A Comparative Analysis: Product versus Service Retailing; Wholesaling versus Retailing

Difference between Product and Service Retailing

Products are tangible in nature, whereas services are intangible in nature. Hence, various aspects such as quality, timeliness, behaviour, and knowledge of the service delivery professional, service customizations as per the requirement of the customer and use of technological support for improving key processes and enhancing the consumer experience, etc play a crucial role in determining the success of an organization involved in services.

• In the case of Product Retailing, the governing factors are the cost as well as the quality of the products. On the other hand, in the case of service retailing the factors which determine the success of services are timeliness and the overall attitude and conduct of the service providers.

• In Product Retailing the relationship between the consumer and the retailer is developed only when the consumer pays frequent visits to the outlets. On the other hand, in the case of relationship, the relationship between the customer and the service provider is established from the start itself.

• Products are tangible and can be very well stored, whereas, services cannot be stored due to its intangibility.

• Another factor which distinguishes product retailing from service retailing is standardization. Standardization is possible in case of product retailing but not possible in case of service retailing due to the human element involved in the delivery of services.

• Transfer of ownership is possible in case of product retailing but not for service retailing. Once the product is purchased by the consumer, the ownership of the product gets transferred from the retailer to the consumer. But, in the case of service retailing the consumers are only the end users of the services but the ownership remains with the service providers.

Key Points of Comparison between Retail and Wholesale Business

• In the case of retail business, the customers can directly buy the products from the retailers. On the other hand, the wholesalers can sell the products to the retailers or sell directly to the customers.

• Since the retailers include their own profit margin before selling the products to the customers, hence the overall cost of the product will increase. But on the other hand, the wholesalers sell the same products relatively at a much lower cost.

• Retailers usually do not maintain a direct connection or contact with the manufacturers of the products, whereas, wholesalers maintain a direct connection with the manufacturers of the products.

• Retailers buy the products in small quantities from the wholesalers and they have the autonomy to question or charge the wholesalers for the non-performance of the products or communicating regarding the product defects. But the same is not possible for the wholesalers as they make bulk purchases from the manufacturers and in the case of any defect they can barely complain.

• Retailers give a lot of importance to the promotional strategies for enhancing product visibility and attracting a maximum number of customers. Whereas, wholesalers are not so much concerned about the marketing or promotional strategies.

• Profitability involved in retail business is comparatively much lesser than the wholesale business.

Key Terminologies used in Retail Business

Consumption: Consumption involves the usage of product/services at a given point of time, but cannot be used for the purpose of resale.

Customer Satisfaction: Customer satisfaction means the extent to which a customer is satisfied with the decision of availing the product/service and getting back to the same retailer/business owner for buying the same product.

Consumerism: Integrated initiative on the part of the individuals, governments and various groups to safeguard the consumer rights and to protect them from the policies and regulations which result in infringement of the rights of the consumers.

Retail: Selling the products/services to the ultimate customers. The retailers keep different products in small quantities and sell them directly to the customers. The Retail business buys the products from the wholesalers at discounted prices, add their margins and sell to the customers.

Wholesale: Wholesale involves selling large quantities of products at a lesser price to the retailers/customers.

Logistics: Logistics deals with the commercial side of retail with focus effective planning, execution and control on procurement and movement of the products for achieving cost advantages and gaining a business edge through effective distribution and resource optimization.

Distribution: It is concerned with the product movement from the manufacturers to the ultimate consumer by following organized channel/intermediaries. The objective of maintaining a robust and a strong distribution channel is to ensure product reach to the maximum number of customers within shortest possible time along with cost advantages.

Inventory Shrinkage: This is a drastic reduction in the existing inventory position due to the occurrence of anti-social events like theft on the part of employees or customers. This may even occur due to certain errors in the process of merchandise management during the stage of receipt of the merchandise. The key focus of any retailer would be on controlling the inventory shrinkage for improving the overall business performance and controlling the costs.

Markdown: This means a reduction in the prices of the product.

Procurement: This involves sourcing the products/services from the vendors/suppliers by managing the end to end procurement cycle. The process includes preparing purchase orders, bargaining for the best deals from the suppliers/vendors, identifying new vendors, making follow-ups, preparing various kinds of documentation/coordination activities and releasing the payment to the suppliers.

Costs of Switching: This essentially implies the total cost which a customer may have to incur for switching from suppliers to suppliers or trying out new marketplaces.

Consumer Empowerment: In the present scenario, the consumers are more aware of their personal rights and can voice out their grievances before the concerned authorities regarding the non-performance of products. The main source of easy access to information for the consumers is the internet and digital technologies.