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What Is Retail Trade? Learn the Basics and Key Examples

Post by: SourceVietnam

Written by VickyNhung

Reading Time: 10 minutes

December 24, 2024

Retail trade involves selling goods directly to consumers, bridging the gap between wholesalers or producers and end-users. It encompasses various formats, such as physical stores and online platforms, each offering unique shopping experiences. Retail trade plays a crucial role in the economy by creating jobs, facilitating consumer access to goods, and driving innovation.

What Is Retail Trade? Learn the Basics and Key Examples

Ever wonder how your favorite products end up on store shelves? It’s all thanks to retail trade! In this article, SourceVietnam.com explores the key aspects of this vital economic engine, from its diverse formats to its relationship with wholesale. You’ll understand what is retail trade and its significance, empowering you to make informed decisions as a consumer or business ow.

What is retail trade meaning?

Retail trade is the commercial activity of selling items directly to the consumer or ultimate customer. It serves as the link between wholesalers or producers and the product’s purchasers. Typically, merchants offer items to customers in modest amounts for personal use rather than resale or corporate purposes.

So, how does retail trade work? Retail is the last step in the distribution process. The retailer purchases the items in bulk (big numbers) from the wholesaler or, in certain cases, directly from the manufacturer at a discounted price. Then, it offers the items to the ultimate customers in tiny units or quantities at retail prices, reaping the profits in the process.

What is retail trade meaning?
Customers shopping at physical stores

There are 2 types of retail trade formats: physical stores and internet platforms.

  • Physical stores: In physical stores, customers may buy items directly, interact with staff, and make instant purchases. This conventional concept provides a reality shopping experience, allowing customers to see, touch, and test things before purchasing.
  • Online environments: In contrast, online retail has expanded fast since the development of eCommerce. Customers may shop from home, accessing various items with a few clicks.

When people shop online, they can learn more about product descriptions and user feedback and use a variety of payment choices, making for a pleasant purchasing experience.

3 Types of retail trade

In the previous part, we learned about what is a retail trade. Now let’s explore 3 retail distribution channels more popular with customers in modern life.

Brick-and-mortar retail

We can understand the type “brick-and-mortar” as a typical street-side business that sells products and services to consumers in person in an office or store that the company owns or rents.

Brick-and-mortar businesses can provide experiential shopping, where customers can test a product or try clothes at a store. We can easily see this type in our daily lives. Retail trade examples are local grocery shops and the neighborhood bank.

Online retail

The retail trade has changed rapidly recently with the growth of eCommerce. Online shopping is more popular, allowing customers to shop anywhere, anytime, with Internet access.

3 Types of retail trade
People can buy things from anywhere through online stores

Online retail can also improve the shopping experience by offering comprehensive product catalogs, user reviews, and suggestions.

Read more: Why Is Wholesale Cheaper Than Retail? The Truth About Pricing

Specialty stores, department stores, and big-box retail

There are various types of formats in retailing, which all have a specific role to attend to, and they include:

  • Specialty Stores: These are retailers specializing in a certain line of goods but focusing on offering a particular and select assortment of products within that category. Examples are specialty supermarkets, all types of bookshops, and boutiques.
  • Department Stores: These are larger types of stores with various products such as TVs, home appliances, garments, etc. To enhance the one-stop shopping experience, department stores usually mix branded items and store their brands.
  • Big-Box Retail: This generally refers to large retail stores offering their customers various products at reasonably cheap prices. They target consumers with a lower income and price their goods very low, coupled with huge quantities.

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Key differences between retail and wholesale trade

The differences between retail trade and wholesale trade are known as:

Buyer relationship

The component that defines the difference between retail and wholesale commerce is the connection between the buyer and the seller.

  • Retail: In the retail sector, consumers are the target. Retailers concentrate on individual buyers and strive to meet their needs. Such direct interactions often foster customer engagement and brand loyalty.
  • Wholesale: Conversely, wholesale trade refers to selling large quantities of goods to other companies, called B2B. These business relationships involve large-volume orders, regular orders, and long-term contracts focusing on the distribution of goods.

