A pair of hiking boots made in a factory is not much use to a hiker in Sudbury until somebody gets it there, in the right size, at a time and place the hiker can shop. Retailers and wholesalers are the businesses that do that job. Retailers are the last link in the channel: they sell to final consumers for personal use. Wholesalers sit in the middle: they buy large quantities from producers and resell them to retailers and other businesses. Both get paid the same way, through a markup on what they paid. Understanding what each one does, and why customers choose one store over another, explains much of what you see when you walk into a mall, scroll a shopping app or check a price tag.
Types of Retailers
| Retailer type | What sets it apart | Canadian example |
|---|---|---|
| Department store | Many product lines under one roof, organized into departments, with more service | Simons |
| Specialty store | One narrow product line with deep selection and expert staff | Sport Chek, a local bike shop |
| Category specialist (category killer) | A huge selection in one category at low prices | Best Buy |
| Supermarket and discount grocer | Food and household items; discount banners offer fewer services and lower prices | Loblaws, No Frills, Food Basics |
| Discount and dollar store | Wide range of low-priced goods with little service | Walmart, Dollarama |
| Off-price retailer | Brand-name goods bought cheaply from overstock and sold well below regular prices | Winners |
| Warehouse club | Bulk sizes in a bare-bones warehouse, for members who pay a fee | Costco |
| Convenience store | Small, open long hours, limited stock at higher prices | Circle K, local corner stores |
| Non-store retailing | No physical store: online, catalogue, vending machines, direct selling | Amazon.ca, a brand's own website |
Most large retailers are now omnichannel: they connect their physical stores, website and app so a customer can browse on a phone, buy online, pick up in store and return by mail. Canadian Tire, for example, lets shoppers check a local store's stock online before driving over. Stores still matter because many customers want to see, touch and try products, take them home right away, and get help from a person. Each retailer picks a position on the trade-off in the table above. A convenience store wins on location and hours, so it charges more. A warehouse club wins on price, so it offers almost no service and sells only in bulk.
Choosing a Location
| Location type | Description | Good for |
|---|---|---|
| Central business district (downtown) | The core of a city, with office workers, transit and tourists | Cafés, restaurants, fashion, services for workers |
| Neighbourhood plaza (strip mall) | A row of stores with parking, serving nearby homes | Pharmacies, takeout, dry cleaners, convenience |
| Regional shopping centre | A large enclosed mall that draws shoppers from a wide area | Fashion, department stores, specialty chains |
| Power centre | A cluster of big-box stores sharing a large parking lot | Category specialists, discount stores |
| Freestanding site | A building on its own, often on a busy road | Supermarkets, drive-throughs, car dealers |
| Pop-up | A temporary shop for days or weeks | Testing a market, seasonal products, online brands |
Location is one of the hardest retail decisions to undo, because leases run for years. Retailers start by defining the trade area: the zone most customers will travel from, often a few minutes' drive or walk. Then they check the factors that turn traffic into sales. Is the target market nearby, judged by census data on age and income? Is there enough foot or car traffic, visibility from the road, parking and transit access? Are there complementary stores that bring the right shoppers (a yoga studio next to a smoothie bar) and how close are direct competitors? Finally, will the expected sales cover the rent? A common measure is sales per square metre, which lets a retailer compare stores of different sizes.
Atmospherics and Visual Merchandising
Atmospherics is the design of a store's physical environment to shape how customers feel and behave: lighting, colour, music, scent, temperature, layout and even how crowded the aisles are. A discount store uses bright lights and long, plain aisles to signal low prices. A luxury boutique uses soft lighting, wide spaces and few items on display to signal exclusivity. Visual merchandising is the specific job of presenting products so they sell. It works because most purchase decisions in a store are made quickly, and many are unplanned. If a product is easy to see, easy to reach and shown with items that go with it, it sells more, without any change to the product or price.
- Decompression zone: the first few metres inside the door, where shoppers adjust and ignore small displays, so key products go just beyond it.
- Store layout: a grid layout (supermarkets) is efficient for planned shopping; a loop or racetrack layout leads shoppers past every department; a free-form layout invites browsing in fashion stores.
- Eye level is buy level: the best-selling and highest-margin products go on shelves between about waist and eye height.
- Endcaps and feature displays: displays at the ends of aisles get heavy traffic and are used for promotions.
- Cross-merchandising: placing related products together, such as salsa beside tortilla chips, to raise the size of each purchase.
- Planograms: diagrams that show exactly where each product sits on a shelf, so every store in a chain looks the same.
Markup Chains and Wholesalers
Each intermediary adds a markup to what it paid, to cover its costs and earn a profit. The manufacturer's selling price becomes the wholesaler's cost, the wholesaler's selling price becomes the retailer's cost, and the retailer's selling price is what the consumer sees on the tag before HST. Retailers also work backward. If customers will pay only 90 dollars for a backpack, the retailer divides by its markup factor to find the most it can pay its supplier, and the supplier does the same. Markup can be measured on cost or on selling price (the latter is usually called margin), so always check which base is being used. Doubling the cost, a 100% markup on cost, is called keystone pricing.
| Wholesaler function | What it means | Why retailers value it |
|---|---|---|
| Buying and assorting | Choosing products from many producers and offering a combined assortment | One order replaces dozens of separate orders |
| Breaking bulk | Buying in huge quantities and selling in smaller lots | A small store can buy two cases instead of a truckload |
| Warehousing and transporting | Storing goods and delivering them quickly | Retailers keep less stock and free up space and cash |
| Financing and risk bearing | Offering credit terms and owning stock that could spoil, be stolen or go out of style | Retailers pay later and carry less risk |
| Market information | Sharing what is selling, prices and new products | Small retailers learn trends they could not research alone |