What is Retail? | How Retailers Make Money | Retail Dogma

Summary

Retail is crucial to the economy as it represents the final step in merchandise distribution, where products are sold directly to consumers. Retail businesses, whether brick-and-mortar or e-commerce, buy products in bulk and sell in smaller quantities for profit. The industry supports 52 million jobs in the U.S. and contributes $1.6 trillion to the GDP. Retail also includes many small businesses employing fewer than ten people, providing convenience to consumers for fulfilling daily shopping needs efficiently without sourcing each product individually.

Takeaways

• 🛒 Retail is the final step in the distribution of merchandise, where retailers sell directly to end consumers in small quantities.
• 🏬 Retailers are classified into store retailers (brick-and-mortar stores) and non-store retailers (e-commerce, mail order, vending machines, direct selling).
• 💼 The retail business model involves purchasing goods in large quantities from wholesalers or manufacturers at a low price and selling them at a higher price in small quantities to consumers.
• 📈 The price difference between buying and selling, known as gross profit, covers operating costs such as store rents, marketing, and sales functions.
• 🛠 Retailers manage several functions, including product sourcing, marketing, store operations, merchandising, and sales to provide efficient services.
• 💡 Retail is crucial to the economy as it reflects consumer demand and consumption patterns, making it a key indicator for economists.
• 👷 Retail is the largest private sector employer in the U.S., supporting 52 million jobs, with 32 million directly in retail businesses.
• 🏪 Over 90% of U.S. retail establishments have fewer than 10 employees, with many being small 'mom-and-pop' shops.
• 📊 Retail had a direct $1.6 trillion impact on the U.S. GDP in 2018, representing 7.7% of the economy.
• 🛍 Retail provides convenience to consumers by offering a variety of goods in one location, saving them the hassle of sourcing products from multiple places.

Q & A

What is retail according to the North American Industry Classification System (NAICS)?

Retailing is the final step in the distribution of merchandise, where retailers sell merchandise directly to the end consumer in small quantities.

What are the two types of retailers mentioned in the transcript?

The two types of retailers are store retailers (brick-and-mortar stores) and non-store retailers (e-commerce businesses, mail order houses, vending machine operators, and direct selling establishments).

How does the retail business model work?

The retail business model involves buying merchandise in large quantities from wholesalers or manufacturers at a low price and selling it in small quantities to the public at a higher price. The difference in price is called gross profit.

What activities do retailers perform to deliver their services?

Retailers perform various activities including product sourcing, marketing and branding, store operations, merchandising, sales, renting stores, offices, and warehouses.

What is the significance of retail to the economy?

Retail is one of the most vital sectors of the economy. It measures consumption and demand, and it is the largest private sector employer in the U.S., supporting 52 million jobs and contributing $1.6 trillion to the U.S. GDP, which is 7.7% of the economy.

How many people are directly employed in the retail sector in the U.S.?

According to the National Retail Federation, 32 million people are directly employed in the retail sector in the U.S.

What percentage of retail establishments in the U.S. employ less than 10 employees?

More than 90% of retail establishments in the U.S. employ less than 10 employees, with many being small mom-and-pop shops.

What role do small retail businesses play in the economy?

Small retail businesses, such as mom-and-pop shops, are a main source of income for families and represent a large portion of retail establishments in the U.S.

Why do economists keep an eye on the retail industry?

Economists monitor the retail industry because retail sales are a key measure of consumption and demand, making it an important indicator of economic health.

What convenience does retail provide to customers?

Retail provides customers with convenience by allowing them to fulfill their daily shopping needs through various channels without needing to drive to different locations for each product.