RETAILERS

Retailing is the process of selling products and services to
consumers for their personal or family use. A retailer is the
final business in a distribution channel that links manufacturers
with consumers. Although a retailer can also be
a manufacturer or a wholesaler in the distribution chain,
most retailers direct their efforts to satisfying needs of ultimate
consumers.

HISTORY OF RETAILING

Retailing had its raw beginnings in early America with
peddlers, a word that comes from the Old English ped,
which was a pack in which articles to be traded in the
streets were stored. One of the earliest records of peddlers
in the American colonies is of an itinerant hawker named
Richard Graves, who in 1642 shouted his wares from
house to house in an attempt to make a deal with whoever
would listen to him.
Peddlers traveled throughout America selling their
wares, and in the course of this adventure, American peddlers
played a part in settling the South and Middle West
because of their ability to carry materials to these sparsely
populated areas. Although some peddlers had circular
routes near home that they serviced each week, most were
wanderers, and trips of 1,500 miles (2,414 km) were not
uncommon, often with 50-pound (23-kg) loads strapped
to their back.
Peddlers sold everything from specialized goods to
specialized services. Native Americans in New York, for
example, hung carved souvenir plates from their horses
and traded them from settlement to settlement. Other
specialist peddlers were carpenters, preachers, dentists,
artists, and even breeders, who offered farmers the services
of stallions for their mares and bulls for their cows. But
the true peddler tended to pack his back or wagon with
many items, because it was more profitable to carry a large
assortment of goods in anticipation of what people might
want or need. Somewhere among all these items would be
the famous Yankee notions, which were pins and needles,
buttons, razors, brooms, books, window glass, and novelties.
Most housewives put aside their “pin money” from
the sale of eggs and other products in order to buy these
notions, but the peddler would often offer credit or barter
for furs and other valuable goods with those who did not.
Peddling was a way out of poverty from colonial days
onward, and it is surprising how many notable Americans
began their careers as peddlers. Like many other frontiersmen
in the nineteenth century, Abraham Lincoln’s father
was a part-time peddler. When he moved his family from
Kentucky to Illinois, he took a trunk full of notions to sell
from his wagon to help offset the expense of the trip.
Inventors John Fitch (1743–1798)—inventor of the
steamboat—and Thomas Edison (1847–1931) both
began as peddlers.
Countless American fortunes were amassed by men
who started their business on the road across America. B.
T. Babbitt, America’s first soap millionaire, began by peddling
his soap in upstate New York, and the company
Stanley Tools was founded by a peddler.
Peddlers probably founded the first real American
country stores, which are often described as primitive
department stores, in remote backwoods areas during the
late 1600s. American country stores enjoyed their heyday
between 1820 and 1860, at a time when personal income
was rising and the population was growing rapidly. Usually
located in the middle of town, the country store was
the hub of community activity, and it was characterized by
its informality, including bare wood shelves, a hodgepodge
of goods, and a porch with rocking chairs where the
townspeople could sit and socialize. It has been said that
the country storekeeper was all things to all men, and he
was usually highly respected and self-educated. His store,
with the inevitable flour, cracker, and cookie barrels near
the counter, carried what was a wonderland of goods to
the civilization-starved settlers; and he usually extended
credit liberally. For the children, penny candy ranging
from licorice whips to all-day suckers were prominently
displayed in jars atop the counter.
Country stores were far from fashionable. For more
than twenty years after paper bags were invented in 1850,
clerks were still wrapping most packages in brown wrapping
paper, folded over and tied with a string. Trading in
the stores was often conducted by barter, or “country pay”
as it was called, with customers exchanging corn, wheat,
rye, and flax, or articles of household manufacture such as
blankets and baskets, for goods on the merchant’s shelves.
Homemade Indian brooms, maple syrup, barrel staves,
skeins of wool, dried apples, blackberries and blueberries,
churned butter, potash, and charcoal were usually used as
cash crops to barter at the country store.
Lincoln clerked in a country store as a youth, and the
story of young Abe walking several miles to return a
penny to a customer is part of American folklore. As for P.
T. Barnum (1810–1891), he ran a general store in Bethel,
Connecticut, where he claimed he learned many a trick
from country people who cheated him as adeptly as any
city slicker could.
Among the founders of great modern-day American
department stores who operated and clerked in country
stores, Adam Gimbel (1815–1896), J. L. Hudson
(1846–1912), Charles A. Stevens, Aaron Montgomery
Ward (1844–1913), and Herbert Marcus (1878–1950)
should be mentioned. Some of the old country stores
became grocery stores, and a few evolved into department
stores.
Origins of the Department Store. As far as anyone
knows, the first true department store arose in France in
the mid-nineteenth century. The best evidence ascribes its
beginnings to Bon Marché of Paris. Founded as a small
shop in 1838, Bon Marché had begun to assume the proportions
of a department store by the early 1850s. Even at
that time, Paris had a long history as a retail and fashion
center dating back to 1300, and the city was known for
large stores, with up to 100 people working in stores
called the Lame Devil, the Little Sailor, and the Beautiful
Farmer’s Wife. Aristide Boucicaut (1810–1877) is cred-
Wal-Mart was the world’s leading retailer in 2005.retailers
ited with starting Bon Marché as well as inventing the
retail concept of allowing people to come into the store
and browse, with no obligation to buy. He was also the
originator of the money-back guarantee, which at the
time was a new concept that built up his trade substantially.
In addition, he clearly marked all his goods with
fixed prices and permitted no haggling between customers
and clerks.
Although Bon Marché and native country stores provided
American merchants with the inspiration for creating
department stores, the great majority of these
department stores began as dry-goods stores. Neither Bon
Marché nor any of the world’s early department stores
would have evolved if economic conditions had not been
favorable at the time. The American department store is
largely a product of the years from 1860 to 1910. More
available capital during the Industrial Revolution, low
taxes, and cheap labor to build and staff stores contributed
to the rise of the department store in America. By the late
1860s or early 1870s, the department store had a firm
foothold in America. Although the term department store
is not recorded in the language until 1887, the idea of separate
departments in stores can be found in print at least
forty years earlier.
Beginning of Mail-Order Retailing. It was also during
this time that mail-order retailing began. The earliest
colonists, with no manufacturers of their own, first used
mail orders to obtain supplies from the mother country.
George Washington ordered goods from England and
France, as did Thomas Jefferson. Benjamin Franklin has
been called the originator of the mail-order catalog
because in 1744 he issued a list of 600 books he would sell
by mail. Ward thought he could eliminate the middleman
by selling direct to country people by mail from offices in
Chicago. In August 1872, Ward, with capital of $1,600 in
savings, founded what was to become Montgomery Ward,
the world’s first great mail-order business, soon to be challenged
by Sears.

