What Is Retail ? (Supply Chain, Retailing, Benefits, Advantages)
What Is Retail?
Retail is a broad term that encompasses the sales and distribution of goods and services to consumers. In today's world, the majority of sales activities revolve around retail businesses. Thus it is even more critical to understand and comprehend the concepts of the term Retail.
By definition, Retail is the sale of goods or services by a business to the ultimate consumers through multiple sales channels to earn a profit. A retail transaction involves the direct sale of a small number of goods to the final consumers. So, if you purchased anything today or yesterday for your consumption, you participated in Retail.
The word retail has been derived from the old French verb 'tailer', which means to cut off a piece, clip, pare or divide in tailoring. Thus, at present, it refers to the sale of goods in small quantities to consumers.
Retail marketing aims at targeting the customers by attracting them with the business model so that the business can drive sales. The concept of retail marketing is developed on four key components, such as 4Ps like Product, Price, Promotion and Place.
1. Product:
Decide on the product, which will be being sold to your retail store
2. Price:
This is the other key aspect, which can fetch the attraction of customers to your products over the competitors. Hence, set the price of the products wisely (considering the competitors’ pricing strategy)
3. Place:
Place is one of the key attributes of successfully running a retail business. Try to open the brick and mortar store in such a location, where you can easily operate the business and the customers can also get to know about the newly opened store.
4. Promotion:
This is the last factor of the 4Ps marketing strategy, with which the retailers can promote the business and the target customers will come to know about the price of the products and many more.
Before we Dive Deep Into The Concept Of Retail, Let Us First Get Familiarized With The Common Terms Associated With Retail
1. Retailing:
Retailing is defined as the set of activities involved in selling goods and services to the final consumers for their consumption. There is a common misconception that retailing involves only the sale of goods in stores. However, it also includes the sale of services offered at restaurants, salons, repair centres, etc. It is undoubtedly the most popular method of conducting business.
2. Retailers:
A Retailer or a Merchant is an individual or a business entity that sells goods such as groceries, clothing, stationery, cars, etc., to the ultimate consumers through various distribution channels in return for a profit. Retailers are responsible for satisfying the demand of consumers identified through the supply chain.
They typically do not manufacture the products themselves, instead, they purchase them in bulk either directly through the manufacturer or the wholesaler and later sell them in small quantities to the final consumers.
3. Retail Stores:
A retail store is where the retailer sells his products to the customers. It represents a single point of purchase directly to the final consumer of the product. It may be a brick-and-mortar store like the store of Godrej, or Puma, or an online shopping website like eBay, Flipkart, etc.
Types Of Retail Stores:
There are various types of retail models in the industry, each having its pros and cons. The most common types of retail models are:
1. Convenience Stores:
A convenience store known as the corner shop is a small retail business that stocks and sells a wide range of everyday items such as groceries, milk, confectioneries, soft drinks, newspapers, etc. These stores are usually located near residential areas where customers can make purchases in their comfort and convenience.
2. Speciality Stores:
Speciality stores focus on specific product categories such as furniture, children's clothes, office supplies, etc. Think of purchasing a product of a particular variety or from a particular brand, and that's a speciality store where you go for it.
3. Supermarkets:
A supermarket is a self-service store that sells various products of different categories like household items, food & beverages, fashion commodities, etc. They are usually larger than convenience stores.
4. Hypermarkets / Big-Box Stores:
A hypermarket is a big-box store that combines a supermarket and a department store. It carries a wide range of products under one roof, including groceries and general merchandise. They usually offer goods in larger quantities than retail outlets.
5. Discount Stores:
Discount retailers offer a wide range of products at lower prices than the actual or supposed maximum retail price. They depend on bulk purchasing and efficient distribution of goods for keeping the operations cost-effective.
6. Department Stores:
A department store offers a wide range of consumer goods under different sections or areas of the store, with each region specializing in a particular product category. The different departments may be dedicated to clothes, groceries, shoes, jewellery, household items, etc.
