Different Types of Retail
Different Types of Retail
Retail is the method of selling products or services directly to consumers through multiple distribution channels to make a profit. Retailers meet demand identified by a supply chain involving manufacturers, distributors, wholesalers, and retailers. The most obvious example of distribution channel in retail is store retailing where products are displayed on a retail outlet store floors. Other distribution channels in retailing include direct selling to the customer, internet retailing, auction sites, mall retailing, direct mail, discount stores, franchise retailing, consignment shops, and garage sales.
Retailers either directly or indirectly sell their merchandise to wholesalers. Some retailers buy from wholesalers themselves and sell to retailers. Wholesale merchants are the mainstay of the retail industry as they purchase directly from the manufacturers and pass the savings on to the wholesalers. Retail stores also purchase from wholesalers who then ship directly to the end user. Wholesale retailers are the backbone of the retail industry as they provide much of the raw material to both the manufacturer and the retailer.
Online retailers have begun to take advantage of wholesale reductions offered by wholesalers and distributors as well as the increased online traffic coming to these websites. Internet retail sales have exploded over the past decade and the majority of online retail sales take place in the third party channels. Many online retailers offer free shipping with purchases above a certain amount and other offer discounts for frequent buyers or frequent sales. Some companies offer drop shipping which is a technique used to provide retailers with inventory in large quantities that can be shipped to a customer who places an order with the company instead of having the items sold in their store. Drop shipping saves time and money for the retailer because it does not require stocking of items and does not require the items to be shipped.
Coupons and discounts are another way that some retailers achieve higher prices for their goods. Discount stores offer shoppers the chance to buy goods at marked down prices and then the retailer deducts the cost of the item from the total price after the discount is applied. The profit from this type of arrangement is then given to the retailer. It is very common for discount stores to be owned by chain stores and many off-price retailers incorporate coupons into their product mix in order to increase their profit margin on the products they sell.
Online store retailing is currently enjoying much higher sales than traditional outlet retailing due in part to the relative price emphasis by the consumers and in part to technological improvements. Many websites offer free delivery for most products and offer a simple point of sale system where the customer can purchase items without leaving their homes. Many sites allow customers to compare prices from multiple retailers and do not display the retailer’s personal rates at the checkout counter. Most off-line retailers also offer cash discounts and free gift wrapping or return labels. These improvements in service and selection has made online store retailing an attractive option for many people who would not otherwise be able to afford designer names.
Due to the increasing number of outlet retailers, the cost of a consumer’s product typically increases by one percent annually. Many experts believe that this cost is too high for many consumers and is keeping many of them from shopping in their local neighborhood retail shops. As more retailers enter the digital marketplace, it is likely that the cost of doing business will decline for all retailers.