Remember department stores? Once the center of American shopping, they made way for big-box stores like Walmart, then specialty shops like Gap, and now – the biggest department store of all – Amazon.

Retail works like this: brands make products, then sell them to retailers, who sell them to you at a markup. That markup? It’s often triple the production cost, according to Goldman Sachs.

Both sides give something up. Brands give away part of the profit to avoid distribution headaches. Retailers don’t need to make products, but only take a cut of the final price. That’s why many are now doing both.

Some go direct – LVMH now runs over 4,500 stores worldwide. But physical stores carry risk: high rents, long leases, and unpredictable foot traffic. Just ask any retailer locked into a multi-year lease in a city with falling retail traffic.

Retailers have long leaned on “private label” goods – their own in-house brands. Macy’s, for example, generates serious income this way. But launching your own brand takes effort and serious marketing spend, especially at the high end.

Some players go all-in: Inditex (owner of Zara and others) controls everything from design to sales. That lets it respond fast to trends and set its own prices – one reason its gross margins are significantly higher than peers like Nike or Macy’s.

👉 Key Idea: The traditional retailer-brand model is shifting. Many brands are now selling direct, while retailers are launching brands of their own.