What is retail in business? You do not have to keep asking this question because this article will answer it. Apart from answering this question, this article will also explore popular sub-topics, such as the importance of retail and the various types of retail businesses. It will even share some great retail business ideas and how to start up a retail business.
So, if you want to learn all of these, then do not go anywhere else until you are done reading this article.
Meaning of Retail in Business – What is Retail in Business
Retail is when goods and services are sold to consumers in units or small quantities for their own use.
Retail is the opposite of wholesale which involves selling products and services to other businesses for commercial purposes.
When you go to the store to buy a bag, that sale is a retail sale.
This is because you bought just one unit of the bag, and you want to use the bag by yourself.
Whereas, if your small business sells bags and you buy 20 pieces of bags from a manufacturer or a merchant and sell those bags to people, that sale would be considered wholesale.
In this case, you are the retailer; you selling every piece of that bag to others would be retail sales.
The major factor that makes any sale retail is that the person who buys the product or service would be the person to use that product/service and would not sell it to someone else.
That is, the buyer is the end user of the goods or services.
Why is Retail Important – What is Retail in Business
Retail is quite important in the business world.
You may not find a manufacturing company or wholesale store everywhere, but you will often find retail stores.
This is because retail is all about consumer convenience.
Retail brings ready-to-use available products closer to consumers.
This way, they can easily access them without going directly to the manufacturers or distributors.
Consumers won’t need to wait endlessly to get a product or service.
All they need to do is visit the store to get what they need immediately.
Most retailers now do doorstep delivery to make it easier for their customers to get their products/services.
It offers consumers a wide range of goods and services at their convenience.
This way, a consumer can easily get different products from the same store without stress.
Apart from the consumer-related benefits of retail, it also offers some economic benefits.
For starters, retail helps to create more workplaces in society.
If you own a retail store, you most likely won’t be able to handle every aspect of the business by yourself.
Even if it is a small store, you would need at least one employee to help with tasks around the store.
This means that retail provides people with jobs, thus reducing unemployment in the country.
Retail stores also pay taxes, which is another way retail aids the economic growth of a country.
It is also a crucial aspect of the supply chain because it links the consumers to the manufacturers.
Without retail, many manufacturers will have a hard time distributing their goods to their users.
Types of Retail Businesses – What is Retail in Business
Retail businesses can be classified into two major categories.
There are store retailers and non-store retailers.
The store retailers operate from the regular brick-and-mortar stores that you are used to.
The non-store retailers, on the other hand, include mail-order houses, direct selling, vending machine operators, and eCommerce businesses.
Retail businesses can also be classified based on what they sell.
The four major categories are based on this classification: hardlines, food, art, and soft goods.
Let’s discuss these different types of retail businesses below.
Hardlines refer to things that last a long time, such as furniture, cars, etc.
A retailer that sells this kind of item is a hardline retailer.
Retailers that sell food items like cheese, meat, seafood, and so on are food retailers.
These retailers deal with everything fine art, musical instruments, and books.
Soft Goods Retailers
Finally, soft goods retailers sell consumables such as shoes, toiletries, clothing, and so on.
Under all these categories we have mentioned so far, there are also some sub-categories.
Let’s take a quick look at them.
Department stores are vast stores where different types of products are sold.
So, consumers can visit a department store and shop for several things, all in the same place.
An excellent example of this kind of store is Target.
This kind of store offers low-priced brands and discounted items.
Discount stores can offer discounts because they buy what they sell directly from manufacturers who sell them the products at a lower price.
After all, they buy in large quantities.
A good example of this kind of store is Walmart.
E-tailers – What is Retail in Business
These retailers run online stores; they typically don’t have a physical location.
They have an online catalogue from which customers go through and order products.
Then, once the order is made and confirmed, the orders will be delivered to the customer, usually at their doorstep.
Prime examples of e-tailers are Esty and Amazon.
Drug Stores – What is Retail in Business
Drug stores stock several varieties of medicines.
Apart from pharmaceuticals, these stores also sell similar products like sunscreens, health and beauty products, snacks, water, etc.
They also have an in-house pharmacist that customers can talk to and get health-related advice.
This kind of store often focuses on a particular niche and is operated by small business owners.
They are local stores you can easily find around your area.
Big Box Stores
These focus on just one kind of product: electronics, furniture, cars, and so on.
Best Buy and Beyond are perfect examples of big box stores.
Retail Business Ideas – What is Retail in Business
If you are considering starting a retail business, you need to choose the type of business you want to run.
There are so many options.
So, it’s easy to get confused and overwhelmed by it all.
This section is dedicated to helping you overcome this challenge.
Here, we’ll look at some common low-capital but substantial-profit retail businesses you can start.
The ideas on this list are just a few, and there are several other retail businesses idea for you to choose from.
However, the idea here is to help you streamline your options.
And even if you do not find an idea that suits your preference in this list, the list can still motivate you to think of something that would suit you.
That said, here are 5 retail business ideas for you.
One industry that has been around for a very long time and won’t fade away is the beauty industry.
Apart from the fact that it is ever-present, it also has a high growth rate.
You can key into this industry by starting a cosmetic business.
The kind of cosmetics you sell will largely depend on your capital and the customers you intend to cater to.
If you have enough capital, you can store branded cosmetics; in this case, your target audience will be people who love luxury products.
But if you have a small capital, mass-market cosmetics is the way to go.
While your target audience would be average earners, your location would also play a major role.
You should not open a cosmetic store that sells mass-market products in a posh area.
Likewise, you shouldn’t open a luxury cosmetic store in an area where the mass population is average earners.