Pricing and quantities

Between retail and wholesale, there are also notable differences in the pricing schemes and purchasing amounts:

  • Retail: Retailers mark up their items and sell fewer of them. This markup covers the costs of marketing, customer service, and shop operations. The enhanced value of accessibility and convenience for customers is reflected in retail prices.
Key differences between retail and wholesale trade
Wholesale and retail sales differ in pricing and quantities
  • Wholesale: Buying in bulk usually results in cheaper unit costs from wholesalers. Thanks to this pricing model, businesses can purchase in bulk, which lowers total expenses. Because wholesalers operate with bigger volume sales and lower overhead costs per item, cheaper prices are made possible.

Inventory and supply chain

Supply chain and inventory management are the next differences between retail and wholesale:

  • Retail: To satisfy seasonal trends and customer preferences, retailers must maintain a varied inventory. They must constantly analyze sales information, predict demand, and ensure that popular items are in stock.
  • Wholesalers: Wholesalers oversee larger stock levels, concentrating on large-scale goods supplied to different merchants. Because they supply products in larger numbers, they may have to deal with longer inventory cycles, but they can take advantage of economies of scale.

How retail trade contributes to the economy?

Besides exploring retail trade, let’s see how it interferes with employment generation, consumer reach, and innovation. Here’s a detailed look at how retail trade contributes to the economy:

Employment opportunities

Retail trade is an important industry, and employment is one of the sector’s main benefits, as it generates many jobs within different skill brackets and trading segments.

Moreover, the retail industry plays a vital role in employment opportunities in other retail sectors, especially the efforts made by local retailers to hire employees from their regions.

Facilitating consumer access

Retail trade includes economic activities that provide several products and services to clients and consumers. As distribution channels, various retail formats enable access to end customers through physical stores, eCommerce, or integrated retail solutions.

Driving innovation

Retailing is a cutthroat business, leading retailers to practice continuous improvement. This competition encourages a variety of innovations in different fields.

  • Improved Customer Support Services System: Retailers implement new technologies in the service like mobile paying and offering customers products based on previous ones bought.
  • New Product Development: Retailers develop unique products and exclusive lines to woo customers, increasing the product range.

Challenges and opportunities in retail trade

The global market has competition between thousands of retailers, so they must find ways to enhance their capabilities. It also brings some opportunities and challenges for some fields.

  • New Technology in Practice: Many retailers learn to apply technology to increase customer satisfaction and minimize costs. With the recent development of technology, customers have found these technologies simple and more convenient to engage with.
Challenges and opportunities in retail trade
Use technology in retail trade.
  •  Improvement of the Range: Retailers create exclusive collections and products to entice buyers. This action leads to a wider variety and higher-quality products in the marketplace.
  • Sustainability Initiatives: Customers nowadays tend to live healthier and find more eco-friendly lifestyles, so many retailers are now looking at ways to be eco-friendly. This trend relates to how people use materials and using eco-friendly packaging.

5 Examples of successful retail trade companies in the global market

Retail trade companies have adapted to changing market dynamics and consumer sales to the success of several top brands globally. Here are some examples:

SourceVietnam.com (online retail marketplace)

SourceVietnam.com is the largest wholesale B2B marketplace for buyers to source from top Vietnamese suppliers of various products. Being the world’s number one sourcing hub, it offers a single solution where every business gets numerous advantages while sourcing products.

5 Examples of successful retail trade companies in the global market
SourceVietnam is Vietnam’s 1 wholesale platform.

SourceVietnam.com gives international buyers the distinct advantages of direct access to Vietnam, a rapidly growing manufacturing community, and our professional assistance in cross-border sourcing. Their mission seeks to enable businesses on the global frontier to access quality products at optimum cost and develop good supplier relations.

