Retailing: Meaning and Role, Significance, Scope

11/11/2021 5 By indiafreenotes

Retailing is a distribution process, in which all the activities involved in selling the merchandise directly to the final consumer (i.e. the one who intends to use the product) are included. It encompasses sale of goods and services from a point of purchase to the end user, who is going to use that product.

Any business entity which sells goods to the end user and not for business use or for resale, whether it is a manufacturer, wholesaler or retailer, are said to be engaged in the process of retailing, irrespective of the manner in which goods are sold.

Retailer implies any organization, whose maximum part of revenue comes from retailing. In the supply chain, retailers are the final link between the manufacturers and ultimate consumer.

Role of Retailing

Retail trade performs many valuable role 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.


Economic Significance

The retailers play the role of sales specialists and also as agents of purchase for their customers and suppliers respectively. Retailers handle the entire gamut of roles and functions aiming at understanding customer requirements and anticipating the demand, gathering information about the market trends through strong market intelligence and making product related assortments and discovering financing opportunities.

It is relatively easier to become a retailer, as large investment is not required, procurement of production equipment is not required, and a retailer can procure merchandise on the basis of credit.

The retail sector in the present scenario is witnessing a fierce competition as a large number of retail players have entered in the same market segment with similar product offerings. The only differentiating factor which may provide a winning edge in the competitive race is by providing better value to the consumers and satisfying the consumers with their offerings. Besides this, a retailer should also be providing justice to the producers and also to the wholesalers by ensuring that their products are sold to the ultimate consumers.

For expansion of business opportunities globally and tapping larger business prospects, large retailers have been diversifying their business formats by way of mergers or acquisitions to cater to the growing needs of a diverse and a larger customer segment. Moreover, the retail industry has been impressive regarding generating large-scale employment opportunities worldwide which is expected to grow at a much faster rate in comparison with the other sectors performance in future as well.

The retail sector has opened newer job avenues for people having different areas of specialization with diverse skills and qualification backgrounds. These opportunities could be in the areas of Finance & Accounting, Retail Operations, Commercial Operations, Inventory & Warehousing, SCM & Logistics, HRM, Distribution Systems, Marketing & Brand Management, IT, New Products Development & Market Research/Business Analysis.

Retailing career can be quite rewarding right from the start of the career for a person as it may require bearing a handling a lot of challenges and responsibilities right from the beginning. Moreover, retailing has given rise to entrepreneurial opportunities, and few of the wealthiest entrepreneurs are involved in the retail business.

Social Significance

In the present business scenario, social responsibility and increasing importance are being given to driving the functions of marketing functions with a sense of social responsibility. This has resulted in retail organizations paying a great deal of attention towards the social responsibilities which they have towards their customers.

Regulation and control from various pressure groups such as social activists, social workers, and consumer activists compel the retailers in implementing their marketing programmes restrictively and communicating the true picture about the benefits or harms of using a product.

The retail fraternity should give importance to the cultural differences and also the differences in the values, beliefs, and faith of people while formulating their marketing strategies and business development plans. This will be helpful in meeting the demands of the consumers by understanding their expectations. The marketing department of retail companies is engaged in identifying the opportunities and threats to the business of the company by analyzing the socio-cultural trends and the buying preferences of the consumers.


  1. Retailer’s Perspective:

From the retailer’s perspective, retailing can include anything that the retailer wishes to sell. It may be goods or services. These may include goods such as mobiles, computers, electronics, readymade garments, textiles and clothing, jewellery, books, paintings, medicines, stationery, watches, or may include services such as catering, hospitality, hospitals etc.

However, in certain cases permission in form of license is required to be obtained from the government. In such cases the retailer will have to comply with all the legal formalities before starting a business. For example, a license is required to operate a chemist’s shop. Hence, the retailer must possess the required qualifications and hence may apply for the license.

  1. Employee’s Perspective:

Retailing has provided tremendous opportunities of employment. The retailers operating at a small level required small number of employees to help them in business. These employees were appointed as salesmen, cleaners, cashiers, etc. by the retailers. But with the increase in the scope of operations and the growth of retailing, there has been tremendous change in the industry.

Now the retailers operate at bigger levels having separate departments for everything such as finance, marketing, advertising and sales, human resource development, etc. Hence, the retailers provide enormous opportunities to the employees.

The following are the areas where the scope of retailing can be seen from the point of view of the employee:

  • Purchase Department:

The purchase department is responsible for making all the purchases for the business. It includes the selection of the merchandise to be sold to the customers, their price range, the selection of the vendor from whom the purchases are to be made, etc.

This department requires vast amount of efforts and includes a lot of paper work, telephonic conversation and travelling. The employees working with this department should be well conversed having good amount of knowledge about the industry as well as the vendors. They must be able to take quick decisions.

  • Finance Department:

The finance is the life blood of any organization. The finance department performs the functions such as making and compiling the financial records, allocation of finance to various departments, management of finance, arrangement of finance, controlling the cash flow, managing the banking as well as investments, deciding the credit allocation, etc. Sometimes a retail audit may also be conducted by the finance department.

  • Marketing and Sales:

The marketing department includes various activities such as sales promotion, advertising, public relations, etc. These activities are extremely important from the view point of reaching the customers. The marketing department is responsible for conducting extensive market research and understanding customer requirements.

The people required in marketing department should be well conversant, having proper knowledge about the product, any they must be able to convince the customer to buy the products. They should also be capable of understanding the customer’s requirements and act accordingly.

  • Stores:

The stores department is responsible for storing the goods. The store’s manager should ensure that at every time the inventory is maintained at proper levels so that there is no shortage of goods. At the same time the department should ensure that too much inventory may cause problems of storage, obsolescence, wear and tear, etc. So the store’s manager must always keep an up to date record of the inventory and ensure uninterrupted supply of materials.

  • Human Resource:

The human resource department is responsible for the recruitment, selection, training, induction etc. of the employees. Human resource is a human centric industry. The people required in this department must be able enough to understand the requirements of the people in the organization and must be able to stop the efficient employees from leaving the organization.

  • Technology in Retailing:

Retail industry in India is in a mature stage and is a very confident user or information technology. The industry is using technologies such as Electronic Data Interchange (EDI) which is used to electronically transfer the information through computers. Database Management, Data Warehousing and Data Mining are the techniques that are used to gather information about the customers and store them for future use.

Data Mining helps in customer relationship management. Radio Frequency Identification System (RFID) is used for supply chain management. The concept of e-tailing is continuously gaining ground in retailing. It includes the use of internet for selling the goods.

  • Supply Chain Management:

Supply Chain Management means managing the supply of materials, services and information along the supply chain. Managing the resources efficiently and effectively increases profitability of the business. Supply chain is managed by using information systems.

Thus, there are many areas where retailing can provide employment to the people. Therefore, it can be concluded that the scope of retailing is very wide. One can engage himself as an entrepreneur or can join the sector as an employee depending upon his skills and finance, etc.