Consumer (1 of 6)

Retail

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Retailers buy goods from suppliers and sell them to shoppers in stores and online, keeping a small margin on every sale.

The big idea: Retail is a volume game on thin margins. A supermarket keeps only about 2 to 5 cents of each euro of sales as operating profit, so small changes in waste, theft, staff hours or buying prices decide whether a store makes money. Profit comes from three things multiplied together: enough shoppers, a healthy margin on what they buy, and a low cost to serve them.

One unit, in numbers: One supermarket in Spain for a year: EUR 9 million comes in, and EUR 555 thousand (6.2%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: 2 to 5 percent in grocery; about 8 to 20 percent for strong apparel chainsRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: MediumA fair amount of money is tied up, in things like stores, stock or equipment. More on capital intensity
The number to watch: Like-for-like (LFL) sales growthSales growth only from stores open in both periods, so new stores cannot hide a decline in old ones (called comparable or "comp" sales in the US).

Ask this first in a case

Which format and which country: grocery, apparel, department store or convenience, and where?

Words used above (1)

Like-for-like (LFL) sales:: Sales growth from stores open in both periods only; called comparable or comp sales in the US.

The industry's other words are explained in Words to know (11).

On this page (17 sections)

How money is made

The trading margin: the gap between the shelf price and what the retailer paid the supplier (a gross margin of about 20 to 30 percent in grocery and 50 to 65 percent in apparel).
Supplier income: brands pay for listings, good shelf space and promotions.
Own brands (private label): products sold under the retailer's own name, cheaper for shoppers but usually a higher margin for the retailer.
Retail media: selling advertising to brands on the retailer's website, app and in-store screens, using shopper data.
Memberships and services: paid memberships (Costco, Walmart+), franchise fees in convenience, rent from brands that run counters in department stores (concessions), and store credit cards.
Cash timing: grocers often sell goods before they pay the supplier, so suppliers partly fund the stock.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One supermarket in Spain for a year (1,500 square metres of selling space), in EUR thousands. Illustrative, rounded figures.
Line	Amountin EUR thousands	ShareShare of revenue
Sales: 1,500 square metres x EUR 6,000 per square metre	EUR 9,000	100%
Minus Cost of goods sold, after supplier rebates (74 percent of sales)	EUR 6,660	74%
Minus Shrink: theft, damage and spoiled food (1.5 percent of sales)	EUR 135	1.5%
Minus Store staff (10 percent of sales)	EUR 900	10%
Minus Rent	EUR 450	5%
Minus Other store costs: energy, cleaning, card fees	EUR 300	3.3%
What is left (contribution)	EUR 555	6.2%

Check: EUR 9,000 minus EUR 8,445 of costs leaves EUR 555 (in EUR thousands).

So what: The store keeps EUR 555 thousand, about 6 percent of sales, before head office costs. One extra point of shrink would cut that by EUR 90 thousand (about 16 percent), and the store would need about EUR 346 thousand of extra sales to earn it back, so waste, theft and staff hours move store profit more than almost anything else.

Key measures(8)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Like-for-like (LFL) sales growth
Sales growth only from stores open in both periods, so new stores cannot hide a decline in old ones (called comparable or "comp" sales in the US). Glossary: Like-for-like (LFL) sales growth
Sales per square metre
Yearly sales divided by selling area: how well a store turns its space into sales, and the quickest test of whether it earns its rent. Glossary: Sales per square metre
Footfall, conversion and basket
Sales = visitors x the share who buy x the average amount spent per purchase; it shows which part of sales moved.
Gross margin
Sales minus the cost of the goods sold, as a share of sales. Glossary: Gross margin
Typical: About 20 to 30 percent in grocery (US grocers average about 26 percent) and 50 to 65 percent in apparel[1]
Shrink
Stock that is lost and never sold (theft, damage, spoiled food, errors), as a share of sales. Glossary: Shrink
Typical: About 1.4 to 1.6 percent of sales on average for US retailers in 2021 and 2022[4]
Inventory turns
Cost of goods sold in a year divided by average stock held: how many times the stock is sold and replaced each year (365 divided by turns gives days of stock).
Typical: Walmart about 9 times a year (worked out from its fiscal 2026 results); a clothing chain may turn only about 4 times[2]
Operating margin
Operating profit (after all running costs, before interest and tax) as a share of sales.
Typical: About 2.3 percent for US grocers and 6.8 percent for US general retailers[1]
Online share of sales
The share of sales ordered online, which brings picking and delivery costs that store sales do not have.

