The Retail Market

What is retail?

Selling consumer goods and services to customers in order to make a profit is what we call retail. Products are sold via multiple distribution channels to customers in order to satisfy demand and the process by which they are delivered to retailers is called the supply chain. The word “retailer” is used to describe both the type of company that engages in retail and a person working in an operational role within the retail market, usually at a senior level as a retail manager.

The money taken by a retail environment is known as its “turnover.” The idea is that the turnover exceeds the amount spent by the retailer on wholesale or manufactured goods and the difference between the two amounts is called “profit.” When turnover is less than the amount spent by the retailer on wholesale or manufactured goods, that is known as “loss” and this is something the retailer wants to avoid (except in the case of loss leaders – see below).

What’s the difference between retail and wholesale?

Retail tends to mean the provision of individual (or small numbers of) goods and services to large numbers of customers whereas wholesale refers to the provision of large amounts of goods and services to small numbers of customers. Wholesale customers tend to be made up primarily of retailers, who will redistribute goods to the public with a mark-up on the wholesale price in order to generate a profit.

Shopping for retail goods

The purchase of retail goods is commonly known as shopping, whether or not it occurs in a physical shop, a virtual online shop or a leisure environment. You could say that there are two main types of shopping – shopping for essential products for the home (what’s known as ‘the weekly shop’) and shopping for fun or recreation (what we call ‘window shopping’).

Shopping for fun doesn’t always include the act of purchasing a product and window shopping may simply be carried out as a way of passing the time where the would-be customer goes home empty-handed.

The history of the retail market

Retail shops and markets go all the way back to ancient history. Some of the earliest retailers were travelling vendors who moved from place to place – their merchandising model being to literally take the products to the customers, from one place to another, rather than the other way around, which is today’s standard retail model (which began with the earliest market stalls).

Modern retail methods

Today’s retailers operate in a highly strategic manner and all aspects of the retail operation are considered before trading commences and continues on an on-going basis, dependent on fluctuations in the market, such as changes in supply-and-demand, retail trends, general economic conditions, reputational issues and other factors.

These are just some of the kinds of strategic decisions made by retailers:

  • What kind of retail environment will it be? (Physical shop, online store, social environment…?)
  • What will it sell? (Will it specialise? Will it be general? Which brands will it choose? Which brands will it not choose?)
  • Who will its retail customer base be? (This relates to socio-economic demographics like age, gender, sexuality, ethnicity, income, career, etc.)
  • What will its retail brand proposition be? (In other words, how will it distinguish itself from other retail brands in order to entice customers away from them?)
  • What will its pricing strategy be? (Will it be a low-cost retailer? Will it be a luxury retailer? Or will it cater to an everyday, middle-income retail customer bracket?)
  • What will its messaging strategy be? (What will its photography and video look like? How will it speak to retail customers? What dress code will it set for its staff? What will its corporate colours be?)
  • Will it operate in multiple markets (such as online and in physical stores) or will it choose one over the other? If it chooses physical, will it operate on the high street, in outlet malls, in suburban locations or a mixture?

What are the different kinds of retail formats?

There are all manner of different retail formats or retail formulas, as they’re also known. The most basic kind of retail format is the market stall, located within a literal marketplace, i.e. a location where multiple market traders or retailers are present and competing with one another to sell their goods. This is where the term retail market comes from.

Beyond this, the retail market is made up of a mixture of smaller independent retailers, such as family-run shops, and much bigger retail chains, which have dominated the market since the latter decades of the 20th Century. The reason retail chains dominate is that they have much greater buying power than their smaller competitors – because they buy wholesale in large quantities, they are given significant discounts, which they can then pass onto the customer in the form of lower retail prices.

Many larger retail companies have subsequently gone into manufacturing and produced ranges of own-brand products, sometimes under their own name or sometimes under a subsidiary brand name. These private labels allow retailers to make far greater profits as a result of owning the means of production and cutting out the wholesale middleman.