TYPES OF RETAILERS

Over time, different types of retailers have emerged and
prospered because they have attracted and maintained a
significant customer base. A retail institution is a group of
retailers that provide a similar retail mix designed to satisfy
the needs of a specific segment of customers. The
most basic characteristic of a retailer is its retail mix,
which include decisions and strategies regarding the type
of merchandise sold, the price of the merchandise, the
assortment of the merchandise, and the level of customer
service.
The traditional general-merchandise retail stores are
specialty stores, department stores, and discount stores.
Since about 1970, a number of new types of general-merchandise
retailers have emerged and are becoming increasingly
important to consumers. These include category
specialists, home-improvement centers, warehouse clubs,
off-price retailers, and catalog showrooms. A traditional
specialty store concentrates on a limited number of complementary
merchandise categories and provides a high
level of service in an area typically smaller than 8,000
square feet (744 sq m).
General-Merchandise Retailers. Department stores are
retailers that carry a broad variety and deep assortment,
offer considerable customer service, and are organized
into separate departments for displaying merchandise. A
home-improvement center is a category specialist that
combines the traditional hardware store and lumberyard.
It focuses on providing material and information that
enable do-it-yourselvers to maintain and improve their
homes. A warehouse club is a general-merchandise retailer
that offers a limited merchandise assortment with little
service at low prices to ultimate consumers and small businesses;
the stores are large and located in low-rent districts,
and the goods usually include food and general
merchandise. Off-price retailers offer an inconsistent
assortment of brand-name, fashion-oriented soft goods at
low prices, in exchange for not using the manufacturer’s
promotional allowances, return privileges, and delayedpayment
options.

