Customer knowledge can be a critical source of competitive advantage in retail business. Ir. this theoretical paper, three sources of customer knowledge are identified in the retail environment, namely customer transactions, customer interactions and customer communities of practice. Lessons for managing these three types of knowledge are derived from knowledge management practices of knowledge intensive service industries such as management consulting and software development. Finally, a decision model premised on consumer behaviour and purchase characteristics is proposed that would enable retailers to focus their knowledge management efforts such that they can leverage the potential of customer knowledge for both productivity benefits and product innovation.