When we think about retailers, most of us picture a shop. But a convenience store on the corner and a huge warehouse club on the edge of town are both retailers, and they work in very different ways. So how do we sort them out?
Marketing textbooks usually group store retailers in a few ways: by how much service they offer, by the product lines they carry, by how their prices compare, and by how they are organized. Let’s work through each one, and we’ll use one simple example the whole way through.
Imagine Sam has just started university and moved into a share house with two friends. The house is almost empty. Over the first week, Sam needs groceries, a kettle, a desk lamp, a printer, a winter jacket, some cheap kitchen gear and, at 11pm on the first night, a carton of milk.
Where does Sam go for each of these? Not to the same store. And the reasons why are really the whole topic of retail types.
What Is a Retailer?
A retailer is a business that sells products mainly to final consumers for their own personal use. Retailers sit at the end of the distribution channel. They buy in bulk from manufacturers or wholesalers, hold stock, and break it down into the small quantities we actually want to buy.
Retailers can be store retailers (a physical shop we walk into) or non-store retailers, such as online stores, vending machines and direct selling. This article focuses on store retailers. If you want the other side, see our post on what is non-store retailing.
Types of Retailers by Amount of Service
The first way to group retailers is by how much help they give the customer.
Self-Service Retailers
Customers find, compare and select products themselves. Think of a supermarket or a discount store. There are few staff on the floor, which keeps costs and prices down.
Limited-Service Retailers
These stores offer some help, such as staff who can answer questions or arrange delivery, because the products need a bit more explanation.
Full-Service Retailers
Staff help customers through every stage of the purchase. High-end specialty stores and some department stores work this way. The service costs money, so prices tend to be higher.
For Sam, the groceries are a self-service purchase. Sam knows what bread and pasta look like. But the printer? Sam might be glad of someone who can explain which model works best with a laptop and how much the ink will cost each year.
Types of Retailers by Product Line
This is the grouping most students meet first. Here we sort stores by the width and depth of what they sell.
Specialty Stores
A specialty store sells a narrow product line, such as shoes, books, sporting goods or car parts, but carries a deep range within that line. Staff often know the products well and give a high level of service.
Sam’s winter jacket might come from an outdoor clothing store. Why go there rather than a supermarket? Because Sam can try on ten jackets, ask about waterproofing and get advice from someone who actually goes hiking.
Department Stores
A department store carries a wide variety of product lines, such as clothing, homewares, cosmetics and toys, with each one run as a separate department. Department stores often act as anchor stores in shopping malls. Many have struggled in recent years as shoppers moved to specialty stores, discount stores and online shopping.
Supermarkets
A supermarket is a large, low-cost, self-service store selling mainly groceries and household products. Margins are thin, so supermarkets rely on high volume. This is where Sam does the big weekly shop.
Convenience Stores
A convenience store is small, close to where people live or travel, and open long hours, often all night. It carries a limited range of everyday items at higher prices than a supermarket. 7-Eleven is the classic example.
So why does Sam pay more for milk at 11pm? Because the extra cost buys time and location. The supermarket is closed and the convenience store is two minutes away. This is the same thinking we cover in the marketing mix for convenience products.
Superstores and Category Killers
A superstore is much larger than a regular supermarket and combines groceries with a wide range of general merchandise. Target and Walmart in the United States are common textbook examples.
A category killer is a very large store with a huge range in one category, usually at low prices. Home improvement and electronics chains, such as Home Depot and Best Buy, fit here. The name comes from what they tend to do to smaller specialty stores in the same category: they can be tough to compete with on range and price.
Sam’s desk lamp and kettle? An electronics or homewares category killer would give Sam plenty of choice at a sharp price.
Types of Retailers by Relative Price
Our third grouping looks at how a store’s prices compare with the rest of the market.
- Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volumes. They offer few services. Dollar stores are a good example.
- Off-price retailers buy brand-name goods below regular wholesale prices, often overstocks, end-of-season lines and closeouts, and sell them below department store prices. T.J. Maxx is the usual example.
- Factory outlets are owned and run by the manufacturer and sell its surplus, discontinued or irregular stock, often in outlet malls.
- Warehouse clubs sell a limited range of products in bulk, at low prices, to customers who pay a membership fee. Costco is the best-known example.
Would a warehouse club suit Sam? Possibly. Splitting a membership and a huge pack of toilet paper three ways could save the household money. But a 48-pack of instant noodles is a lot of noodles. Low price isn’t the only thing customers weigh up, and storage space matters too.
For the cheap kitchen gear, though, a discount store is a great fit. Sam doesn’t need the best frying pan, just one that works.
Types of Retailers by Organizational Approach
Finally, we can group retailers by who owns and runs them. Many stores are independent, but plenty belong to a bigger structure:
- Corporate chains: two or more outlets under common ownership and control, which gives them buying power and consistent branding
- Voluntary chains and retailer cooperatives: independent stores that band together to buy and promote as a group, so they can compete with the big chains
- Franchises: a franchisor licenses its brand and system to independent owners, which is common in fast food and services
Why does this matter to a marketer? Because it changes who makes the decisions. Selling a new product into a corporate chain means convincing one central buyer. Selling into independent stores means convincing many separate owners.
Why the Same Customer Uses Different Retailers
Let’s go back to Sam’s first week. In a few days Sam has used a convenience store, a supermarket, a specialty store, a category killer and a discount store, and may soon join a warehouse club.
Is Sam being inconsistent? Not at all. Each purchase has different needs. The milk needs speed and location. The jacket needs range and advice. The frying pan needs a low price. Each retail type has built its whole strategy (location, range, service, hours and price) around one of those needs.
That is the key idea for marketers. A retailer can’t be everything to everyone. A convenience store that tried to match supermarket prices would lose money, and a discount store that added full service would lose its price advantage. So each type picks a position and its marketing mix follows from it.
And the lines do blur. Supermarkets now sell clothing and kitchen gear. Convenience stores sell fresh food. Many retailers sell their own private label brands, and almost every store type now sells online too. The categories are a starting point for understanding a retailer, not a fixed box it has to stay in.
So here is a quick question to test yourself. A store sells only running shoes and running gear, has staff who check how you run before recommending shoes, and charges full price. What type is it? It’s a specialty store, offering full service. Now, what about a huge store selling every kind of sporting good at low prices, with a few staff and lots of self-service? That sounds like a category killer.
Sources
OpenStax, Principles of Marketing: “18.2 Major Types of Retailers”
