What Is Retail? Definition, Types, and How It Works

People often compare retail to ecommerce with a “this or that” approach. But if you want to open a retail store, it’s important to know that lines have blurred, and consumers no longer differentiate between them. 

Instead of choosing one or the other, successful retailers are both. 

Below, learn more about retail and how it can fuel your business in 2025. 

Ready to start your business? Create your website today or learn more about Shopify’s tools for selling online and in person.

What is retail?

Retail is the process of selling goods or services directly to consumers for personal use. This activity can occur in brick-and-mortar storefronts, online, or through other channels. Retail encompasses a variety of businesses, including supermarkets, department stores, and ecommerce websites, and focuses on providing customers with accessible products while enhancing their shopping experience

Retailer vs. retailing

In simple terms, “retailing” is a verb that describes the act of selling goods to end users, and “retailer” is a noun that describes who performs the sales. Here are two common types of retailers:

Independent retailer

Independent retailers are entrepreneurs who build retail businesses from the ground up. They may juggle multiple roles, including buyers, salespeople, or brand marketers.

Franchise

A franchise is a ready-made retailer with an existing business model and trademarked names and products. Retail establishments can pay a fee to benefit from the franchisors’ established market positioning.

Types of retail businesses

Retail is the largest employment sector in the US, with more than three million retail trade businesses directly employing 9.8 million people.

Walmart, Amazon, and Costco are some of the largest retail companies in the world.

Retailers can be described by the types of goods they sell:

• Hardline retailers sell long-lasting products such as appliances, cars, and furniture.
• Soft goods or consumables retailers sell items like clothing, shoes, and toiletries.
• Food and grocery retailers sell produce and baked goods.
• Art retailers sell fine art, books, and/or musical instruments.

Within the retail categories, you’ll find different types of retail stores. Some of the most common are:

Department stores

Department stores are the oldest and often largest places for consumers to shop for various products under one roof. Department stores like Target, Nordstrom, and Macy’s typically organize layouts by product category.

Big-box stores

Big-box stores are major retailers that specialize in one product category, such as electronics. Best Buy, Home Depot, and Bed Bath & Beyond are examples of big-box stores.

Discount stores

Discount stores are essentially department stores that stock discounted items and value brands. Some examples of discount stores include Dollar General, Aldi, and Ross.

Mom-and-pop stores

Mom-and-pop shops are small, often niche stores run by independent business owners—think corner stores and local storefronts. 

Ecommerce stores

Retail doesn’t need a physical storefront. Online retailers sell over the internet and then deliver products to customers’ doors. PlanToys and Stellar Eats are examples of ecommerce stores.

Key components of the retail supply chain

The retail supply chain consists of four players, often identified in a retail business plan:

1. Manufacturers who produce goods
2. Wholesalers or distributors who buy goods from manufacturers
3. Retailers who purchase goods from wholesalers
4. Consumers who buy goods from retailers

1. Manufacturers

Manufacturers kickstart retail supply chain operations by transforming raw materials into finished goods. For example, a toy manufacturer might use plastic, paint, and other materials to create a line of action figures.

2. Wholesalers

Wholesalers buy goods in bulk from manufacturers at lower prices before selling them to retailers. For instance, a book wholesaler might buy thousands of copies of a new novel from a publisher, and then distribute them to bookstores.

3. Retailers

Retailers buy goods in large quantities from wholesalers or directly from manufacturers, then sell those goods to end users, a business model known as direct-to-consumer (DTC or D2C). A local hardware store, for example, might buy pallets of paint cans from a wholesaler and then sell the cans directly to individual shoppers.

4. Consumers

The consumer is the last link in the retail supply chain. They purchase relatively small quantities of goods or services from retailers to satisfy personal needs or wants. Consumer retail purchases cover a broad range, from buying snacks at a convenience store to hiring landscaping teams for your backyard.

How do retail markups and profit margins work?

At each step along the chain, manufacturers, wholesalers, and retailers add a markup or profit margin to the purchase price. For instance, manufacturers calculate production costs and add a profit percentage before selling to wholesalers.

Wholesalers do the same thing, adding a profit percentage to the price they pay for products. Retailers then add their own profit margins before selling to customers.

A product that costs $1 to make might sell to wholesalers for $2. Wholesalers could then sell it to retailers for $4, who sell it to buyers for $8.

Why a point of sale is essential for retail businesses

A point of sale is where retail transactions happen. In a physical store, this could be a cash register or a self-checkout lane. For ecommerce, it’s the online checkout where customers input credit card information to complete purchases.

Retailers with points of sale across multiple platforms, such as online and in-store, are known as omnichannel retailers. 

To offer a seamless shopping experience, many omnichannel retailers use Shopify POS, which integrates online and in-store sales for real-time inventory tracking.

Making commerce better

Retailers aim to source high-quality products from wholesalers at competitive prices; they also compete to provide the best customer service. Success in the retail industry requires more than selling the right products—it’s also about creating a shopping experience to meet consumers’ evolving demands.