What is Retail? Real Examples and Practical Tips

Retail is when a business sells goods or services directly to everyday people for personal use rather than for resale or use for business purposes.

Most people interact with retail daily. Picking up groceries? Buying a new shirt online? Booking a haircut? That’s all considered retail.

In this article, we’ll break down what retail means, how retail differs from wholesale, the types of retail businesses, and how the system works from supply chain to store shelves. You’ll also learn how retailers make money, what tools they use, and some modern tips to help you run a successful retail business.

Retail involves selling directly to the end consumer, whereas wholesale refers to selling large volumes to businesses using or selling the products for a markup.

For example, the mattress company Casper Sleep sells large quantities of its mattresses to retail partners like furniture stores, which is considered wholesale. These stores then sell individual mattresses to customers, which is retail.

Wholesale prices are lower due to bulk sales, whereas retail prices are often higher due to the necessity of covering costs like storage, staff, buying in smaller quantities, and the in-store experience.

Department stores are big players in the retail space. They stock a bit of everything: clothes, beauty, homewares, you name it. Their draw for customers is that they offer convenience and variety. Both Myer and David Jones are classic Australian department stores that have been around for more than 100 years.

These stores keep prices low by selling in high volumes of smaller purchases with lower margins on each. These are stores like Kmart, Big W, and Target. Their products aren’t fancy. Instead, they offer practical and affordable everyday items that people need. Many consumers who are feeling the cost of living squeeze love getting more for less. In 2023, Kmart was ranked as one of Australia’s most trusted brands.

Specialty stores focus on one category and do it well, like sporting goods, books, or electronics. Consumers go here when they want more choices. While a department store might have a few types of shoes, a shop like Betts will have more options under one roof. Some other examples of specialty stores in Australia are JB Hi-Fi, Lush, and Rebel Sport.

Ecommerce is another name for online retailers that sell through a website or apps. The benefit of this is that consumers can shop anytime, compare prices, and get products delivered directly to their door. Popular ecommerce shops in Australia include The Iconic, Kogan, and Booktopia. In late 2024, online shopping made up 11.6% of all retail sales in Australia, and this number is predicted to keep growing.

Independently owned retail businesses, often family-run, provide personalised service and a special community connection for which many buyers feel nostalgic. Examples include local bakeries, boutiques, and convenience stores found in suburban Australian neighbourhoods.

Whether it’s a big department store or a local family-run shop, every retailer plays a role in getting products from where they’re made to the people who buy them.

Let’s take a look at how that process works.

The retail supply chain is essentially the path a product takes to get from where it’s made to the person who buys it.

It usually involves four main players: the manufacturers, wholesalers, retailers, and consumers. Here's a short description of each.

• Manufacturer: This is where the product gets made. The manufacturer will typically manage the production, quality, and packaging.
• Wholesalers: Wholesalers buy large amounts of stock from manufacturers at a cheaper price. They store the goods and then sell them in smaller batches to retailers.
• Logistics: Behind-the-scenes logistics companies handle storage, shipping, and delivery so products get where they need to go.
• Retailer: Retailers then choose what they want to stock, display it in-store or online, and sell it to customers.
• Consumer: This is the person buying the product and using it, which is the final link in the chain.

That’s the typical flow that a product goes through to reach customers. Next, we’re going to look at how retailers can make money from this process.

Retailers make money by buying products at a lower price and reselling them for more. The difference between what they paid and what you pay is called the markup. For a retailer to be successful, their markup must cover their costs like rent, staff, and marketing, while still leaving a profit.

Making money as a retailer requires balance. If prices are too high, customers won’t buy unless you have a strong brand. If prices are too low, you won’t be making enough margin to stay afloat. Most retailers adjust their retail pricing based on external factors such as what their competitors are doing and customer behaviour.

There’s more to retail than putting products up for sale and patiently awaiting customers to flock to your store. Behind the scenes, there are a few elements that help retailers attract customers and keep them coming back.

Marketers use four elements in the marketing mix to encourage people to buy from retailers: product, price, place, and promotion. They need to pick the right products, price them competitively, sell them in the right place (whether online or in-store), and promote products in ways that make people want to buy them.

Some of the most effective retail marketing often happens where the customer already is, like social media, paid social, Google Shopping, email campaigns, and in-store signage.

What makes people come back isn’t just the product; it’s the entire shopping experience. Great customer service, helpful staff, personalised recommendations, easy returns, and a store that’s nice to be in all make a difference. Some high-end retail shops go all in on this concept and offer customers glasses of champagne as they shop to make the experience feel extra special.

POS systems have come a long way from being simple cash registers. They can now keep track of what’s selling, manage inventory, collect customer data, and help staff speed things up at checkout.

Online shopping has completely reshaped how people buy. Most shoppers now check a website before they ever set foot in a store, even if they prefer to shop in person. Retailers have had to shift with them, building out online stores, mobile apps, click-and-collect, and delivery options to compete. Omnichannel retail (meaning selling through multiple channels) gives your customers the same experience no matter how they shop: online, in-store, or a mixture of both.

Retail software is the technology that helps stores run behind the scenes, gather data for marketing, and adapt to customers in real time. It’s also sometimes called a retail management system, POS software, or CRM (customer relationship management) software, depending on what it’s used for.

Retail software helps businesses stay organised. It can track sales, manage stock, monitor business finances, and build a clearer picture of your customer base. Depending on your software, it can include specific tools for things like:

• Taking payments and tracking sales
• Managing inventory so you don’t run out of stock or over-order
• Storing customer data, like past purchases or buyer preferences
• Running promotions, loyalty programs, or email campaigns
• Viewing real-time reports on what’s selling, what’s not, and how you can increase your conversion rate
• Making it easy to process returns, track refunds, and manage exchanges
• Chatbots, help desks, or service tracking for ecommerce sites

• Know your customers: Figure out what they want, when they buy, and how they shop, then use that to guide what you stock and how you market.
• Train your team well: Whether online or in-store, your staff should know the products and how to help without being pushy.
• Make the shopping experience easy: Have a visually pleasing layout, clear navigation, and fast checkout. Any level of complexity could lead to buyers dropping off.
• Price smart: Balance what your product is worth with what your customers are willing to pay. Stay in step with competitors, but don’t race them to the bottom.
• Keep your website fast and mobile-friendly: Most people shop on their phones. If your site’s slow, clunky, or simply not optimised for mobile, your customers will bounce.
• Stay consistent across channels: Online and in-store should feel like one business. Pricing, branding, and customer service should all be aligned.
• Know what your customers ignore: Your slowest products can sometimes tell you more about your customers than your bestsellers. If something’s not moving, consider fixing the deal or getting rid of it.
• Bestsellers can fade: Just because something sold well last season doesn’t mean it will again. Over-ordering ties up cash in old stock and leaves less room to trial new products. Retailers like Zara and Uniqlo are known for using this lean inventory model.
• Test more: Try a new product display for a week. Flip your layout. You can run live A/B tests in your store and then translate them into digital action on your ecommerce site.
• Follow up when people return something: Take returns as feedback in disguise. Ask why, then fix the issue or learn what led the customer to believe this would be the right product for them.
• Reward people who almost bought: Set up abandoned cart emails or “you left this behind” texts for customers who didn’t check out.