Walmart (big-box retail)

Walmart makes people think about it as the largest retail company in the whole world. It makes a broad variety of products available at reasonable rates. Walmart is arguably one of the oldest retail stores, both online and offline stores.

5 Examples of successful retail trade companies in the global market
Walmart is one of the most famous examples of retail trade business

Amazon (eCommerce/online retail)

Amazon is one of the first companies in the online shopping field. The website focuses on its users’s needs, offers quick shipment, and offers cutting-edge features like Amazon Prime. Its popularity has changed the way people shop nowadays.

5 Examples of successful retail trade companies in the global market
Amazon is a pioneer company in e-commerce

Target (retail chain)

Target is a well-known retail business that sells different items, including apparel, electronics, and groceries. This company aims to provide a one-of-a-kind shopping experience by offering trendy products at affordable prices. Target has also increased its online buying capabilities.

5 Examples of successful retail trade companies in the global market
Target is a significant retail trade example

Best Buy (consumer electronics retail)

Nowadays Best Buy is known for consumer electronics and appliances. This is one of the brands famed for its well-informed employees and excellent quality of consumer service.

5 Examples of successful retail trade companies in the global market
Best Buy is a retail trade business that has many customers

Regarding this issue, it is crucial to note that Best Buy has formed a great link between online and store purchases, creating a convenient shopping environment.

Conclusion

This article provided a comprehensive understanding of what is retail trade. Retail trade is considered one of the most important factors in our economy since it helps to facilitate the direct link between consumers and producers, who are providers of the necessary goods and services.

FAQs

What is the meaning of retail trade?

Retail trade is the process of selling goods or services directly to customers. It takes different forms, including physical stores and online shopping. Examples of retail trade businesses include clothes stores, electronics stores, and supermarkets.

What are the main characteristics of retail trade?

There are some types of retail trade, including:

  • Brick-and-Mortar Retail
  • Online Retail
  • Specialty Stores
  • Department Stores
  • Big-Box Retail

How does retail trade differ from wholesale trade?

There are some differences between retail and wholesale trade:

  • Buyer Relationship: Retail trade sells directly to consumers (B2C), while wholesale trade sells to businesses (B2B).
  • Pricing and Quantities: Retailers provide fewer quantities and higher prices, while wholesalers sell larger quantities and are cheaper.
  • Inventory Management: With this difference, retailers maintain a broad inventory to fulfill consumer demand, whereas wholesalers concentrate on larger inventories for delivery to retailers.

Why is retail trade important to the economy?

Retail trade is important to the economy for several reasons:

  • Job Creation: Many people are working in the retail trade field and it also contributes to the development of the economy.
  • Consumer Access: Retailers offer a wide range of products, increasing convenience and satisfaction.
  • Economic Growth: Retail trade improves the economy by increasing consumer spending and supporting local companies.
  • Innovation: The competitive environment of trade retailers increases innovation in products and services, benefiting customers and businesses.

What challenges do retailers face in the retail trade?

Retailers encounter several challenges, including:

  • Competition: Intense competition from both physical stores and online retailers can impact sales and profitability.
  • Changing Consumer Preferences: Retailers must adapt to evolving consumer trends and preferences to remain relevant.
  • Supply Chain Issues: Disruptions in supply chains can lead to inventory shortages and affect product availability.
  • Technological Advancements: Keeping up with technological changes, such as e-commerce platforms and digital marketing strategies, is essential for success in the retail sector.
VickyNhung

VickyNhung

Vicky Nhung - Before joining MediaStep as a Leader Content Marketing, she spent over a decade in the B2B marketing field, working as an editor, journalist, and marketer. She has worked at renowned brands and companies across various industries, particularly in the B2B technology sector, creating content for marketing campaigns for Dior, Olay, Chanel, and more.

Vicky Nhung is one of the members who regularly provides valuable articles and delivers useful information to users across many fields, especially in the beauty and fashion industries.

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