Why Is Retailing Important?
Retailers are the final link in the supply chain between manufacturers and consumers. Retailing is important because it allows manufacturers to focus on producing goods without having to be distracted by the enormous amount of effort that it takes to interact with the end-user customers who want to purchase those goods.
Retailers should make the purchase of goods easy for the consumer. That’s why retail stores have salespeople, why Internet shopping websites have customer service instant chat popups, and why catalogs have descriptions, photos, and toll-free phone numbers.
Retailing is about displaying products, describing the features and benefits of products, stocking products, processing payments and doing whatever it takes to get the right products at the right price to the right customers at the right time. Some retailers offer additional services to the retail transaction like personal shopping consultations, and gift wrapping to add something extra to the retail customer experience and exceed the retail customer experience.
What’s the Difference Between Retail and Wholesale?
Wholesalers sell in large bulk quantities, without worrying about many of the aspects of retailing that consumers expect like visual merchandising. Wholesalers do not want to deal with a large number of end-user customers. Rather, their goal is to sell large quantities to a small number of retailing companies.
It is rare for a wholesaler to sell goods directly to consumers. The exception to that would be membership warehouse clubs like Costco, Sam’s, and Bj’s Wholesale. These members-only retail stores are a hybrid of wholesaling and retailing in that they sell directly to consumers, but they sell in large quantities, which often allows them to sell at prices that are lower than other retailers that sell in small quantities from impeccably merchandised stores in high-rent shopping districts.
The big difference between wholesale and retail is in the price. The retail price is always more than the wholesale price. The reason for this is because the added cost of selling merchandise to end-user customers—labor, rent, advertising, etc.—is factored into the pricing of the merchandise. The wholesaler doesn’t have to deal with such expenses, which allows him to sell goods at a lower cost.
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How Does The Retail Supply Chain Work?
The retail supply chain consists of manufacturers, wholesalers, retailers, and the consumer (end user). The wholesaler is directly connected to the manufacturer, while the retailer is connected to the wholesaler, and not to the manufacturer.
Here are the roles of the key players in a typical retail supply chain:
retail supply chain infographic
Manufacturers: Produce the goods, using machines, raw materials, and labor.
Wholesalers: Purchase finished goods from the manufacturers and sell those goods to retailers in large bulk quantities.
Retailers: Sell the goods in small quantities to the end-user at a higher price, theoretically at the MSRP (Manufacturers Suggested Retail Price).
Consumer: End-user who buys the goods (or “shops”) from the retailer for personal use.
There are exceptions to this traditional supply chain, however.
Some of the world’s largest retail companies like Walmart, and Amazon.com, for example, are large enough to deal directly with manufacturers, without the need for a wholesaler in the middle of the transaction.
Why Is Retailing Important?