So, ensure you do your research before you open your store.
With consumerism’s adverse effects on our environment, many people are now embracing thrift shopping.
People are cutting down on how often they buy new clothes and are buying second-hand ones more.
Due to this, the thrift industry is thriving.
This is a retail business that you can start with a small budget and build the business from there.
You can convert your passion into a money-making business by opening a flower shop if you like flowers.
People love flowers; people gift flowers, buy flowers and plants to fill up their gardens at home or use houseplants to create a cosy ambience in their homes.
But before you open a flower shop, make sure you decide how you want to run the business.
You can either have a regular brick-and-mortar flower shop or a store online.
Both options are great; you have to pick them based on your preference.
Once you have made this decision, you have to find a supplier and put everything in place to kickstart your business.
Organic Food Store – What is Retail in Business
Many people are now so concerned with nature and their health that they are ditching processed foods in favour of organic food.
This renewed consciousness has made organic food stores a thriving business idea in the retail industry.
These stores are typically stocked with organic foodstuffs that meet the requirements and preferences of people who have decided to go organic.
Sports Shop – What is Retail in Business
Yet another idea that can help you convert your passion into a money-maker is a sports shop.
If you’re a lover of sports, then you likely have ample skills and knowledge that will help you conveniently and successfully run a sports shop.
You would know how to select the best products for your customers.
You will also be able to give your customers good advice that will help them make the right choice whenever they visit your store.
But before you start this business, make sure you consider every important factor that may make or break the business.
Carry out your market research to find the best way to meet your potential customers’ needs.
How Retail Works – What is Retail in Business
There are four major retail players: the manufacturer, distributors or wholesalers, retailers, and the consumer.
The manufacturer makes the product, and then the distributor or wholesaler buys it in large quantities from the manufacturer.
The retailer buys a substantial quantity from the wholesaler, and finally, the consumer purchases the product (in a small amount) from the retailer.
Every step is a transaction between two players until the product gets to the end user (the customer).
There is usually a profit margin at every step of the process.
When manufacturers make the product, they calculate their production cost and add their profit to it before they sell the product to the wholesaler.
The wholesaler then buys the product and adds their profit percentage to the purchase cost before selling to the retailer.
Finally, the retailer does the same thing before they sell the product to the end user.
So, let’s say a manufacturer spends 2 dollars to make their product, they would then sell it to the wholesaler for 3 dollars, and the wholesaler would, in turn, sell it to the retailer for 5 dollars.
The retailer can then sell it to the consumer for 8 dollars.
This system makes it possible for everyone (minus the consumer) involved in the process to make a profit.
While the retailer’s profit margin may be much higher than that of the wholesaler and manufacturer, these other parties will still generate enough profit for their work because they work on a larger scale than the retailer.
How to Start a Retail Business – What is Retail in Business
Now you know how retail works, and you likely have a retail business idea.
At this point, you are most likely eager to kick-start your business.
But you must be careful because if you aren’t, the business may not be successful.
If you follow the tips below, you can start and maintain a successful retail business.
Find Your Niche
Your first step in starting a retail business would be to choose your niche.
Even if you have an idea, you should not conclude on it until you consider some vital factors such as your interests, customer base, competitors, profitability, etc.
Your best bet at running a successful retail business is focusing on something you already enjoy doing.
For example, you can open a thrift store if you love clothes.
Once you know your interest and find a niche based on it, you should consider the idea’s viability by carrying out market research.
This will help you learn about your customers, competitors, best practices and strategies to employ in the niche, and so on.
Create Your Business Plan
Next, create a business plan that reflects the vital points of your business.
The business plan should cover the products you sell, location information, target audience, vendors, employees, marketing strategies, budget to start the business, and so on.
Also, focus on budget allocation.
Ensure that your budget covers the expenses needed to start up the business.
This includes insurance, license/regulatory fees, marketing, advertising, wages, rent, maintenance, equipment rentals, and so on.
Choose a Business Structure and Register Your Business
Your business structure determines how your business will be taxed.
This is why you must consider it properly before deciding on one.
Several types of business structures include sole proprietorship, partnership, C corporation, S corporation, and limited liability corporation.
You simply need to read up about the various types of business structures and then decide on the one that would suit your business best; visit here to do so.
Once you decide on a business structure, register the business.
You need to think of a unique and catchy business name that reflects your business identity and purpose.
Ensure the name isn’t being used by any other business.
You can do this by checking the name on U.S Patent and Trademark Office.
Once you are sure the name is free, register your business.
Get the Required Licenses
If you need a license(s) to operate the kind of business you want, ensure you get them before you kick off the business.
Find out what license you need to operate by checking the clerk’s website for your city.
Also, ensure to get your business insurance at this point.
Look for trustworthy and reliable suppliers for your business.
Factors you should consider when choosing suppliers include reputation, customer service, quality of products offered, and so on.
Create your Online Store or Rent a Physical Location
If you want to run an online business, you need to create an online store.
You can do this on any e-commerce platform of your choice.
If you want to run your business in a physical location, you need to rent a place.
Ensure you choose a location that would be great for the kind of business you want to do.
You would need help around your store regardless of how small it is.
So, at this point, interview candidates and employ only those perfect for the position.
Once you have all of the above, you can open your store.
At this point, you should focus on marketing your business.
This is the best way to get customers and make sales to ensure your business stays sustainable.
Conclusion on What is Retail in Business
Retail is when goods and services are sold in small quantities or units to consumers.
It is important because it makes buying products more convenient for end users.
If you want to start a retail business, the tips shared in this article should help you do so successfully.