A retailer is a business that purchases products to sell them directly to the final consumer for personal use. They act as the last link in the supply chain connecting a manufacturer to a customer. This can range from a local clothing boutique to a corner store, where the sale is made to the person who will ultimately use the item.
The Role of a Retailer in the Supply Chain
The supply chain is the path a product takes from creation to consumption. It begins with the manufacturer, who produces goods from raw materials and is responsible for design and quality control. Manufacturers produce items in large volumes and sell them to wholesalers.
Wholesalers purchase goods in bulk from manufacturers and store them in warehouses. They then sell these products in smaller, yet still large, quantities to retailers. This allows a single shop to source products from numerous manufacturers through one central supplier, without managing dozens of separate relationships.
The retailer then purchases goods from the wholesaler to sell directly to the end consumer. Retailers operate on a business-to-consumer (B2C) model, selling individual units rather than bulk orders. For example, a manufacturer sells thousands of phones to a wholesaler, who sells pallets of phones to a retailer, which in turn sells a single phone to you.
Types of Retailers
Retail establishments come in many forms and are categorized based on their product offerings, pricing, and sales methods to meet different consumer needs.
Department Stores
Department stores are large retail businesses that offer a wide variety of merchandise organized into different sections or “departments” under one roof. Customers can find categories like apparel, home goods, and electronics in a single visit. These stores, such as Macy’s or Nordstrom, are often located in shopping malls and provide in-store customer service.
Supermarkets and Grocery Stores
Supermarkets are primarily focused on selling food, beverages, and common household products. Retailers like Kroger and Whole Foods are examples that provide a large, self-service shopping environment for weekly groceries. They offer a mix of fresh produce, packaged goods, and cleaning supplies.
Specialty Stores
Specialty stores concentrate on a specific product category, offering a deep assortment and expert-level knowledge within that niche. Examples include Best Buy for electronics or a local independent bookstore. Because they focus on one area, these retailers can provide specialized products and a high degree of customer guidance.
Discount Stores
Discount stores offer a broad range of products at prices lower than those of other retailers. Businesses like Dollar General and TJ Maxx achieve these prices through strategies like bulk purchasing and efficient supply chain management. Their focus is on providing value, often with a constantly changing inventory.
Online Retailers (E-commerce)
Online retailers, also known as e-commerce stores, sell goods directly to consumers through websites and mobile applications. Giants like Amazon and specialized sellers like Wayfair operate without a physical storefront, giving customers the convenience of shopping from anywhere. These businesses can offer a vast product selection and competitive pricing due to lower overhead costs compared to brick-and-mortar stores.
Key Functions of a Retailer
Retailers do more than just sell products; they perform several functions that add value for both consumers and the supply chain. One of their primary roles is “breaking bulk,” which involves buying goods in large quantities from wholesalers and then selling them in small, consumer-friendly units. A manufacturer may produce thousands of items at once, but a retailer makes it possible for an individual to buy just one.
Another function is providing assortment. Retailers gather products from different manufacturers and present them in one convenient location, like a physical store or website. This gives consumers a wide selection of brands, styles, and price points, saving them the effort of sourcing from multiple suppliers.
Retailers also work to create a pleasant and efficient shopping experience, which includes customer service, store ambiance, and convenience. In a physical store, this might involve helpful sales associates and an attractive layout. For online retailers, it includes an easy-to-navigate website, clear product information, and reliable delivery services.
How Retailers Differ from Wholesalers
A common point of confusion is the distinction between retailers and wholesalers, but they serve fundamentally different purposes within commerce. The primary difference is their target customer. Retailers sell directly to the end consumer for personal use (a B2C model). In contrast, wholesalers sell to other businesses, like retailers, who then resell the products (a B2B model).
Their sales volume and pricing structures also diverge. A retailer sells products in small quantities—often just a single item at a time. Wholesalers, on the other hand, deal exclusively in bulk, purchasing massive quantities from manufacturers and selling large batches to retailers.
Because they buy and sell in bulk, wholesalers operate on a high-volume, low-margin business model, offering a lower price per unit. Retailers purchase those goods and add a markup to the price before selling to consumers. This retail price is higher than the wholesale price because it must cover the retailer’s operational costs—such as rent and staff salaries—while also generating a profit.