The retail value chain defines a series of actions that enable businesses to sell their products to customers. Each action in the chain brings a portion of value to the entire process. The four steps in the retail value chain are creating the product, storing the inventory, distributing the goods and making the product available for consumers. Small businesses that participate in the retail value chain must be aware of how each of these processes operate.
Carriers represent trucking companies that move goods from one point to another. They deliver goods from manufacturers to warehouses and warehouses to retail stores. Their sole purpose in the retail value chain is to work as a service for each company. Retailers rarely have trucking divisions as part of their retail businesses. They contract this service out to save costs on insurance, fuel, wages, and maintenance.
After the manufacturer has created sufficient quantities of a product, the company must store these items until they are ready for the next step. Warehouse personnel track inventory items as they arrive, count them as they are stored and prepare them for distribution to various retail outlets. Cold storage rooms preserve meat, dairy and other animal products before they are shipped to grocery stores. The hard drives on Internet servers store music, movies, games and software for customers to download.
Filling Store Shelves
When the retailers receive the items, they must make those items available to shoppers. They must determine if they have the correct items in quantities that will meet customer demand. If they have too few items or a limited selection, the items will sell out quickly, and late-arriving customers will find empty shelves. If the retailers carry too many items to meet customer demand, those items will remain on the shelf and not be converted into the revenue every link in the retail value chain requires.
Distributors are responsible for moving goods from the warehouses to the retail outlets. Distributors must deliver products on time, on budget and undamaged. Seasonal clothing, such as summer shorts, Halloween costumers and winter coats, must be delivered in time to meet customer demand. Online retail servers must be maintained to ensure that the items are available and that the connection can handle high-traffic shopping days, such as the Monday after Thanksgiving, without a loss of transmission speed.
Developing the Product
Before a company can sell a product, the product must exist as a salable item. Firms may use their own resources to create these products or they can receive raw materials from other sources. Manufacturing firms employ workers on a factory floor to assemble the component for many types of products. Computer programmers write thousands of lines of code to create a PC software product or smartphone app for a development studio.
Suppliers are the final step in the retail value chain. Retailers may own their own supply chains as part of their retail companies. These are the localized distribution centers that deliver goods straight to retail stores. Not all retail value chains have suppliers as part of their processes. Retailers can avoid these businesses by working directly with warehouses to deliver goods into their retail outlets.
Technology allows retailers to shorten the ordering process within the retail value chain. Electronic ordering ensures that retail stores order goods in a real-time format. This helps avoid stock outs and reduces the possibility of losing sales from consumers. Electronic systems also remove human flaws from the ordering process. Employees do not need to write paperwork or make phone calls to suppliers, warehouses, or manufacturers.