A retail business is a business that sources products in bulk and then sells them directly to the end consumer through online or offline retail stores.
An ecommerce store, for example, is an online retail business.
Read Also: What is Retail?
In this article, we are going to discuss in details the different components that are essential for a retail business, such as the key activities, resources, value proposition, channels, … and more.
Retail Business Model Canvas
We are going to use the nine block Business Model Canvas to explain the different building blocks of a retail business
You can download a free printable copy of the above retail business model canvas template and fill it with your business’ details from here
Value Proposition of a Retail Business
The main value proposition of any retail business is in putting together a product assortment that is sought after by the target end consumer, and making those products available for purchase in a convenient way.
Retailers don’t have to manufacture or create their own products and brands, and so retail in its essence is actually a service business. This service is curating a product assortment and bringing it closer to the end consumer to buy directly and conveniently.
The more attractive such product assortment, and the more newness and freshness is injected into it on a regular basis, the better the value given to the customer. Some retailers, such as discount and off price retailers, offer value by maintaining everyday low prices and passing savings to their customers
Which takes us to the next point..
Key Activities in a Retail Business
Based on what we have just mentioned as the key value proposition, the key activities to bring this value proposition to life are the following:
- Product sourcing from different manufacturers and suppliers
- Marketing the offered products to the end consumer through different channels to drive traffic to the stores
- Opening and operating the stores to display and sell those products
- Regular replenishment of the sold products for continuity of business and for best customer experience
- The actual sales transaction at the end of the process
The most important partners for a retail business are the suppliers, manufacturers, wholesale vendors , as well as the landlords at all the brick & mortar locations.
The better the relationship is kept with those partners, and the more optimized the costs and margins are kept between all the parties, the healthier and more sustainable the business is going to be.
Read Also: Supplier Bargaining Power
A retail business, by definition, serves the end consumer. The products sold could be relevant to the mass market (such as groceries) or could be more niche related, such is the case for specialty retailers.
The main channel for customer relationship is directly at the store through customer service and interactions on the floor.
In addition to that, many retailers collect customer information and feed them into a CRM system to be able to communicate the newest offers and collections to the customers and bring them back to the stores.
Retail businesses need to rent store locations and warehouse facilities to deliver the service to the customers. Furthermore; since this is a service business, human resources is a key component for operating this business.
The traditional sales channel used to be brick & mortar retail stores.
In the past few years, ecommerce started to emerge, and retailers started integrating online channels into their existing offline business. As we have mentioned earlier, one of the key value propositions is convenience and being closer to customers. Ecommerce delivers on this.
Some retail businesses have chosen to be pure play online retailers; although many of them have resorted to opening brick & mortar stores to reach a bigger audience and be closer to customers.
Recently, a lot of retailers have also started experimenting with the idea of Pop-Up stores, which are primarily used as a marketing activity and also to test the waters before taking brick & mortar locations.
The main revenue stream for this business is direct product sales at the stores.
Access our members area and learn about different alternative business models that a retailer can use to diversify his revenue streams and build on his business success
The cost structure represents what needs to be paid for all the key activities and key resources to materialize.
At retail businesses the cost structure will include:
- COGS: what the retailer pays to source the products
- Store Rents
- Logistics: Warehouse rents, trucks and product processing
- Employees: Store and corporate
- Marketing & Branding
Using this one-page business model canvas allows a store owner or a retail manager to see the whole big picture in one place. This is especially useful while making strategic decisions or brainstorming ideas for alternative business models or revenue streams for the business.
Retailer & Founder of Retail Dogma, Inc.
Rasha has 14 years of retail & ecommerce experience. She has started an ecommerce business in 2008, and later worked at H&M, Bath & Body Works, Victoria’s Secret and Landmark Group. She’s lived in 4 different countries, speaks 3 different languages and holds a BSc in Pharmaceutical Sciences and an MBA in Strategic Management & Marketing.