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Which format and which country: grocery, apparel, department store or convenience, and where?
Is the problem in the stores we already have (like-for-like sales), or in new stores and the growth plan?
Did sales move because of fewer shoppers, fewer buyers per visit, or a smaller basket?
How is gross margin moving by category, and what is happening to shrink and markdowns?
What do the best stores in the chain do differently, measured by sales per square metre and store profit?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Make the product
Margin varies
Brand owners and manufacturers (Nestlé, Unilever, local food makers) and the factories that make own-brand goods
Strong brand owners often earn far higher margins than the retailers that sell their products (see the Consumer goods brief).
Step 2: Buying and range
Medium margin
The retailer's buying teams
Choose what to sell and negotiate price, rebates and promotion funding. Supplier income can be a large part of a grocer's profit.
Step 3: Logistics: distribution centres and trucks
Thin margin
The retailer's own warehouses and fleets, logistics firms and wholesalers
A cost centre of about 2 to 4 percent of sales in grocery.
Step 4: Store operations
Thin margin
The retailer's own stores, or franchisees in convenience (small local stores)
Staff, rent, energy and shrink (lost stock) use up most of the gross margin.
Step 5: Online orders and delivery
Thin margin
Retailer websites and apps, delivery partners and quick commerce apps
Picking and delivering each order costs money that a store shopper does for free.
Step 6: After the sale: data, advertising and services
Fat margin
Retail media teams, loyalty programmes, memberships and store credit cards
Advertising sold to brands on the retailer's app and screens earns a high margin.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

In grocery, much of the profit in the chain sits upstream with brand owners, who earn operating margins of about 10 to 22 percent against 2 to 5 percent for the grocer. Retailers win profit back through buying scale, own brands, supplier income and newer high-margin streams such as retail media and paid memberships. Discounters with small ranges and high sales per store, and local champions that know their shoppers, win in many markets.

Cost structure(6)

The main costs, each as a share of revenue (the money from sales).

Cost of goods sold (what suppliers are paid, after rebates): 70 to 78 percent
Store staff: 8 to 12 percent
Rent and occupancy: 3 to 6 percent
Logistics (warehouses and trucks to stores): 2 to 4 percent
Other store costs (energy, cleaning, card fees, shrink): 2 to 4 percent
Head office and marketing: 2 to 3 percent

Benchmarks(7)

Typical figures for the industry, to check a client's numbers against.

Operating margin, US grocery retail: About 2.3 percent[1]US-listed companies, January 2026 data.
Operating margin, US general retail: About 6.8 percent[1]US-listed companies, January 2026 data.
Walmart, year to January 2026: Revenue about USD 713 billion; gross profit rate 24.2 percent; operating income about 4.2 percent of revenue[2]
Tesco adjusted operating profit, 2025/26: About GBP 3.15 billion on about GBP 66.6 billion of sales (excluding VAT and fuel), a little under 5 percent[3]On a comparable 52-week basis; the year had 53 weeks.
Average shrink, US retailers: About 1.6 percent of sales in 2022, up from 1.4 percent in 2021[4]
Own brands (private label) share of grocery value, 17 European countries: About 38.7 percent in the 12 months to early October 2025[5]
Operating margin, two large fashion chains, 2025: Inditex (Zara) about 20 percent; H&M about 8 percent[16]H&M figure from its full-year report 2025. The best apparel chains sit well above grocers.

Typical cases(8)

Case prompts you might hear in this industry.

