The Modern Rules of Retail

Retail Industry

There’s no doubt that the retail industry is an important part of our lives. For most people, buying anything involves some form of shopping in a store or online.  There’s a good reason for that: until recently, it was hard to buy something from the original manufacturer. Consumer products would be made and then shipped either to wholesalers or the store itself. Beyond the bricks-and-mortar stores, though, what does this industry look like? The following should give you a good idea if retailing is something you should consider for yourself.

Retail is big business

Most people will agree that retail stores are everywhere. They sit on the corner and take up space in shopping malls. Perhaps it is no surprise, then, that in 2017 America’s retail industry was worth over $5 Trillion. That same year, retailers of all sizes employed 29 million workers, many of them low-wage hourly positions. Almost everyone knows that for people with few skills and little education, there are plenty of job opportunities.  

Since the economy has recovered from the Great Recession, the retail industry has grown. After all the belt-tightening in 2009, where retailing declined by over 11%, people have been slowly going back to the stores and online retailers. Current trends suggest growth is flattening out, but there are still plenty of opportunities available. 

Perhaps the biggest reason why retail will continue to be big business in the future is that you still need to buy most things through retailers. For example, car dealerships are a big part of the retail industry, as are grocery stores. Buying a new car without going through an authorized dealership is, at least for now, inconceivable. 

Retail is a diverse industry

There’s little question that department stores are an important part of retailing. But did you know that there are many different types of businesses that make up this sector? In fact, in most cases, if goods are being sold directly to the consumer, you are dealing with a retail establishment. Here are several examples of opportunities in the retail industry. 

Department stores

Many times, when news outlets talk about problems in the retail industry, department stores are the first thing they mention. Household names of this type include Sears, Macy’s, and JCPenney. Each of them has had issues with profitability, and even closed stores recently due to declining sales. Naturally, many of us are starting to wonder if any of these stores will survive.

Even considering these challenges, some experts feel that department store performance has bottomed out.  As management starts to adapt to industry trends and the reality of online shopping, there should again be a rise in same-store sales. In the meantime, the survival of the fittest still applies, and weaker retail players will be forced to adapt or go out of business.

Grocery stores

Perhaps the most important store any of us go to, local grocery stores primarily sell food products and household goods. Industry data shows that people go to the supermarket on average more than once a week. Part of this, of course, is due to the nature of the products. many of them can go bad if left out of the refrigerator for too long. Groceries are also something that people don’t like to wait for, and as a result, online retailing hasn’t had much of an effect on this type of business. 

One advantage that grocery stores have over other types of retail is that they generally remain profitable. Margins are very thin, less than 3%, but the food is something that everyone must buy. Therefore, grocery stores make money by selling a large number of individual products to shoppers every time they stop by. At scale, they can pay the rent and labor costs in a way other types of stores have trouble doing.

Big box stores

Another type of retailer that seems to be everywhere these days is the big box store. Familiar names in this sector are Target, Walmart, and Best Buy. Products offered to vary widely by the franchise. For instance, Target and Walmart sell a little bit of everything, while Best Buy offers various types of consumer electronics and appliances. In contrast to the corner boutique, a big box store is over 50,000 square feet. They make money by buying their products cheaply using an economy of scale, and passing these savings on to the customer.

Another way in which big box stores make money is by offering extra services. For example, Walmart has a “financial services” division. If you don’t have a bank account, for example, you can go there to buy a money order, cash a check, or purchase a prepaid card. They’ll even connect you with tax preparation services.  Also well-known is Best Buy’s Geek Squad. Originally a computer tech support division, they now service appliances and make repairs to other consumer goods. Offering these services is very smart on the part of retailers because they are much harder to purchase online.

Car dealerships

Retail Industry

Most people think of car dealerships as part of the automotive industry. While that’s certainly true from the standpoint of the products they sell, dealerships are part of the retail industry as well. This type of retailer includes both new and used cars, with both often available in the same place. Unfortunately, they are becoming less profitable, with margins decreasing sharply over the last several years. Cars are expensive, and consumers are working harder to save money on this product. 

Dealership franchises, or groups with several stores, are becoming more common. This hasn’t been kind to small operators, who are also dealing with online car dealerships like Carvana. Being connected to the automotive industry, and its boom and bust nature doesn’t help either. On the plus side, dealerships typically have service departments, where brand-specific specialists service a lot of cars. Providing service is a great opportunity for profit.


This category includes both retail chains selling their products from small stores in a shopping center or mall, and mom-and-pop specialty shops.  Examples of chain stores in this category are Coach, Lens Crafters, and Victoria’s Secret. Like most other parts of the retail industry, many of these stores are having trouble keeping adequate sales volume and profits. One of the reasons for this is that they tend to have a smaller sales volume and must, therefore, make more money off of each product they sell.

On the other hand, mom-and-pop stores are a different story. Sure, you’ll pay more for the same products at your local family-run store, but there are plenty of advantages. For example, you often get to know the owner and his family. They are in touch with what the local market needs, and have the agility to respond to them. Regional trends are easier to identify. Hot climate? Your customers probably won’t need a heavy coat. Arctic blast every winter? Everyone’s going to bundle up.  In contrast, chain stores have less regional variation.

