Let’s talk about retail…

In a world where starting an online business has become more possible than ever, there are terms that are new to a whole new generation of entrepreneurs.

We’re going to dive into everything you need to know about retail to help you better understand every aspect of your business.

What is Retail?

A retail transaction is when a business sells a product or a service to a customer. Retail is specifically a transaction between a business and a single customer not a business. There a  number of ways the sale can happen:

  1. Online store
  2. Brick-and-mortar store
  3. Direct sales
  4. Direct mail

As long as the person using the product is the person buying it, then it counts as a retail sale.

Here at startupbros we teach people how to start their own online retail business selling on Amazon. And in general online retail businesses are limited to the products they can sell. It’s not as limited as you might think but the products need to be small and typically not weigh over 50lbs.

However there are plenty of different types of retail businesses that someone can get into and that’s something we want to cover next.

What is a Retailer?

A retailer can be an individual person or business that a customer can purchase from. They wouldn’t manufacture their own items. They buy their products from a wholesaler, distributor or manufacture and sell them to the end customer. What makes a retailer different is that they sell products in small quantities.

What is Retailing?

Retailing the actual selling of goods and services to customers. The act of actually doing it. Retailing is the final step in the supply chain of a product.

Now that we have the definitions out of the way we can look towards the world of retail and see how it’s growing year over year.

Different Types of Retail Businesses

retail store numbers in the United States

According to The North American Industry Classification System there is an estimated 2.5 million retail businesses in North America today.

And if you look at the numbers from the National Retail Federation there are an estimated 3.7 million retail establishments in the U.S. And those businesses employ close to 42 million people. That makes retail the largest private employer in the United States with 1 of 4 Americans working in retail.

Retail includes clothing stores, food stores, auto dealers, restaurants, hardware stores and general merchandise.

You can break down retail into 4 major categories:

Product Categories

  • Hardlines – these are non personal physically hard products like furniture, electronics, appliances, tools, sports equipment and jewelry.
  • Softlines – these are physically soft products like clothing accessories, clothing, shoes, personal hygiene, bedding, linens, pillows and towels.
  • Food & Grocery – this is anything you can eat including meat, cheese, produce, baked goods and supplements.
  • Handmade – art, decorations, books, music.

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Inside those categories there are stores you might be familiar with…

  1. Department Stores: Stores like Sears, Macy’s and JCPenney come to mind when thinking of department stores. They sell big variety of products that’s arranged into categories and sections. The idea being that you can go into one department store and find everything you need. The categories include shoes, clothing, furniture, beauty products, jewelry, travel, housewares, etc.
  2. Grocery Stores and Supermarkets: Walmart, Publix, Target and Winn Dixie are the types of stores that sell all types of food, liquor, household essentials, baby products, and sometimes also furniture, clothing, and electronics as well.
  3. Warehouse Retailers: We’re talking about Lowes, HomeDepot, Tractor Supply Company, BJ’s Wholesale and Costco. These are big warehouse-type retail stores where people can buy large, bulky products in large quantities. Typically they’re sold cheaper than at a typical store.
  4. Niche Retailers: These are retailers that focus on a specific category like furniture, Sports & Outdoors, shoes or underwear. Companies like Bass Pro Shop, Reebok, or Fossil Watch.
  5. Convenience Retailer: Gas stations are the most common type of convenience store but included in this are local pharmacies where you can pick up things you need quickly. They sell everything slightly overpriced because less people come into the stores. These stores carry common car, household and quick food items.
  6. Discount Retailer: These stores are known for their “off-brand” private label or generic products. And they sell these products significantly cheaper than typical retail stores. One of the most well known discount retailers is $5 below where everything in the store is less than $5. But there are plenty of other discount retailers like Family Dollar, Dollar General, Dollar Tree and Harbor Freight Tools. These stores often have clearance or heavy discounted products.
  7. Consignment Retailer: In consignment stores they buy used products from the public and resell them at a profit. It helps people declutter their homes from heavy furniture, gently used clothing and building materials.
  8. Online Retailer: A person or a company that has a website where they sell products directly to customers and ship it to their homes. They normally don’t have a physical store and handle all of the retail transactions online. Because everything happens online, the prices are usually cheaper than going into a store. Creating a store online using Amazon is the most common way people sell products online. But you can also create your own website and sell products on there.

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Retail Supply Chain

In retail, you find there a 4 main stations from start to finish:

Manufacturers: Gather the raw materials, parts, machines and human labor to create the product in high volumes.

Wholesaler/Distributor: They buy the products in large orders at a discount to sell at hundreds of retailers.

Retailers: The products are purchased at a discount in smaller quantities to sell directly to customers for a profit.

Customers: The final user of the product who buys the product for personal use.

Each one of these sells their product for a slight profit because they buy in bigger quantities and sell for smaller quantities.

Retail Point of Sale

This is when customers make a purchase. Either at a cash register or website checkout page. The point of sale process is typically handled by a machine or software and the retailer is the one that is supposed to set up the system. When starting an online business, it’s one of the last steps to make sure that works before launching a product online.

Wrapping This Up…

Understanding the retail process will help you figure out where you want to fit in this whole process. Some people start an online business and then move into small brick and mortar stores. Afterwards they expand into huge stores like Target and Walmart.

Other people are fine starting a small online business and selling at flea markets on the weekends. It all depends on what you want to do. When you’re looking to start an online retail business you can choose from different online platforms like Amazon, eBay, Etsy or Shopify. It completely depends on your desire about how big you want to grow.

One of the biggest brands on the planet “Under Armour” started by selling t-shirts out of the trunk of a car. And that’s still considered a retail business! The possibilities are endless…

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