Types of Retailers: Benefits, NAICS Classification & Examples

Instructor: Jason Dellwo

Jason has worked in corporate management, taught college retail management courses, and has a Masters in Organizational Leadership.

When you decide to go shopping you have many stores to choose from, each offering distinctive benefits. This lesson looks at the types of stores, inventories, and service levels influencing your shopping decisions.

Deciding Where to Shop

Imagine you're starting a new job next week. You want to make a great first impression, so you go to your favorite mall for a new outfit. Chances are you'll find what you need at one of the department or clothing stores you visit. This makes sense because these stores have a wide selection to choose from, a staff trained to help, and some even offer to custom fit your new look.

People purchase merchandise and services that fulfill their wants and needs, which is more likely to happen when they shop at a store that offers the specific benefits they seek. You go to an auto dealer to purchase a vehicle, a bakery for a custom cake, and a home improvement store for plywood. Each retailer has specific characteristics that help you decide if you should shop there. These characteristics are based on the retailer's unique mix of classification, assortment, variety and services.

Classifying Retail Types

When it's time to shop for something, we have many options available to us. For example, we can buy food from supermarkets, convenience stores, restaurants, bars, street vendors, butchers, bakeries, produce stands, online and so on. To help make sense of all this, the United States Census Bureau publishes the North American Industry Classification System (NAICS), which places businesses into Classifications based on their common characteristics and qualities.

According to the NAICS 2017 Manual, there are 12 retail classifications:

  • Motor Vehicles and Parts Dealers
  • Furniture and Home Furnishings Stores
  • Electronics and Appliance Stores
  • Building Material and Garden Equipment and Supplies Dealers
  • Food and Beverage Stores
  • Health and Personal Care Stores
  • Gasoline Stations
  • Clothing and Clothing Accessories Stores
  • Sporting Goods, Hobby, Musical Instrument and Book Stores
  • General Merchandise Stores
  • Miscellaneous Store Retailers
  • Nonstore Retailers, including catalog and online

Each classification is divided into several subcategories. Very general classifications like Clothing and Clothing Accessories Stores has subcategories within subcategories within subcategories. For example, Health and Personal Care Stores splits into:

  • Pharmacies and Drug Stores
  • Cosmetics, Beauty Supplies, and Perfume Stores
  • Optical Goods Stores
  • Other Health and Personal Care Stores, which breaks down further into:
    • Food & Health Supplement Stores
    • All Other Health and Personal Care Stores

The NAICS allows us to collect and classify data to keep us informed on the economy's health. This helps retail organizations understand their unique niche within the marketplace and gives data to track new trends.

North American Industry Classification System (NAICS) Logo

Breadth, Depth, and Services

We consider more than retail categories when we decide where to shop. We also look at the merchandise and services each store offers. For example, when shopping for your new wardrobe you might visit a specialty store if you have a certain look in mind, or a department store if you just want to browse a wide selection of general styles.

When it comes to deciding the specific benefits to offer, retailers consider three things. First, they determine the variety of merchandise categories they will sell, which tells us the breadth of merchandise offered. A department store has a wide variety, which can include clothing, shoes, accessories, cosmetics, jewelry, housewares, luggage, linens, small appliances and so on.

Next, the retailer will decide the assortment they will offer for each variety category, which shows the depth of merchandise they have. A menswear store for business professionals has a wide assortment of dress shirts, suits, ties, and accessories in many colors, styles and sizes.

Finally, a retailer decides what services they will offer, with levels and types varying from store to store. For example, a vending machine offers almost no service - we just need someone to stock it and plug it in. Most stores are self service, because we browse the displays alone and take our items to a register when ready. A high-end boutique in Manhattan or Beverley Hills might have a very high service level, where a client sits on a sofa sipping champagne as several staff members model the most recent fashion trends that will later be customized to the client's measurements.

Making it Profitable

Most retail companies are for-profit organizations, but even a non-profit thrift store must manage its finances to stay in business. Two of the costliest line-items on any retailer's balance sheet are payroll and inventory.

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