The world of retailing is a mystery to many people, and it is a complex world. It basically involves buying merchandise, usually from manufacturers, and reselling it to end consumers to generate a profit.
Demand is created through marketing, advertising and promotional activity. Profit is generated by buying at one price, selling at another that will cover overheads and leave an amount for the retailer’s profit.
In the last century retailing was almost entirely carried out in stores, whether small high street retailers, chain or department stores, or out of town shopping Malls.
Retailers offer benefits to consumers in that they are able to purchase small quantities of a wide range of products at commercially viable and affordable prices, usually at a store near them.
Online retailing has made store location less of a consideration. But has the drawback that customers can’t handle the product, or try it on for size. They can easily compare the features and benefits of several products, and of course competitive pricing.
Retailers offer benefits to manufacturers in that they are a route to market for them, allowing the manufacturer access to their customers, and allowing manufacturers to promote their product to their target market, and get consumer feedback.
Without retailers, consumers would have to go directly to a manufacturer to buy every single item they need –a daunting and probably impossible task. Retailers add value to the supply chain by making it possible for manufacturers to sell their product and easy for consumers to buy it. They are the last link in the chain
Effect of online retailing
These days an increasing amount of business is transacted online, paid for electronically and delivered by couriers. For a while it looked as if the demise of “bricks and mortar “stores was likely and many retailers cut back their store development plans.
However one of the most successful retail models in very recent times has been “click n collect”. Here the customer orders online, from a retailer who may have many retail branches and distribution centres. If the retailer has the item in stock, it is reserved for the customer. If not, it will be shipped into the store from stock held in the nearest distribution centre. This is usually done overnight and the customer can collect the item the next day.
It is easy to see why this is so popular. If the customer knows what they want, they just check pricing online, and order from the retailer who offers them the best price. No wondering if there will be stock left, your item is reserved.
Gone are the days of wandering around a shopping centre with no idea what you might want to buy until you come across something nice. Shopper’s attention needs to be attracted long before they venture out of the house with this model.
So in a sense, the world of retailing, promotions and advertising has been turned upside down. The customer makes their selection in response to brand awareness, advertising and promotions and Internet presence. Often the decision to purchase is made in the home. The store just delivers what the customer has already decided on.
Why do manufacturers need retailers?
So why does a manufacturer need a retailer? Well in years gone by, retailers were crucial to them. It was a life and death issue to have your product listed by retailers -how else would the customers see your product and buy it, other than in the store?
The retailer might co –advertise with the manufacturer to get consumers into their stores. They would haggle about prices, both cost and selling price for the retailer, who wants to sell at competitive price and make a decent margin.
They would work together on “point of sale” material and advertising, worry about ordering and re-ordering, and distribution into all their stores. And surplus, that was always a problem for the retailer.
Why do they need them now?
Surely the next few years will mark the demise of, or at loss diminish the importance of, the retailer. They are just a middleman here. If a manufacturer has a strong brand presence, and a website, why do they need a retailer? The retailer is just an on- cost (or additional cost), and an unnecessary part of the supply chain.
They can deal directly with the consumer. They don’t need to organise stock in thousands of stores across the country, and deal with Buyers from different retail groups. As soon as the big brands are confident they don’t need retailers, they will dispense with them and sell direct to consumers from a couple of distribution centres around the country.