Retail - A business selling directly to the consumer or end-user. Generally requires a storefront, either actual or virtual (for Internet businesses.) Depends on walk-in or drive-by traffic.

Examples of retail businesses...

Wal-Mart
Sears
McDonalds
Sams Club and Costco (despite their 'warehouse' appearance, these businesses are actually retailers.)

Wholesale - A business selling to retailers or distributors. Generally does not require a storefront because it does not depend on walk-in traffic. Requires warehouse capability and front-office functions; generally requires a sales force to "make the rounds" to service their retail customers.