What Are the Factors of Production for a Retail Store?
Production is more closely associated with manufacturing than retail. However, the concept still applies. The store provides a service to customers in the form of available merchandise rather than assembling a product. What a retail store produces is value for its customers through merchandise selection and competitive pricing. The retail industry employs about three million more people than the manufacturing industry, according to the Bureau of Labor Statistics. The factors of production -- land, labor, capital and enterprise -- were developed by economists to describe the foundation of the economy.
While a retail store doesn't have raw materials that make up the final product, it does have inventory. The inventory is produced from natural resources from the land. For example, shirts are made from cotton, silk and linen -- all natural resources. Take this one step farther -- while we might not think of polyester as natural, it is produced from oil, which is natural.
The store's staff unpacks the clothing, displays it, assists customers and finalizes the sale through the store's point-of-sale equipment. The accountant sets up the accounting system, does the payroll, pays the bills and reviews the financial statements. The webmaster designs the store's website and updates it on a regular basis. The marketing manager is responsible for creating the advertising, publicity and setting up the social media accounts. The store's labor includes those who work full time, part time or provide labor on a consulting basis if the store can't afford a dedicated employee for a certain function.
A manufacturer has a facility, which includes an assembly line with equipment necessary to manufacture the product. A retail store has a physical location within a mall, strip shopping center or a free-standing building. The store has lighting, shelves, rounders and hangers to display the clothing. A computerized point-of-sale system is also part of the capital investment the store owner makes.
The other three elements of production, land, labor and capital, are useless without a spark to ignite them into an efficiently functioning business. That spark is the entrepreneurial efforts of the business owner. She determines what type of clothing is best for her customers and determines how to display the merchandise. She hires, trains and fires staff and obtains the capital to finance the store's operations. Her talent is critical to the success of her retail business.