consumers more likely to buy the products they’re selling, differentiate themselves from competitors—understand their strengths and weaknesses compared with those in other markets, and increase sales by building strong relationships between customers (retailers) and potential buyers.
Marketing strategies can be as simple as having a great coupon on a Sunday newspaper insert, or as complex and expensive as an advertising campaign. Your strategy depends on your business goals, budget and resources, competitors’ marketing strategies, and customers’ buying habits and patterns.
Store Layout and Design Strategies
Store layout and design strategies refer to the way products, displays, and fixtures are arranged within a retail store.
A store’s layout and design can significantly affect how customers feel about shopping there. Retailers who implement effective store-design strategies create pleasant shopping environments that make customers want to come back again and again. The following are a few examples of store-design strategies:
- creating a welcoming environment with clearly marked entrances and exits, ample lighting, and appealing décor
- grouping similar products in different sections of the store
- placing well-designed displays near main doors to attract customers’ attention
You can even get high-end retail displays to help create a more upscale shopping experience. Retail displays can be used to help create an upscale shopping environment. Exhibiting new products or educating consumers about your company and its wares is only part of the equation for retail success; creating a more luxury-oriented atmosphere for customers works too!
Challenges in Retail Trading
Retail trading can challenge many business owners, especially in today’s competitive marketplace. You need to know what your customers want and how to create an atmosphere (or product offerings) that encourages them to spend money on their one-time visit and make the store their go-to place every time they buy something within this category. The following are some of the challenges you may face when trying to trade successfully:
Competition from eCommerce
The growth in online sales has been a massive challenge for traditional retailers. The key to success is to integrate your online and offline presence, so customers can shop from the comfort of their homes but still come into your store for that one-on-one interaction.
Managing Inventory
Inventory management is one of the most crucial aspects of retail. It’s not just about having enough products in stock but also knowing when to replenish them and how much to order. This requires solid planning and forecasting skills.
Customer Service
Customer service is another crucial aspect of retail success. You must ensure that your customers are happy with their purchases and leave your store satisfied with their experience.
Keeping Up with Technological Advances
Technology is constantly evolving, and if you want to stay competitive in the retail industry, you need to keep up with these changes. This includes updating your store’s website, social media presence, and other technology-based tools that can help you reach more customers.
Conclusion
Retail is a competitive industry, but it can also be very lucrative. If you have the drive to succeed and your business plan is well-conceived, there’s no reason why you shouldn’t be able to build a profitable retail operation of your own.
With the right tools, you can ensure your store is fully equipped to compete with other retailers. One of these tools is a high-end retail display that can help you showcase your products and make them more attractive—so customers are drawn to buy what they see!
