A retailer is any business that sells goods or services directly to individual consumers. Whether it’s a grocery store, an online clothing shop, or a gas station, retailers are the final stop in the supply chain before a product reaches the person who actually uses it. They operate in what’s called a business-to-consumer (B2C) environment, meaning their customers are everyday people rather than other businesses.
Where Retailers Fit in the Supply Chain
Products typically pass through several hands before reaching a store shelf. A manufacturer produces the goods, a distributor moves them in large quantities across regions, and a wholesaler breaks those bulk shipments into smaller orders for individual stores. The retailer is the last link in that chain, purchasing relatively small quantities from wholesalers or distributors and selling them one unit at a time to shoppers.
This positioning shapes everything about how retailers operate. Unlike wholesalers, who focus on logistics and moving large volumes efficiently, retailers invest heavily in merchandising, store layout, marketing, and customer experience. Their job isn’t just to stock products. It’s to present them in a way that convinces someone to buy.
How Retailers Make Money
The basic retail business model is straightforward: buy products at a wholesale price and sell them at a higher retail price. The difference between those two prices is called the markup, and it varies dramatically depending on what’s being sold.
On average, retailers mark up wholesale products by 30% to 50%. But that average hides enormous range. Grocery stores operate on razor-thin markups of less than 15%, which is why they depend on high sales volume to stay profitable. Cell phone retailers work with markups of just 8% to 10%. Clothing retailers, by contrast, typically mark up products 100% to 300%. Jewelry commonly uses what’s called keystone pricing, a 50% markup over wholesale cost.
Several factors determine where a retailer’s markup lands. Products that are expensive to store, handle, or transport justify higher markups. Goods expected to be in high demand can command steeper prices. And when a product is available at dozens of competing stores, markups tend to shrink because shoppers can easily compare prices. Retailers also consider the manufacturer’s suggested retail price (MSRP) as a starting benchmark, then adjust based on their local competition, brand positioning, and product quality.
Types of Retailers
Retailers come in many forms, but they generally fall into a few broad categories based on how they reach customers and what they sell.
- Brick-and-mortar stores are traditional physical locations where customers shop in person. This includes department stores, supermarkets, specialty shops, convenience stores, and big-box retailers. Their advantages include letting customers see and touch products before buying, immediate ownership at the point of sale, and simpler return processes. The trade-off is higher operating costs from real estate, staffing, and limited store hours.
- Online retailers sell through websites or apps and ship products to the customer’s door. They benefit from lower overhead since they don’t need expensive storefronts or large sales teams, which often lets them offer wider product selections at lower prices. The barriers to starting an online retail business are relatively low compared to opening a physical store, and expanding to new markets is much easier. The downsides include dependence on shipping logistics, cybersecurity concerns, and the inability for customers to physically examine products before purchasing.
- Omnichannel retailers blend both approaches. A customer might browse products on a retailer’s website, order online, and pick up in store, or visit a physical location and have a larger item shipped to their home. Most major retail chains now operate this way.
What Sets Retailers Apart From Other Businesses
The defining feature of a retailer is that it sells to the end consumer. A business that sells office supplies in bulk to companies is a wholesaler. A business that sells those same supplies one pack at a time to individuals walking through the door is a retailer. The distinction isn’t about what’s being sold. It’s about who’s buying it.
Retailers also differ from manufacturers and wholesalers in how they spend their money. A significant share of a retailer’s budget goes toward marketing, because attracting individual customers requires constant effort. Wholesalers can rely on a relatively small number of business relationships, but a retailer might need thousands or millions of individual transactions to stay profitable. That’s why you see retailers investing in advertising, loyalty programs, store design, and seasonal promotions in ways that upstream supply chain businesses typically don’t.
Physical Stores vs. Online Operations
The cost structures of physical and online retailers look very different. A brick-and-mortar store pays for real estate (often through long-term leases), utilities, store maintenance, and a larger workforce of customer-facing sales staff. These fixed costs make physical retailers slower to adapt when market conditions shift. If consumer preferences change suddenly, a store with a 10-year lease and a warehouse full of inventory can’t pivot overnight.
Online retailers operate with much lower overhead. Without expensive storefronts to maintain, they can hold less inventory and offer broader product assortments. They’re also more flexible, able to update pricing, product listings, and marketing campaigns almost instantly. However, they’re heavily dependent on their digital marketing capabilities and their ability to actually fulfill orders and deliver them on time. An online retailer with poor shipping logistics or a clunky website will struggle regardless of how good the products are.
For shoppers, the experience differs in practical ways. Physical stores let you try on clothes, test electronics, or squeeze an avocado before buying it. You walk out with your purchase immediately. Online stores offer convenience, often lower prices, and the ability to shop at any hour from anywhere. Most consumers now use both depending on the purchase.
How Technology Is Changing Retail
Retailers increasingly use artificial intelligence to personalize the shopping experience. Rather than showing every customer the same homepage or store display, AI-driven systems analyze purchasing history and browsing behavior to surface product recommendations tailored to individual shoppers. Some tools go further: reordering household essentials automatically or suggesting recipes with links to the ingredients you’d need to buy. According to Gartner, 40% of enterprise applications are projected to include task-specific AI agents by the end of 2026.
Behind the scenes, retailers use predictive analytics to forecast demand, optimize how much inventory to keep in stock, and reduce waste. AI can reroute shipments in real time and rebalance inventory across multiple store locations, cutting costs that ultimately affect what consumers pay. Year-over-year spending on AI across industries is expected to grow by nearly 32% annually through 2029, and retail is one of the sectors driving that investment.
Examples of Retailers You Already Know
Retailers are everywhere in daily life. Supermarkets and grocery stores are retailers. So are pharmacies, clothing boutiques, electronics stores, gas stations, and bookshops. Fast-food restaurants function as retailers when they sell prepared food directly to consumers. The corner hardware store is a retailer. So is the massive online marketplace where you ordered your last pair of shoes. Any business where you, as an individual, hand over money and walk away (or click “buy” and wait for a package) with a product or service is, by definition, a retailer.