Catalog Showrooms.

A catalog showroom is a retailer
whose showroom is adjacent to its warehouse. These
retailers typically specialize in hard goods such as housewares,
jewelry, sporting goods, garden equipment, and
consumer electronics. Catalog showrooms can offer low
prices because they minimize the cost of displaying merchandise,
provide minimal service, and are located in
lower-rent areas rather than regional malls.
Retail Chains. A retail chain is a company operating multiple
retail units under common ownership and usually
has some centralization of decision making in defining
and implementing its strategy. Some retail chains are divisions
of larger corporations or holding companies.
Because of scale economies and an efficient distribution
system, the corporate chains can sell at lower prices. Since
about 1990 there has been considerable restructuring of
corporate retail chains. These restructuring activities
include consolidation and focus, with consolidation of
existing retail chains leaving fewer large chains and focus
referring to the expertise in managing a specific retail format
rather than operating as a holding company for a
diverse set of retail formats.


Franchises.

Franchising is a contractual agreement
between a franchiser and a franchisee that allows the franchisee
to operate a retail outlet using a name and format
developed and supported by the franchiser. Approximately
one-third of all U.S. retail sales are made by franchisees.
Some of the most-well-known franchises in
America are McDonald’s, Subway, and Dunkin’ Donuts.
Mail-Order Retailing. The mail-order retailing of the late
1800s has developed into two types of nonstore retailing:
(1) general-merchandise and specialty catalog retailers and
(2) direct-mail retailers. General-merchandise catalog
retailers offer a broader variety of merchandise in catalogs
that are periodically mailed to their customers, while specialty
catalog retailers focus on specific categories of merchandise.
Direct-mail retailers typically mail brochures
and pamphlets to sell a specific product or service to customers
at a particular time. Direct-mail and catalog retailing
are attractive business opportunities because a business
can be started with minimal inventory and can use existing
mailing lists to tailor its mailings to a targeted market.

MODERN-DAY RETAILING

Retailing is experiencing international expansion, with
many retail organizations opening stores and expanding
beyond the borders of the United States. The most commonly
targeted countries or regions are Mexico, Europe,
China, and Japan. U.S. retailers have strong incentives to
expand globally because U.S. markets are saturated in
terms of the number of stores, available locations, and
competition. Experts believe that some American retailers
have a natural advantage when competing globally
because of such factors as technology and the emulation of
American culture abroad. Like foreign companies entering
the United States, however, American companies
entering into these countries face specific government regulations,
different cultural traditions, and a variety of languages.
Today, the success of small retailers and major retail
corporations depends on how much they embrace the
retailing concept. The retailing concept is a management
orientation that focuses a retailer on determining the
needs of its target market and satisfying those needs more
effectively and efficiently than its competitors. Three critical
environmental factors affect retailing:

1. Competition, because each department store, specialty
store, and other type of retail outlet is competing
against all others for the consumer’s dollar
2. Consumer demographic and lifestyle trends and the
impact they will have on retail strategies
3. Needs, wants, and decision-making processes that
retail consumers use

Among the list of consumer trends that are greatly affecting
retail sales today are the growth of the elderly population,
as the baby boomers age; the rapidly growing
minority segments of the U.S. population; the importance
of shopping convenience, with consumers wanting onestop
shopping; and the rising number of two-income families.
Another response to the changes in consumers’ preferences
is a form of co-branding in which two retailers
share a location. McDonald’s has developed partnerships
with Wal-Mart and Home Depot, and Starbucks has
opened cafés in more than 100 Barnes & Noble bookstores.

ONLINE RETAILING

Since its inception in the mid-1990s, online retailing continues
to grow. Online sales in 2004 rose 23.8 percent to
$141.4 billion, which represented approximately 5 percent
of total retail sales. Online sales of cosmetics and fragrances
were expected to grow 35 percent, while the sales
of over-the-counter personal care were projected to rise 32
percent. Early in the twenty-first century, retailers have
attained growth by launching country-specific sites in
order to attract the growing number of international consumers.