7. Ecommerce Store / Online Stores / Websites:
Online stores sell goods or services to the customers via the internet through their website. Customers make online payments for the purchase, or they may opt for the payment on delivery option. The stores deliver the products directly from the warehouses to the customers at their homes, workplaces, or wherever they want.
8. Warehouse Stores:
Some the warehouse stores like IKEA and Costco sell a wide range of products at lower prices than the market price. These warehouse stores are getting popular since the customers can save money on the essentials. In turn, it is mandated to purchase the goods from the warehouse retail stores in bulk quantities.
Retail Supply Chain
The retail supply chain is the process of transportation of the final goods to the ultimate consumers. It encompasses all the activities involved in acquiring the raw materials for the production of goods to their delivery to the consumer's hands. The retail supply chain consists of manufacturers, wholesalers, retailers, and end consumers.
Each of these entities plays an essential role in completing the retail supply chain.
1. Manufacturers:
Manufacturers purchase raw materials and turn them into finished goods.
2. Wholesalers:
Wholesalers purchase the goods from manufacturers in bulk and supply them to retailers and different cities or locations.
3. Retailers:
Retailers sell the goods in small quantities to the ultimate consumers at higher prices or what we call the manufacturer's suggested retail price.
4. Consumers:
These are the end-users of the products produced by the manufacturers. Consumers are the ones who generate demand for the products and initiate the supply chain.
Ready For Retailing?
Now, since you have a thorough knowledge of what Retail is and what it encompasses, you are all set to start your own retail business. Stay a step ahead of your competitors by starting with an online retail business. When it comes to e-commerce platforms, there are many options available in the market.
Some of them may be available at a low price, or some may offer different features. Fynd Platform offers an optimum combination of these: the ultimate solution for omnichannel retail business.
It allows you to create your e-commerce website at an affordable rate and with several features like delivery assistance, payment gateway integration, user and API documentation, marketplace catalogue generation, data insights with tracking and analytics, etc.
Common Retailing Types
The retail stores are available in varieties of sizes and shapes. And there are certain pros and cons to each retail type. Considering the type of the businesses, one particular retailing model is better fitted compared to the others. Check the types of retailing models here in the following section.
1. Independent Retailer:
Independent retailing is something when someone builds his business from scratch. Mostly, the owner of the independent retail store looks after the entire operations, however, he may have assistants or can hire someone extra as per his requirement.
2. Existing Retail Business:
According to the name, the owner of the existing retail store has already been running the business. Usually, someone inherits or can buy from others an existing retail business and then take over the ownership and responsibility.
3. Franchise:
A franchise is nothing but an existing business plan, which includes the trademarked name, and aneady determined product set, as well as already established business concepts. If a retailer wants to take a franchise, then they will get the permission of using the above-mentioned elements.
To purchase the right of retaining a franchise, one should follow certain rules and must go through some definite processes. In addition, to take a franchise, one must pay the required amount to the retail owner for retaining the franchise.
4. Dealership:
A dealership is a combination of a franchise and an independent retailer. If a retailer works with the dealership, then they have the license of selling a brand of products (a variety of brands). Unlike a franchise, there is no need to pay fees for licensing.
5. Network Marketing:
This is a type of multi-level marketing, where the selling of products is solely dependent on the people in the network. Apart from that, a person might sell the products; whereas he also recruits the other sales person for selling the goods too, simultaneously at the same time.
Steps To Start A Successful Retail Store
To start a successful retail business, one should follow the below-mentioned steps mentioned here.
