What Is Retail?

What is retail and what can retail software do for your business?

Retail, retailing, and retailers. You’ve probably heard these terms before, but what do they mean?

 

Retail, by definition, is the sale of goods or service from a business to a consumer for their own use. A retail transaction handles small quantities of goods whereas wholesale deals with the purchasing of goods on a large scale. Retail transactions are not to be confused with online transactions; goods must be sold from a single point directly to a consumer for their end use.

 

A retailer is the person or business that you purchase goods from. Retailers typically don’t manufacture their own items. They purchase goods from a manufacturer or a wholesaler and sell these goods to consumers in small quantities.

 

Retailing is the distribution process of a retailer obtaining goods or services and selling them to customers for use. This process is explained through the supply chain.

What is a supply chain?

A supply chain is the process the occurs between companies and suppliers in order to distribute products to end users. It’s how a good or service is delivered to consumers. Retailers must understand their supply chain to ensure they receive the right products at an affordable price within a reasonable timeframe. If something goes wrong somewhere along the supply chain, it will likely lead to an increase in product cost or delivery time.

 

This is what a basic supply chain looks like from start to finish:

 

1. Manufacturers and Wholesalers

Manufacturers produce goods from raw materials using machines and labor. Once production is complete, wholesalers purchase the goods and sell them to retailers. Wholesalers sell large quantities of goods to retailers at low prices.

 

2. Retailer (also known as the merchant)

Retailers purchase goods either from the wholesaler or directly from the manufacturer. From there they will sell those goods in small quantities to end users.

 

3. Consumer (end user)

Purchases goods from the retailer in small quantities to satisfy demand.

 

Common retail types:

Retail comes in many shapes and sizes; each one comes with its own pros and cons. Depending on the type of business, one retail model may be a better fit than others.

  • Independent Retailer: An independent retailer is someone who builds his/her business from the ground up. Usually, the owner does it all, but he/she may have assistants or hire someone extra.
  • Existing Retail Business: An existing retail business is, as the name suggests, a retail business that is up-and-running. Typically, someone inherits or buys an existing business and takes over its ownership and responsibilities.
  • Franchise: A franchise is an existing business plan, including a trademarked name, an already determined set of products, and established business concepts. If a retailer wants to become part of a franchise, they are granted permission to use all of the above elements. The tradeoff to purchasing the rights to a franchise is that there typically are ground rules and processes that must be followed in order to retain rights to the franchise, as well as fees that must be paid to the franchise owner.
  • Dealership: A dealership is a cross between a franchise and an independent retailer. A retailer that works with a dealership has the license to sell a brand of products (usually there is a variety of brands). Unlike a franchise, there are no fees to the licensor.
  • Network Marketing: Network marketing, or multi-level marketing, is a business model where the selling of products depends on the people in the network. On the one hand, a person is selling products, but at the same time, other salespeople are being recruited to sell the same goods.

Try an Erply demo if you are interested in opening any of the following retail models. Erply’s solution is simple enough that it can work for one-store independent retailers but comprehensive enough that it can be used by franchises to successfully manage high volumes of inventory and reporting. Erply is scalable, so businesses can transition smoothly from one retail model to another.

How can retailers benefit from retail software?

It might seem intimidating to switch from traditional, hardware cash register to a cloud-based POS system the switch is well worth it. Retailers have a lot to gain from using a POS, from functionality to analytics and reporting.

  • Detailed Information: At the end of the day, the only information that you’re going to get out of a cash register is cash flow. A POS, on the other hand, can give you an overview of how much leftover cash is actual profit, how many products were sold, and customer insights.
  • Improved inventory management: Any business needs access to detailed inventory reports to plan what products to stock and when to stock them. POS solutions go above and beyond inventory reports — they can show sales trends, sales history, and items that sell out very quickly, or not quickly enough. Businesses can use their POS to automatically order inventory when the levels reach a certain threshold.
  • Accuracy: Retail software is a great way to reduce human error in sales processing. Discounts and promotions can be automatically applied to orders. Rather than writing up squick purchase orders for a few items, stock orders can be made right from the POS.
  • Security: POS monitors precise inventory levels, so employees will be more alert knowing stock is being tracked. A POS can also be locked to prevent a non-employee from accessing your system. User rights can also be assigned internally, so cashiers won’t have access to inventory transfers or other in-depth features.
  • Customer satisfaction: Speed absolutely matters when it comes to customer satisfaction, and using a POS streamlines the checkout process. Rather then asking for a customer’s information every time they come to your store, their information can be saved at the POS for easy integration with your rewards program and a quicker checkout.

 

You might also like:

Why Experiential Retail is Necessary for Brick-and-Mortar Stores

11 Smart Retail Marketing Tips for 2018

 

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About the author
Kristjan Hiiemaa
Entrepreneur building better POS and cloud-based retail management suite . Product guy. CEO & Founder of Erply.