What is retail and how does the retail market work?

Retail is a term that means selling goods or services directly to the end consumer. According to the Ukrainian Retailers Association, as of November 2024, there are more than 22,500 retail outlets in Ukraine in various retail sectors.

This article will tell you how the retail market is organized and what are its peculiarities.

What is retail?

Retail is the process of selling goods or services directly to the end consumer for personal or home use.

On the way to the buyer, any product goes through several stages that correspond to different types of retailers:

• manufacturer — an industrial enterprise that produces goods;
• distributor — a trading company that purchases a batch of goods for further resale;
• importer — a trading company that purchases goods abroad and imports them into the country for sale;
• retail company — a network or a single outlet that sells goods to the end consumer.

Retail differs from wholesale trade in that the consumer buys goods for personal use rather than resale. Typical examples of retail are the sale of goods in supermarkets, shops, kiosks, and online stores. They buy goods in bulk and then sell them at a premium.

Retail trade has the following characteristic features:

• retail outlets offer customers a wide range of products to meet their needs for everyday goods;
• goods are grouped into categories, groups, brands, etc. — both in supermarkets or shops and on online shopping sites;
• the location of retail outlets is important for offline retail: they are opened in densely populated areas or in places with developed infrastructure;
• promotions, discounts, and bonus programs are common in retail, which helps retailers create competitive advantages.

Types of retail

There are several types of retail. They differ in the forms of trade organization, product categories, and other features. Let’s take a closer look at the main types.

Food retail

It includes trade in everyday goods: food, household chemicals, hygiene products, etc. These categories of goods are in constant demand. Therefore, food retail is considered the most stable type of retail.

Non-food retail

Non-food retail is the sale of clothing, footwear, household appliances, books, stationery, etc. These goods are sold both in individual stores and in retail chains.

Chain retail

Trade through a chain of stores of the same brand. The stores are united by a single concept, supply chain and logistics system. Today, supermarket chains, hypermarkets, optical stores, etc. are actively developing.

Street retail

Trade in specialized outlets, such as markets or small shops. Street retailers most often sell seasonal goods (e.g. ice cream, soft drinks in summer, Christmas decorations in winter, etc.).

Electronic commerce (e-commerce)

Trading on the Internet through online shopping sites or social networks. The peculiarity of e-commerce is the use of various technical means (e.g. online banking, software cash registers, etc.).

How does the retail market work?

Retail trade is associated with many business processes: procurement of goods, logistics, pricing policy, and consumer behavior management. The efficiency of each of these processes affects the profitability of a retail company.

Selling goods at retail, companies simultaneously solve several problems:

• optimize operational processes that make up the supply chain;
• manage costs;
• tailor the range of goods to the needs of customers.

In Ukrainian retail, retailers organize their supply chains in different ways. However, under any supply chain scheme, the main goal is to get the goods from the supplier at the lowest possible price to ensure competitive prices in the chain.

EDI services in retail

Efficient supply of goods largely depends on the accurate and fast exchange of data on prices, availability of the necessary goods, etc. Therefore, EDI services are increasingly being used in retail to establish supply chains.

EDI (Electronic Data Interchange) is a system for exchanging structured data. This exchange simplifies the ordering and delivery of goods. The network sends an order file to the supplier. It describes what goods, in what quantity, and at what price the chain is ordering, and to which warehouse they should be delivered. The supplier, in turn, confirms, corrects, or rejects the order.

Providers offer various EDI services for retail automation. Vchasno.EDI has been helping to automate supply chains since 2019. It is currently used by more than 90 retail chains.

The main advantage of Vchasno.EDI for retail is its versatility. The service is part of the Vchasno ecosystem for business automation.

This simplifies the work, because in a single interface, the user can better control business processes. It also saves companies’ resources and takes into account all their needs.

How do EDI services bring profit to retail companies?

The transition to EDI requires certain investments from retail companies. However, they can quickly pay off. It depends on several factors that a company should consider when deciding to switch to EDI.

1. The volume of document flow. The more documents a company processes, the more time and resources the EDI service saves. Automation can save 60-80% of administrative costs, including paper, printing, and document delivery costs.
2. The number of errors. They occur when a company employee fills out documents manually. Due to errors in the documents, the company may receive a fine or lose the goods. Reprinting and resending a document brings additional costs to the company. Automation minimizes the likelihood of errors and saves resources and time.
3. The size of the document archive. The company also saves on storing and archiving documents. An electronic archive allows you to save money on renting premises and maintaining the archive.
4. Number of partners. The more partners connect to the system, the greater the savings on document management. This allows the company to return investments faster.

How to start the transition to electronic document management in retail?

First of all, you need to analyze which documents are the most important in the company. These can be orders, delivery notes, or other primary documents that suppliers use to interact with retailers. After that, you need to set up the integration of the EDI platform with the company’s accounting system. This will automate processes and minimize errors.

The company can switch to electronic document management gradually. First, you can take the most critical processes (for example, ordering and order confirmation). Later, you can add other documents: certificates of completion, specifications, delivery notes, eCMR, etc.

After setting up the system, you should test the exchange of documents with partners to make sure that everything works correctly. Later, you can scale EDI to other processes. To ensure that electronic documents transmitted via EDI are legally binding, it is imperative to use a qualified electronic signature (QES).

How to join Vchasno.EDI?

To join Vchasno.EDI, a retailer needs to take several steps.

1. Agree with partners on the chain of documents they will exchange in the EDI service. These can be orders, acts, invoices, etc.
2. Fill out an application on the Vchasno.EDI website and get a consultation. The Vchasno team will analyze the technical possibilities together with the company: The ERP system used by the retailer, the availability of qualified electronic signatures, and other factors that determine the possibility of working on the EDI platform.
3. Integrate the EDI service with the retailer’s accounting system. This will allow you to set up automatic data exchange between the EDI platform and the company’s internal system.
4. Conduct a test data exchange to make sure that the system works correctly.
5. Conduct staff training.

Vchasno.EDI provides technical support to its clients. Thanks to this, the company can quickly resume work in the service in the event of any technical failures.