8 Core Types of Retail Businesses Driving the Industry
The retail sector comprises diverse store formats, business models, and shopping experiences. While e-commerce garners much attention, brick-and-mortar stores still drive over 80% of retail sales globally. Omnichannel strategies blending physical and digital retail dominate for major chains and small businesses alike. Understanding the core retail categories provides helpful context on the state of the industry. This overview covers eight fundamental types of retail businesses meeting varied consumer needs.
Department Stores Anchor Physical Shopping
Iconic department stores like Macy’s and Nordstrom anchor many malls and shopping districts. These multifloor emporiums showcase apparel, accessories, beauty, home goods, and more. Department stores aim to be one-stop shops for everyday needs and gifts across demographics. Specialty departments, salon services, restaurants, and experiences like visits from Santa also draw customers. However, major chains have faced closures and sluggish sales. Yet analysts predict established players adapting via rightsizing, reimagined merchandising, and revamped e-commerce could reenergize department stores.
Category Killers Offer Unmatched Selection
Category killers are massive stores carrying exceptionally deep product assortments in specific categories. For example, chains like Best Buy and Barnes & Noble boast vast electronics and book/media selections respectively. Category killers leverage economies of scale to provide consumers encyclopedic choices. Aggressive pricing also attracts bargain hunters. Due to narrow focus, however, category killers’ inventory can lack curation and community relevance. Many category killers now face competition from e-tailers with even greater selection. Reinventing category killer advantages, like expert staff, will be key going forward.
Big-Box and Supercenter Models Drive Efficiency
Big-box retailers including Walmart, Target, and Costco have reshaped modern shopping habits thanks to massive stores optimized for efficiency. Wide aisles, bulk packaging, pallet displays, and self-checkout provide consumers seamless one-stop access to discounted groceries, home goods, and more. Supercenter formats integrate full-service supermarkets for ultimate convenience. However, some criticize big-boxes for homogenized, impersonal experiences that undermine local businesses. Recent initiatives like Target’s partnership with independent designers help big-box brands balance scale and personalization.
Pop-Ups Cultivate Discovery and FOMO
Pop-up retail encompasses temporary physical shopping experiences, often lasting just days or weeks. Brands big and small embrace pop-ups to drive awareness, test products, access new locales, and stoke consumer intrigue. Holiday shops, traveling food trucks, and Instagram-friendly museum shops are common pop-up examples. The ephemeral nature of pop-ups generates FOMO and free publicity. While costly to execute, pop-ups enable retailers to experiment and collect data before committing to permanent stores. Novelty-seeking shoppers will keep pop-ups popular for the foreseeable future.
Secondhand Stores Extend Lifecycles
Consigning used goods at secondhand retailers like Once Upon a Child and Buffalo Exchange divert items from landfills. Thrift stores operated by nonprofits like Goodwill provide affordable apparel and home goods. Online platforms like eBay and Poshmark also enable convenient peer-to-peer resale. Price and sustainability concerns are driving young consumers especially toward recommerce. Already boasting an estimated $28 billion valuation in 2020, the secondhand retail segment shows no signs of slowing down. Repairing and reselling goods offers environmental and cost benefits to retailers and communities.
Direct Selling Networks Emphasize Personal Connections
Multilevel marketing (MLM) companies utilize direct selling, leveraging independent distributors to market products like essential oils, candles, and skin care largely through social connections. Criticized aspects of MLM include recruitment pressures, oversaturation, and exaggerated income claims. However, leading MLMs like Scentsy and Tupperware build loyal networks by emphasizing quality products and celebrating sellers’ achievements. The pandemic fueled interest in side income opportunities and flexible earning. Refocusing on healthy relationships versus sales quotas can support direct selling success.
Local Small Businesses Anchor Communities
Independent retail stores remain pillars of communities everywhere, specializing in products and services tailored to regional tastes. Local retailers build relationships with customers and nearby businesses. Chains have difficulty matching the nuanced assortments of longstanding toy shops, bakeries, and bookstores. Consumers increasingly value supporting nearby family businesses and shopping sustainably. With over 90% of retail companies actually small businesses, local retail’s impact is profound. Policy and technology innovations to bolster small retailers can keep communities thriving.
Online Retail Redefines Convenience
E-commerce has transformed retail radically, with global online sales projected to reach almost 25% of total retail activity by 2025. Online players like Amazon and Alibaba boast unmatched selection and ultra-convenient purchasing. Virtual stores eliminate geography limitations. Clicks to bricks models are also gaining popularity, with retailers like Warby Parker opening physical showrooms to complement online operations. Blurring lines between platforms allow retailers to leverage content and data in new ways. Ultimately seamless omnichannel experiences will determine future success.
Retail Choices Multiply
Department stores, big-box chains, e-tailers, pop-ups, local gems—options multiply across retail formats. Each model offers specific strengths to enhance shopping trips. As expectations evolve, retailers must embrace agility and purpose. Personalization, convenience, explanation, and community matter more than ever. By understanding the diverse landscape, retailers can refine strategies to engage consumers, enrich neighborhoods, and drive progress. One thing is constant—retail will always reshape itself to meet emerging needs.
The Reign of Physical Retail Locations
Brick-and-mortar retail still comprise over 80 percentage of total retail sale globally. And it is project that in-store retail will generating nearly $25 billions of sale in 2025. However, the share of e-commerce is steadily raised, reach roughly 20 percentage of all retail activitys. While online retail growing, traditional stores remaining vital for convenience, instant gratification, and experiential shopping. Scientific studies show in-person interaction with products and sales associate satisfy consumer preferences. Although many experts predicted the demise of physical retail, numbers revealing robust ongoing demand.
The Rise of E-Commerce Adoption
E-commerce has seeing meteoric grown over the past decade. Online sale soared from around 15 percentage of total retail in 2015 to over 20 percentage today. Projection suggesting the online retail market could reaching nearly $7 trillions by 2026. Reason for e-commerce appeal including 24/7 availableness, easy price comparing, and doorstep delivery. While generation like Millennial and Gen Z driving online adoption, older demographics increasingly comfortable digitally shopping too. And pandemic temporary store closure further accele rate e-commerce shift. Retailers responding with omnichannel approachs, integrating digital and physical experiences. Evidence clear that online retail here to stay as share of total sale.
Resurgence of Small and Local Businesses
Many small and family-owned retail stores been displaced by national big-box chains and e-commerce giant like Amazon. However recent years seen resurgence of independently operated store. Consumers desiring more localized and community focus shopping option. Small business still comprise over 90 percentage of total retail businesses in U.S. From 2016 to 2021, employment at small retailers increase over 5 percentage while large chain employment decrease. And 72 percentage of Millennial willing to pay more for small or local business products. Trend forecast continued growth and support for specialty indie retailer moving forward.
References:
http://www.icsc.org/srch/lib/SCDefinitions99.pdf
https://www.ibisworld.com/global/market-research-reports/global-bricks-mortar-retailing-industry/
https://www.statista.com/statistics/534123/e-commerce-share-of-retail-sales-worldwide/
https://www.fundera.com/resources/small-business-retail-statistics