1. Have A Detailed Plan:
If you have a plan for starting a retail business, then it is important to have a solid and detailed retail business plan. You should have the answers ready to the following questions:
1. What to sell?
2. When to open?
3. Where to open?
4. Why open?
5. How to start the retail business operations?
Once you have all the answers ready, you are good to go to open a retail store. To make a retail business plan, you should include the following points:
1. An executive summary, where you should explain the goals and objectives you set for your retail business
2. A plan on how to operate the retail business function and what items you are targeting to sell or introduce in the marketplace
3. A detailed market analysis, where you should cover the details like local market area, economic trends, competitor analysis and retail sales so that you can find out the potential of starting a retail business. Along with it, you can assume the probable position of your retail store following the proposed business ideas
4. An organizational flowchart, which includes management structure and team member responsibilities
5. Also, add a marketing advertising plan for promoting the business
6. Keep a section for funding expectations. Also mention there about the initial investment. You should also estimate the required funding for the first two to five years of retailing business
2. Seek Financing:
Unless you do have a strong financial backup, one should think of financing for operating the retailing business. If you are seeking a business loan from a financial institution, you should decide the amount of the loan, so that you can repay the amount within the mentioned time. To take business loans, the retailers should attach a business plan.
3. Check The Space For Retail Store:
Since you have plans for opening a brick-and-mortar shop, therefore, you must have a look at the space/ location. To select a space for opening a retail store, one should consider the below-mentioned attributes:
1. Size of the space
2. Price per square foot
3. Whether storage capacity is there or not?
4. Is there any opportunity for the further renovation?
4. Plan For Acquiring Adequate Materials:
Manufacturing, Production are not enough to run a retail business successfully, but you also need a whole store full of furniture and accessories.
1. Precisely, the retailers should add shelves, full-size racks, hanging bars, rotating racks, mannequins or other materials to display the inventories
2. Add hangers, podiums and other required tools to display the merchandise
3. To protect the valuable inventory, add security tags
4. Counters and display cases
5. Also, you should have a pricing gun, price tag tape, barcode scanners and stickers
6. It is mandatory to keep cash registers, money drawers, as well as clothing sections
7. You can also add shopping carts, baskets etc
5. Create A Strong Team:
It is not possible to look after the entire operations of a retail store on your own. It will be wise to make a strong team by recruiting specialists for every department. It will in turn reflect in the operational process of the business. The team will be experts to manage the back office work as well.
6. Invest In Installation Of POS System:
A retail POS system can look after both the front office and back office work simultaneously. More specifically, the installation of POS software will be helpful to efficiently do the work like ringing up orders, tracking the revenues, managing inventory and taking care of the other operations.
7. Organize The Accounting And Bookkeeping:
The retailers cannot survive without having a proper approach to small business accounting. Otherwise, the retailers can incur losses from the business. In this context, the retailers might get help from the POS Software.
8. Track The Inventory:
Monitoring what is selling, and what is not is an integral part of tracking the inventory. Consequent;y, the retailers will be able to estimate the average turnover and profitability margin of the business. To get help in this matter, the retailers can take help from the inventory management software, which deals with the internal processes.
9. Building Of Ecommerce Presence:
Retail businesses can reach faster and larger customers with the help of an ecommerce website. As per the statistical report, approximately 67% of customers have been used to buying online pick-up in-store options, which in turn means that the e-commerce transaction will increase the sales of the retail business by 20% within 2024.
With the concept of Etailing (Electronic-Retailing), the sales of the retail stores will be done through the internet. For instance, Amazon.com is the largest online retail store. Considering the success story of this Giant retail store, many brick-and-mortar stores are showing their interest to invest in the e-tailing business.
In a nutshell, the omnichannel business experience (pair of an eCommerce business and the brick and mortar physical store) for the consumers can uplift the revenues of the business.
10. Opt For The Marketing Strategy:
Unless you opt for marketing strategies to promote the newly opened retail business, you will not be capable of driving sales for your business. An effective marketing plan is effective to grab the attention of the customers.
To drive traffic to the brick-and-mortar store, the retailers can follow the below-mentioned marketing strategies.
1. Retail Displays and In-Store Activities:
The retailers can create a vibrant look or can get an aesthetic look so that the customers want to visit the store physically. Get the display and decoration of the store sober and soothing, do not make it clumsy by adding some unnecessary things. Keep the store floor spacious, so that you can allow sufficient visitors to your store at a time.
