A retail market is one in which goods or services are sold to consumers for the purpose of consumption. In the financial world, it means the selling of securities to individual investors rather than institutional investors.
What is the retail process?
The retail process typically involves a supply chain of manufacturers, wholesalers, retailers, and consumers. Wholesalers purchase goods from manufacturers and resell them to retailers at a markup. This is known as the wholesale market. Retailers then sell the goods to individual consumers at a markup. This is known as the retail market.
Let’s look at an example to demonstrate how it works. A factory in Pennsylvania manufactures children’s toys. Once the toys are ready, the factory sells 500 toys to a wholesaler for $1 per toy. Fun Time Toys, a toy retailer in Philadelphia, buys 100 toys from the wholesaler at $2 per toy. Fun Time Toys then sells the toys to individual customers in its store for $5 per toy.
What are some different types of retailers?
While the retail process is related across industries, there are several different retailer types. Convenience retailers like gas stations and corner stores sell snacks, medicine, and vehicle products. Because they are in a convenient location, they are able to charge a premium.
Warehouse retailers sell products in bulk at a low price. Outlet retailers sell products with a specific brand name and a targeted niche. Discount retailers sell generic goods at a significant price discount. Internet retailers allow customers to purchase goods from online stores and have products shipped directly. Grocery retailers sell beverage and food products.
A franchise retailer is a large company that sells the rights to its business model and branding to an owner. The owner runs one or more franchise locations and sells goods or services under the large company’s name. An example of a franchise retailer in the food and beverage industry is McDonald’s.
What are retail investors in finance?
Retail investors are those investing money on behalf of themselves. They are non-institutional investors and often use a broker to help them in the investment process. In general, retail investors have less capital than institutional investors and pay higher fees on transactions.
Retail investors often make investments to achieve goals like buying a home, saving for retirement, or sending children to college. The retail market simply refers to the transactions between retail investors and the seller of their securities.
Institutional investors are those investing money on behalf of others.
They include investment banks, insurance companies, money managers, hedge funds, mutual funds, and pension funds. These investors handle larger amounts of money than retail investors and get to pay lower fees on investments. These investors are more sophisticated and consist of finance professionals.
To summarize, a retail market is one in which stores called retailers sell goods and services to individual consumers. Unlike wholesalers, retailers sell for the purpose of consumption instead of redistribution. The retail supply chain typically involves a manufacturer, a wholesaler, a retailer, and consumers. Common retailer types include grocery stores and outlet stores.
The financial retail market is the selling of securities to individuals known as retail investors. Unlike institutional investors, retail investors are less sophisticated, invest for personal gain, deal with less capital, and pay higher fees.