Here are some of the different types of retailers:

  • Softline retailers
    Retailers who sell single-use or limited-lifespan products, such as clothing, paper products, toiletries, cosmetics and medicines.
  • Grocery shops, convenience shops, supermarkets and hypermarkets
    This type of retailer stocks a variety of different food, drinks and consumable household goods, such as cleaning and other hygiene products. The larger the store, the wider the range, in general, so in a hypermarket, you might also find clothing lines, homeware, furniture and motor vehicle accessories.
  • Hardline retailers
    Retailers who sell long lasting, durable products are known as hardline retailers. Hardline retail goods include things like cars, furniture appliances or white goods, sporting goods, electronics, gardening equipment, tools and parts for other hardline products.
  • Specialist retailers
    These are retailers that focus on specific types of products or themes, such as music shops, craft ale shops, bookshops, craft shops, art supplies shops – you might also consider certain leisure environments like pubs and clubs to be retail environments in that it is their purpose to sell drinks.

The world’s biggest retailers

There are currently 7.1 million retailers operating solely online in the world today with 1.8 Million of those based in the USA. However, of all the retailers on the planet, just a small handful have come to global attention.

Here are the Top 20 retailers in the world today:

  1. Walmart
  2. Costco
  3. Kroger
  4. Amazon
  5. Schwarz Gruppe
  6. The Home Depot
  7. Walgreens Boots Alliance
  8. Aldi
  9. CVS Health
  10. Tesco
  11. Ahold Delhaize
  12. Target Corporation
  13. Æon
  14. Lowe’s
  15. Alberstons
  16. Auchan
  17. Edeka
  18. Seven & I Holdings
  19. Rewe Group
  20. JD.com

Retail careers

Working in retail offers many different career options, most of which offer lots of professional development and progression opportunities. Someone who starts out as a shelf-stacker or shop assistant might end up one day becoming the CEO of a retail company, if managed progression is in place and there is appropriate training available to help someone along their chosen retail career path.

Here are just some of the different retail jobs and retail careers available:

  • Shelf Stacker
    Shelf stacking is associated with large-scale corporate retail companies, primarily supermarkets and hypermarkets. This entry level retail job requires lots of energy as it is a very physical role and may also demand occasional customer interaction, if the role is being carried out during opening hours.
  • Cashier
    A cashier works on the cash register or till, handling cash and card payments from customers. It’s a hands-on role that offers lots of direct, face-to-face customer interaction and is a great first step on the retail career ladder for people who want lots of early customer service experience.
  • Sales Assistant
    A Sales Assistant or Shop Assistant role is probably the job you first think of when you consider what it means to work in retail. It’s all about taking care of retail customers, making sure they have all the help they need while browsing to choose the right products and increasing sales. This is one of the best roles within which to build customer service skills.
  • Department Manager
    Once someone has worked in retail for a while, especially in a bigger store, they might progress to become a department manager. This gives them chance to develop their earliest people management and operations management experience. It will probably mean working within a certain section of a retail environment or working on a specific product or brand.
  • Store Manager
    It’s only a few short steps up the retail career ladder from the role of Shelf Stacker to that of Store Manager, but the progress made between those roles is immense. Store Managers oversee the work of all department managers, logistics managers and, ultimately, everyone working in the retail store. They also have responsibility for profitability and any losses made, so they have great forecasting and budgeting skills, as well as overseeing customer interactions and the overall tone of the retail environment.
  • Buyer
    A Retail Buyer selects and purchases the wholesale products stocked in the retail environment. It’s a negotiating role and the buyer works to get the best quality products for the range at the lowest possible price. It requires brilliant interpersonal and communication skills and offers the potential for lots of travel to see wholesalers, sometimes internationally.
  • Visual Merchandiser
    Also known as Display Designers, a Visual Merchandiser is the person who arranges the displays that catch retail customers’ attention, both in the window displays and in stores, including at point-of-sale, and entices them to buy products. It a role that requires design training and is a specialist type of retail career.
  • Logistics Manager
    A Logistics Manager in retail makes sure that all goods incoming and leaving the retail warehouse are planned and effectively transported – in the right quantities, at the right time and in perfect condition. This is a behind-the-scenes retail management career that requires outstanding people management, time management and forecasting skills.
  • Human Resources
    Working in HR in retail, means overseeing all matters related to the people working in the shop, supermarket or other retail environment. From working with recruitment advertising agencies who develop the retail employer brand to writing role profiles, interviewing candidates, developing on-boarding solutions and managing the disciplinary and grievance processes.
  • Loss Prevention Manager
    Retail stores are open to the public so, of course, they experience theft from time to time. A Retail Loss Prevention Manager works to ensure this happens as infrequently as possible, so it’s about keeping an eye on the types of products that are most frequently being stolen and adapting merchandising or even cutting lines that aren’t performing profitably due to theft.