2. Online Listing:
To increase the reach of your store to a large base of customers, the sellers can take the help of Google listing, so that it will in turn help to discover the store in their neighbourhood.
3. Digital Marketing:
A lot of people are connected with social media. Hence, Facebook ads and Instagram posts to AdWords can drive huge sales for the retail store by increasing the in-store traffic. Advertisement through social media is beneficial to make people aware of the exciting offers and discounts by the stores, even without visiting them physically.
4. Word of Mouth:
If the customers will be satisfied with the products and services of the retail store, then they will talk about the store to others. Word of mouth marketing tool can also pull off a huge number of customers to your store.
How the Retailers Get Benefits from Retail Software?
Sometimes, it might be difficult to switch the traditional and hardware cash registered store to a cloud-based POS system. However, the experts suggested that switching to cloud-based POS retailing systems is way beneficial in terms of operating business functions to check the business analytics to make reports.
Go through the following section to get to know about the benefits of retail software.
1. Detailed Information:
In the end, the only information about getting out of a cash register is the cash flow. A POS system leads the retailers to give an overview of the leftover cash. So that the retailers can calculate the actual profit from it. In addition, they can also calculate the total number of products sold as well as the customer's insights.
2. Improved Inventory Management:
Through POS, the retailers can easily get access to detailed inventory management and from it, they can estimate what to stock and when they need to stock them. POS solution also generates inventory reports- through which the retailer can find out the sales trends, sales history, and the items that are selling out very quickly.
3. Accuracy:
Retail POS software is the best way of reducing human errors, especially during sales processing. In addition, with the help of POS software, the retailers can automatically apply discounts and promotions to the orders.
4. Security:
POS software continuously monitors the inventory level, so that the retailers will get an alert about the low stock of the products. Apart from that the POS system also keeps the system of the retail business locked so that the non-employees or the competitors will not get track of it. The cashiers also won’t have the access to the inventory transfer or the other in-depth features.
5. Customer Satisfaction:
POS software helps to deal with the page loading error and hence world on the speed so that the customer satisfaction level can be lifted. POS does not ask for customers’ information every time, hence, the customers do not need to visit the retail store frequently. Instead, their detailed information will be saved at the POS for easy integration with the rewards program along with a quicker checkout.
How To Get Benefit From Online Retail Business?
Online retail shopping refers to the buying and selling of products in terms of electronic commerce instead of purchasing the products physically, by entering the brick and mortar store. Especially after COVID 19 pandemic, the sales of the online retail business are leaping. For instance, Morrisons and Ocado have increased their online retail business.
Go through the major benefits of online retail business here in the following section.
1. Brand Awareness:
Brand awareness is one of the key aspects to grow the retail business and increase the market share. Once the retailers will start to sell the products online, they will be able to deliver the goods to a large number of customers. No geographical barrier will be there.
People from far away can purchase products from online eCommerce websites, which is not possible when you sell only via a physical store. Customers from far locations will not prefer to visit the brick-and-mortar store (which is a mile apart distance) and make the purchases. To increase brand awareness, social media promotions are working like magic.
As per the above chart, several customers are highly active on social media and they like to purchase from the online retail store and get the delivery at the doorstep over visiting the store physically, Hence, the focus of the retailers should be on improving the brand awareness.
2. Lower Down the Overheads:
Overhead cost is nothing but the operation cost, which is needed to run a business. If you own a small-sized retail shop, then it is very important to reduce the unnecessary expenses, otherwise, you cannot experience a large percentage of profitability.
Once you start to get success in an online retail business, then you can stop the brick and mortar store, to deal with the expenses. On the other hand, operating a retail business from an online store is cheaper than the brick and mortar store.
3. Customer Accessibility:
There are some other reasons of choosing the Online retail store over the Brick and Mortar store, since the online retail store offers better accessibility of purchasing the required goods from anywhere and anytime. Whereas the Brick and Mortar store will be opened for a particular time.
On the other hand, in the case of traditional retail business, there is no option of getting home delivery; whereas, in the case of purchasing through online retail stores, the customers can get the delivery at their doorstep. Hence, they can get a chance of experiencing hassle-free purchasing.
