Why are retailers classified as service firms?
In the study of services marketing, retailers are classified as service providers. One of the questions I am often asked by university students is why retailers are service firms. After all, retailers generally sell a physical product – so why are they service providers?
This is a good question, given that a consumer will leave a retail store carrying a physical product. In the consumer’s mind, they probably believe that the retailer has provided them with this product. However, in reality, the retailer has simply provided a service only.
What a retailer does
The easiest way to understand why retailers are classified as service firms is to think about what they actually do in their business and how they provide value to a consumer.
Retailers will source a variety of merchandise from a whole collection of suppliers and manufacturers. These manufacturers can be located anywhere in the world. A retailer will seek out reliable manufacturers that can supply products that are relevant, good quality and may also carry a strong brand.
The retailer buys a selection of product from each manufacturer (sometimes via a wholesaler) and presents a related mix of merchandise within the store (or online or via direct selling) that appeals to the interests and needs of the retailer’s target market.
The retailer then presents this range of merchandise in a logical and/or attractive manner. As a supermarket, they may present their products in a structured aisle form to allow for easy and convenient purchases. As a department store, they may present their merchandise in related themes an attractive environment, and so on.
Some retailers will also provide additional services such as parking, finance/credit, sales and service advice, delivery services, and so on. Many retailers also endeavor to provide an enjoyable and engaging shopping experience through the way they design their store (and as servicescape) by a suitable use of layout, colors, music, aromas, displays and so on.
Retailers = a service provider
As you can see, retailers provide the service of combining a related selection of physical products within a suitable and convenient shopping environment – and therefore, are clearly service providers.