Our client is a supermarket chain in Poland. Sales grew last year but profits fell. What is going on, and what should they do?
A Gulf grocer wants to open 40 new stores in Saudi Arabia over five years. Should it, and how fast?
A UK department store chain is losing money. Which stores should it keep, and what should it do with the space?
A fashion chain in India ends every season with too much unsold stock. How would you fix it?
Should a European grocer grow its own brands from 30 to 45 percent of sales?
A supermarket chain in Southeast Asia wants to sell advertising to the brands on its shelves. How much could this be worth?
Shrink at a US drugstore chain has doubled in three years. Where would you look first?
How many supermarkets does Riyadh need?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Praising total sales growth without asking for like-for-like growth. Instead, split growth into new stores and existing stores first: new stores can hide a decline.
Treating a bigger basket caused by inflation as real growth. Instead, split the basket into number of items and price per item.
Comparing gross margins across formats (apparel keeps far more per sale than grocery). Instead, compare operating margin or store profit within the same format.
Ignoring shrink and markdowns because they hide inside cost of goods. Instead, ask for them directly: in grocery one extra point of shrink can remove a sixth of a store's profit.
Opening new stores next to old ones without counting the sales they take away (cannibalization). Instead, estimate net new sales for the whole area.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Own brands keep gaining in Europe: private label reached about 38.7 percent of grocery value across 17 countries in the 12 months to early October 2025, slightly up on a year earlier. Brand owners lose shelf space and price power to discounters such as Aldi and Lidl.[5]
Retail media became a real profit line. Walmart's global advertising business grew 46 percent to nearly USD 6.4 billion in the year to January 2026, earning far more per dollar than selling groceries.[2]
The US suspended its USD 800 duty-free limit (de minimis) for low-value parcels from all countries on 29 August 2025, raising costs for ultra-cheap sellers that ship single parcels from abroad and helping store-based retailers.[6]
In November 2025 EU governments agreed to remove the EUR 150 customs duty exemption for small parcels in 2026, with a simple temporary duty until a permanent system is ready.[7]
Theft became a board topic. Police-recorded shoplifting in England and Wales rose for several years, then fell 4 percent to about 507,000 offences in the year to March 2026; retailers still spend more on tags, cameras and guards.[8]
In India, quick commerce apps grew very fast (Blinkit's order value rose about 95 percent in the year to the March 2026 quarter) and now compete with supermarkets and kiranas for top-up shopping.[9]

Players by region(7)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Walmart (US, first by retail revenue in Deloitte's 2025 ranking)
Amazon
Costco (membership warehouse clubs)
Schwarz Group (Lidl and Kaufland, Germany)
Aldi (German discounter)
Europe: Tesco (UK)
Carrefour (France)
Ahold Delhaize (Netherlands and Belgium)
Schwarz Group and Aldi (discount-led groups in Deloitte's global top 10)
Inditex (Zara) and H&M in apparel
Middle East: Lulu Retail (UAE hypermarkets, listed in Abu Dhabi in November 2024)
Majid Al Futtaim (runs Carrefour stores under franchise in the UAE, Saudi Arabia, Qatar, Egypt and other markets; in Jordan, Oman, Bahrain and Kuwait it replaced them with its own HyperMax brand in 2024 and 2025)
Panda Retail (Saudi Arabia, part of Savola)
Othaim Markets (Saudi Arabia)
India: Reliance Retail (about 20,160 stores at March 2026)
Avenue Supermarts (DMart, 500 stores at March 2026)
Trent (Westside and Zudio, part of the Tata Group)
Kirana stores (small family shops that still sell a large share of groceries)
Southeast Asia: CP All (runs 7-Eleven in Thailand)
DFI Retail Group (Hong Kong based; sold its Singapore supermarkets in 2025)
SM Retail (Philippines)
Alfamart and Indomaret (Indonesian minimarket chains)
United States: Walmart
Costco
Kroger (supermarkets)
Target
Home Depot (home improvement)
Africa: Shoprite (South Africa; revenue about ZAR 257 billion and a net 281 new stores in the year to June 2025)
Many local chains and informal shops (spaza shops, dukas)

Words to know(11)

Linked words have a fuller entry in the glossary.

Like-for-like (LFL) sales (glossary entry): Sales growth from stores open in both periods only; called comparable or comp sales in the US.
Sales per square metre (glossary entry): Yearly sales divided by selling area; also called sales density.
Shrink (glossary entry): Stock lost to theft, damage, spoilage or errors, shown as a share of sales.
Markdown (glossary entry): A price cut to clear slow or end-of-season stock.
Private label (own brand) (glossary entry): Products sold under the retailer's own name instead of a famous brand.
Inventory turns: How many times a year the stock is sold and replaced.
Gross margin (glossary entry): Sales minus the cost of the goods sold, as a share of sales.
Footfall, conversion and basket: Visitors to a store, the share who buy, and the average amount each buyer spends.
Retail media: Advertising a retailer sells to brands on its website, app and in-store screens.
Distribution centre: A large warehouse that receives goods from suppliers and sends mixed loads to stores.
Cannibalization (glossary entry): When a new store or product takes sales from the company's own existing ones.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(17)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

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Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.