4. Access to More Communications Channels:
Online retailers offer their consumers omnichannel service experiences. The online retailers try to connect with potential buyers through email, live chat, chatbots or social media. Based on their feedback, the online retailers can make modifications, so that the customer satisfaction level can also be increased. It in turn helps to maintain the customer relationship in the long run.
Apart from the customers, the online retailers should also maintain a good connection with the other stakeholders, such as manufacturers, and shippers. In this context, the retailers should contact trustworthy and reliable ones, so that the customers can expect a safe delivery within the projected time.
5. Real-Time Data:
Once the retail store goes online, then it will be easier to integrate the reporting tools for gathering real-time customer data. These accurate insights will help the retailers to streamline the Ecommerce service, as well as the customer experience will be improved. Along with this, online retailers can optimize their pricing strategy.
The Disadvantage Of Online Retail
Apart from the above-mentioned benefits, there are some disadvantages of Online retail business.
1. Website Costs:
Before going from the retail business to the online medium, the retailers should work on planning, designing, creating, hosting, securing and maintaining a professional website. The entire process will take a lot of money and growing the ecommerce business is also time taking. Also, it will affect the sales percentage of the Ecommerce website.
2. Infrastructure Costs:
If you are operating your retailing business in online mode, then you should pay the infrastructure cost for maintaining the website. If the retailers start an online business, then they should also pay the cost of physical space for order fulfilment, warehousing goods and dealing with the staff.
3. Security and Fraud:
With the rising of eCommerce businesses, fraud and scams have increased with time. For instance, 82% of retailers have been experiencing a rise in fraud attempts since the pandemic began.
This will in turn create a negative effect (46%) on the retail business. It will in turn create a negative impact on the online retail business in the long run. Apart from that, the retailers will also face legal issues.
4. Advertising Cost:
In the case of online retailing business, the retailers should pay a lot for the advertising cost, so that they can reach a large scale of customers. This in turn increases the overall budget for running the retailing business.
5. Customer Trust:
If the online retailers will run the business not efficiently, then the goodwill of the store will be damaged. In turn, customer trust in the retail business will also be affected. Moreover, since it will be an online retail business, therefore, the retailers would not be able to meet with the customers face-to-face and convince them. The retailers should depend on online customer service.
Top Retail Business In India
The top retail businesses in India have a large contribution to the Indian GDP. For instance, retail business in India accounts for 10% of the Indian GDP. Here in the following section, the top low invested, medium invested and high invested retail businesses in India have been highlighted.
As per the expert's suggestion, Grocery is the lowest invested yet successful retailing business. Based on the current trend, the grocery retailing business will be increased sharply within 2026.
For instance, investment for the Grocery retailing business is INR 100,000 and the net profitability earning will be 60%. Similarly, a stationary and books store also needs INR 100,000 investment, however, the profit margin will be 20% to 55%.
Whereas, coffee shops are a highly invested retail business in India, which needs INR 10 to 20 lakhs to start and the profit margin will be 20% to 80%. This refers to the fact that retail business in India can be a profitable business, not only in metropolitan cities but also in small cities. Some of the successful retail businesses are grocery, drug, department and convenience stores.
To start a newly opened retail business, the retailers should take the help of the Fynd online platform for marketing purposes, so that the people will come to know about the newly started business.
Fynd Platform aims at launching a new campaign for the retailers, namely “Retail ka Naya Address”. With the help of this campaign, Fynd will promote the retailing business on YouTube apart from campaigning through several social media platforms, including Instagram, Facebook and Twitter.
Fynd platform offers a 30-day free trial to the retailers without any credit card. Moreover, this newly launched retail campaign also helps the online retailing business in payment integrations, marketing, super fast shipping, delivery and support etc.
Since, COVID 19 pandemic has made obsolete the traditional business method, hence, Fynd has launched this new campaign. In a nutshell, the Fynd platform assures retailers to accelerate their business growth.