 

What is supply and demand?

Supply refers to the amount of a specific retail product or service being sold into the market by the companies producing or manufacturing it. When prices are higher, it becomes more profitable for a company to increase supply.

Demand refers the amount of a specific retail product or service consumers are willing to purchase at various prices. The higher the price of a product or service, the fewer people will demand, but when prices fall, more will be demanded.

An example of supply and demand would be to think about why oranges are so much cheaper in Spain than they are in the UK, where they are comparatively expensive. It’s all a question of supply and demand.

Oranges don’t grow in the UK, so supply is limited, but there is nevertheless a significant demand for them from consumers. So, by flooding the UK market with oranges at a higher price, retailers are able to make a significant profit on them.

In Spain, oranges are plentiful, so supply is abundant. Therefore, demand for them is naturally much lower than in the UK. By controlling and limiting supply to the Spanish market, however, retailers are better able to compete for profit and ensure prices are not forced to fall too low in order to entice people to buy them.

The active consumer

An active consumer is a retail customer who is actively engaging with a brand or a product; seeking it out, in other words. An active consumer follows and shapes the narrative of a given brand. They might write about it on social media, share pictures of it, write fan letters, join groups or associations related to it or, even, write a blog dedicated to it. Active consumers go looking for retail products – engaging with them at multiple opportunities over a lengthy period. They do not wait for retail products to come to them.

The passive consumer

A passive consumer is a retail customer who isn’t actively looking for the retail product or service that they end up considering for purchase. This might describe a window shopper, who idly browses the shelves in order to pass the time. It might also describe someone watching an advertisement on TV or on a billboard or on the internet as they engage another more active pursuit, like attending to a TV programme or walking to work or browsing the internet for news. Passive consumers tend not to engage with the retail product or brand beyond the moment of consumption (purchase or, in the case of food and drink, devouring).

What is a loss leader?

Sometimes, in the retail market, retailers will price products lower than the amount the paid for them at wholesale cost in order to entice customers into the shop or store. These products are known as “loss leaders.” The idea is that customers who purchase loss leaders will also spend money on other, higher priced items, while they’re in the shop or store, so the loss leader products ultimately help to increase overall profitability of the retail environment.

 

What is the customer journey?

The customer journey symbolises the brand narrative experienced by the customer from the moment they first experience the retail environment to the point at which they decide to return to the retail environment and purchase something else. Designing and implementing an effective retail customer journey, means identifying the customer’s needs and ensuring each stage of engagement with them meets and exceeds those needs. We call these stages of engagement ‘touch points’ and they occur across five key stages: Awareness; Familiarity; Consideration; Purchase; Loyalty.

Drop-shipping and made-to-order retailing

Drop-shipping is a modern form of retailing that offers low risk to the retailer and potentially good profits, if the retailer is talented, dedicated and a master of all aspects of the retail experience as well as SEO and digital marketing.

The drop shipping retail business is an online retail portal without a warehouse facility and it advertises products to customers, which it then has shipped directly from the factory or other manufacturing facility. This enables the retailer to operate with low overheads outside of the cost of running a website and, potentially, sales assistants (dependent on the size of the drop shipping operation).

The main risk in drop shipping is that there are now so many people doing it that it’s become increasingly hard to compete for business, unless the drop shipping operation offers bespoke products and, even then, it is a case of mastering digital marketing to the degree that the company appears within the first three pages of Google for relevant searches. The biggest retail operations in the world invest millions of pounds into just such activity, making it very hard for small independent made-to-order retailers to compete.