A retailer, or merchant, is an entity that sells goods such as clothing, groceries, or cars directly to consumers through various distribution channels with the goal of earning a profit. This merchant can operate in a physical building or online.
Retailers are the consumer-facing part of the supply chain, and most people interact with them frequently. They come in all different, types, styles, and sizes.
What Is a Retailer?
Retailers typically buy goods from a manufacturer, wholesaler, or other distributor and then resell them to the public. Large retailers such as Walmart and Target purchase goods in huge volumes from manufacturers or wholesalers, but small, family-operated pharmacies or your local grocery store can buy from the same outlets or from smaller vendors.
Either way, the retailer sells those goods to the end-user at a markup—the difference between their purchase price and the resale price. This is how retailers make a profit.
The difference between retailers and wholesalers is that while retailers sell directly to consumers, wholesalers sell their goods to other businesses (including retailers).
The main categories of products that retailers sell include:
- Hard or durable goods (such as furniture or cars)
- Soft goods (such as clothing or footwear, which have a lifespan)
- Art goods (such as books, musical instruments, or art supplies)
How Retailers Work
Retailers must be set up to sell directly to consumers in some form or another. This involves not only decisions about physical and digital locations but about how to market products and connect with customers.
Most modern retailers typically make their strategic decisions based on the following:
- The type of store (e.g., major national chain vs. small stores in select cities vs. online only)
- The market served (e.g., high-end product consumer vs. cost-conscious consumer)
- Optimal product assortment (unless, of course, you're Amazon and selling everything)
- Customer service (e.g., an in-store customer relations rep vs. a toll-free 800 number)
- Market positioning (e.g., customers with discretionary income vs. those with disposable income)
Types of Retailers
Stores with brick-and-mortar locations aren't the only kinds of retailers. There are hundreds of thousands of small single-person enterprises selling their goods online from bath oil beads to Bermuda shorts.
Less traditional businesses also qualify as retailers. For example, an artisan who sells homemade jewelry at a crafts fair is considered a retailer, as long as the person is selling goods to consumers in order to earn a profit.
Retailers aren't only in the business of selling goods; they can also be service providers. For example, the consumer electronics chain Best Buy has a Geek Squad department in its retail outlets that offer repair services for the products it sells. Plus, the Geek Squad makes house calls and has an online customer service operation.
Here is a list of the typical retail formats or types:
- Brick and mortar (i.e., a physical building)
- Special event (refers to shows such as art shows or fairs)
- Catalog (refers to business conducted solely through a print or online catalog)
- Pop-up (temporary brick-and-mortar space that's especially popular during the holiday shopping season)
Today, retailers need to be omnichannel, which means that they must sell in more than one kind of venue (or retail channel) to be successful. For example, Amazon has added brick-and-mortar stores as an adjunct to its digital operation. Today's customer likes to have multiple options to purchase from their favorite brand.
While some consumers like the convenience of shopping from the luxury of their own home, others want to be able to interact with a product before buying it—especially when it comes to clothing, where the weight and feel of an item are key.
Retail industry standards are the accepted standards for operating a retail business. They can be very useful to help both new and ongoing retail businesses operate more efficiently. There are two most compelling standards that retail operations need to know.
GS1 Retail Industry Standards
GS1 is focused on supply chain management, built primarily around the GS1 number system used in Universal Product Codes (UPC). This system improves efficiency by allowing retailers to manage inventory and checkout systems electronically. GS1 helps with other critical information exchanges all along the supply chain from manufacturing to retail.
American National Standards Institute (ANSI)
The ANSI Accredited Standards Committee sets the standards for interchanging electronic data across a wide range of industries. These standards inform the operating procedures of many retail businesses. For example, electronic data interchange (EDI) is a document standard that allows for interface across two or more computer programs at different locations. This enables a retail business to transmit ordering information from an online store or website to a distribution center or warehouse. All retail operators should be familiar with the various ANSI standards.
Top 10 U.S. Retailers
The 10 biggest U.S. retailers (based on 2019 sales) run the gamut from companies that sell food to those that sell medicine to online storefronts.
- The Kroger Co.
- Walgreens Boots Alliance
- The Home Depot
- CVS Health Corporation
- Lowe's Companies
- Albertson's Companies
How to Become a Retailer
Choosing to start a retail business involves a lot of planning and preparation, from researching your market to writing a business plan to hiring staff. Before you start selling, make sure you have all the necessary documents, legal and otherwise, that are required. You'll need to get an Employer Identification Number (EIN), which is like a Social Security number for your business. Most vendors you work with will require you to have an EIN before doing business with you. It's free to apply for an EIN on the IRS website.
Having an EIN means that you'll be responsible for a variety of taxes, including sales tax, so know what your local and state taxes are and become familiar with what you'll be expected to pay the federal and local government entities. Check with your local chamber of commerce if you're unsure how to proceed.
Retailers also need to have business licenses, and these vary based on what you're selling and the laws in your city or state. Check with your local government office to find out what you'll need. Local and state laws will also determine if you need a resale license, an industry-specific certificate, or a certificate of occupancy for your brick-and-mortar stores.
- A retailer sells products and services directly to the public in person, online, or through a combination of both.
- Retailers purchase goods from manufacturers and wholesalers and resell them to customers for a profit.
- In today's' economy, the most effective retailers are adept at selling through a variety of physical and digital channels.