What are the Functions of Retailing?

Various parties to the production and distribution of goods play a pivotal role in any economy keeping the robust volume of trade and commerce flowing through the market, leading a nation to prosperity. One of the important participants in the distribution network is the retailer. There are many functions of retailing which have to be taken care of by the retailer. Before we go to retailing, let us understand the major participants of distribution.

Major participants in Production and Distribution cycle

The major participants in any commercial cycle are:

1. Manufacturer – the one who sources raw materials, land, labor and applies his entrepreneurial skills in the production of goods.
2. Wholesaler – deploys huge investments in warehousing and stocking of goods bought in bulk quantities from the manufacturer to sell them at a wholesale mark up i.e. profit margin to the retailers.
3. Retailers – selling the goods bought from the manufacturer to the final consumer.
4. Consumers – they are the people who buy goods from the retailer to satisfy their daily needs.

Meaning of a Retailer

A retailer is a person who has set up a commercial establishment to sell goods and services in smaller quantities to the end consumers for their personal use. He sells these goods at a markup or profit margin considerably higher than that of the wholesaler.

Characteristics of Retail

• The retailer is the last link in the supply chain connecting the manufacturer and wholesaler to the end consumer.
• The retailer is the first to identify shifts in trends and consumer preferences because of close connection with ultimate consumers.
• The retailer is rightly placed to gather critical consumer feedback and market intelligence about products and services on offer and pass this valuable information on up in the supply chain through the wholesaler to the manufacturer.
• Many retailers are present in more than one retail format such as online retail as well as a brick-and-mortar store. Presence in multiple channels enables them to reach larger customer base and tap their market potential more effectively.

Functions of Retailing

Retail trade performs many valuable functions for the trade and commerce as a whole. Some of them are as follows:

1) Delivery of the goods to the end consumer

This makes shopping for all requirements quite hassle-free for the consumers. This also facilitates consumption and maximizes consumer satisfaction. Because the company cannot take responsibility of delivery to every single customer, it appoints retailers. One of the functions of retailing is immediate delivery.

2) Is an essential part of the distribution chain

Because the retailer takes over the cumbersome task of distribution of goods manufactured to the target market, the manufacturer is relieved of this responsibility and can divert his resources to manufacturing activities.

3) Finances the wholesaler

While booking his order of goods with the wholesaler, the retailer pays some percentage or the whole of the order price in advance. This helps the wholesaler to carry on with his operations seamlessly. In some industries, it is the retailer who pays cash to maintain stock and in others the wholesaler has to carry the stock as paid capital. Nonetheless, financing is one of the major functions of retailing. A retailer who does not contribute to financing will bring down the effectiveness of the supply chain.

4) Stores the goods according to market requirement

The retailer invests his working capital in building a gamut of inventory reflecting market requirements. He also sells the requisite quantity, however small or big, to the final consumers satisfying their needs. The retailers know the complete demand and supply potential due to their years of experience. Hence it is one of the functions of retailing to balance the demand and supply as per external market conditions.

5) Lends a hand in manufacturer’s marketing initiative

Retailer plans and executes many advertising and promotion activities at the point of purchase i.e. right in his store. This leads to gain in popularity of and favorable market conditions for the product of the manufacturer.

6) Assumes storage and credit risks

When the retailer orders and stores a large quantity of goods from the manufacturer, he makes sufficient provisions to store it safely for some days. This involves costs. Also, there is also a risk of loss of these goods on account of destruction, theft, spoilage etc. The retailer assumes these risks while storing goods.

 7) Extends credit facilities to the consumers and assumes credit risk

The retailer does so to encourage shopping. This adds to the vigor of commercial activities in the economy. But there is also a risk that the customers won’t pay for the goods bought or may return damaged goods to the retailer. This inherent risk in trade is assumed by the retailer.

8) Offers wide variety of customers and enticing price range in a product line

In order to attract more customers, a retailer offers a wide range of merchandise at attractive prices. This results in higher consumer satisfaction and higher standards of living in any economy.

9) Provides convenience in shopping

Retailers try to set up their shops nearby housing areas or near parks, schools – the areas where the customer finds it very convenient to shop. This enhances the consumer welfare.

10) Offers after sale services, differentiated packaging, giving more information about the use of the product

All these activities add value to the retail transaction and cater to various requirements of the consumers suitably.

11) Hears the voice of the market

The retailer measures the pulse of the market by listening to the consumer feedback, expectations, complaints, and by observing a shift in the tastes and preferences of the consumers. This arms him with very critical market intelligence enabling the entire commercial fraternity to gear up for the changing economic scenario.

12) Generating employment for masses

Retail trade, especially the brick-and-mortar models, are human resource-centric establishments. They require many employees for numerous functions such as stock taking, over the counter selling, packaging, after sales services, floor management etc. Thus, retail sector thrives with lots of lucrative employment opportunities for all the talented job aspirants.

Here is a video by Marketing91 on the Functions of Retailing.