This study explores the impact of financial management challenges, financial decision-making, and digital financial knowledge on the trading activities of retail store dealers in China’s retail sector. Specifically, it examines how financial decision-making mediates and digital financial knowledge moderates the relationship between financial challenges and trading behaviors. Using a structured survey, data were gathered from a sample of 339 retail store dealers across various Chinese cities. The analysis was conducted through Partial Least Squares Structural Equation Modeling (PLS-SEM) to examine the structural relationships and measure the influence of each construct on trading activities. Results indicate that financial management challenges significantly influence trading activities among retail dealers. Financial decision-making plays a mediating role between financial challenges and trading behaviors, while digital financial knowledge moderates this relationship, enhancing the effect of financial management challenges on trading activities. This highlights the importance of both decision-making processes and digital knowledge in adapting to financial challenges within the retail sector. This study contributes to the understanding of financial behavior in the retail industry by showcasing the interaction of financial decision-making and digital financial literacy as mechanisms for managing trading activities amid financial challenges. These findings provide actionable insights for retail practitioners and policymakers focused on improving financial resilience and trading strategies in China’s retail industry.