Online retail

Arguably, online retail outlets are the sector that everyone else loves to hate.  Since coming onto the scene over 20 years ago, Amazon has been a significant source of industry disruption. Now, it is one of the biggest retailers in the world, with almost 70 Billion USD in quarterly sales.  Initially, one of the things that made Amazon great was the fact they carried everything at a reasonable price. If you needed a book that was hard to find, Amazon had it. 

Local retail stores have, unfortunately, found online shopping to be a major threat. After all, millennials enjoy the convenience of being able to buy something online and have it shipped to their home. Other consumers appreciate the competitive pricing and better selection, as well. Sadly, this also means less profit for the locally-based retail industry. On the other hand, nothing beats being able to see an item before you buy it. 

Retail Industry Tips

Everybody knows that the retail industry is changing. You’ve already seen how the industry is facing internal pressures from competition and profitability issues. Market disrupters, like weak profit margins and the online sector, have made the job of retailing more difficult than before. To help you stand out from the crowd, here are some ways that you can build a profitable retail business.

Be Unique

Let’s face it: most people enjoy browsing a bricks-and-mortar store. Especially during busy shopping seasons like back to school time or the holidays, it’s nice to see what is available while deciding what you need. Even for small gifts, like birthdays or baby showers, there’s no replacement for actually touching the product before buying. Unfortunately, some customers take advantage of the opportunity to “showroom” you. This means that they touch the product in your store, and buy it for a lower price elsewhere. 

The best way to combat this issue is to be unique. One way to do that is to offer products that fit a particular niche. For example, it is much harder to buy colored pencils or makeup online. Color swatches are sometimes difficult to evaluate from a computer screen. Sure, the customer can come in to choose what they want and buy elsewhere, but why do that? The chances are that the price difference won’t make up for value-added services like your help with product selection. When your product is different from the one other retailers are offering, it gives a nice reason for customers to buy from you instead. Having a nice place for people to hang out doesn’t hurt, either.

Be informative

One of the disadvantages of online retailers is that buying the right product can take a lot of guesswork. For instance, if you want to buy a handful of nuts and bolts, you’re going to need a lot of information. How big of a hole are you trying to fill? What size nut fits the bolt? These aren’t questions that the guys at Home Depot are likely to answer as easily. They tend to be more general retail employees rather than lifelong handymen. Plus, the bigger store size makes it more difficult to find things quickly. 

If you’re operating a craft or hobby store, then you have an even bigger advantage in this regard. Calling customer service at Amazon is unlikely to find potential customers the advice they need. When you’re able to solve someone’s problem or ensure that they have just the right experience, they’re likely to come back and buy more stuff.  Customers respond well to consultative sales techniques because they’re happy to get customized solutions. 

Be honest

Integrity in business is a big deal, and the retail industry is no exception. Have you ever been annoyed by the sales professional at a car dealership? It seems like they’re always trying to make a sale, even if the product they’re selling isn’t the right one for the customer they’re working with. Another good example is at the electronics store. They’re always trying to sell the same thing to every customer. Have you ever wondered why? Financing. Certainly, offering this service can be a great way to make money. However, too many retailers cheat their customers or use it as a reason why customers should buy more than they need. 

Here’s your opportunity to be an honest retailer and win customer loyalty. Talk to your customers and determine exactly what they are looking for. Listen to their concerns. Don’t promise the moon, and fail to deliver. Let customers know that they can count on you and your business to give them the right product for the right price. And when things go south, whether it is your fault or that of someone else in your supply chain, be honest and attempt to handle the consequences properly. Build the cost of mistakes and unavoidable losses into your profit equation and put your customers first. Do that, and they’ll be more likely to come back even after experiencing an issue.

Be well-informed

Thriving in the retail industry is as much an art as a science. While being informative when customers come inquiring about a product or service is important, so is keeping up with current trends and shifts in the market. Have you heard of the “unicorn” craze? All sorts of customers abandoned the usual colors in various products for something that looked like a rainbow with glitter. This theme graced everything from specialty coffee drinks to shoes, make-up, and leather goods. As long as the trend lasted, nobody could keep these themed items in stock.

As a retailer, you should know about consumer trends. After all, you don’t want to pass up a sales opportunity by not being responsive to what people want. One of the best ways to understand the market is by leveraging retail analytics. These tools take a lot of guesswork out of ordering, especially during busy shopping seasons. Other best practices include carrying out market research to identify what people want and how you line up against your competition. 

Be relevant

Lastly, make your business relevant to the local market. One of the best ways to do this is by practicing social responsibility. It creates name recognition for your store and has a strong influence on consumer behavior. For example, a local general store might collect food donations for the local homeless shelter. When the hospital has its annual walk-a-thon, it could consider sponsoring a team. These efforts might not cost much, but they sure look good to customers.

Another way that you can encourage retail sales is by making your store sustainable. In some communities, potential customers might like the fact that you have solar panels on your roof, or that you buy carbon offsets. Even here, knowing your customers can go a long way in boosting sales and dealing with competition. 

What’s your favorite retail industry secret?  Share in the comments below.