Danger of Advertising

Danger of Advertising

To Consumer


1. He may be misled by false claims

A consumer may be misled into buying a product or service because of its false claims



2. He may have difficulty in choosing the brand

A consumer may have difficulty in choosing the right product because of the claims that been made by different type of brands



3. He may make unnecessary purchases

A consumer may be persuaded into buying something which he did not intend to buy as a result of successful sales publicity stunt employed by advertisers like giving special offers and gifts for purchases



4. He may be irrational in his buying

A consumer may base his choice on the appeal in the advertisement which has nothing to do with the quality of the goods



However, the dangers of advertising to consumers are minimized through consumer protection afforded by the Consumer Association and the government (See the topic on Consumer Protection)



To Producer



1. His production cost increases

A producer’s cost of production increase because of the additional cost of advertising



2. His expenditure may not be justifiable

A producer may spend more on advertising that the return in terms of increasing the sales



3. He may incur financial losses

a. His advertisements have to be continuously improved upon and this means increasing costs

b. A price war (by undercutting his competitors) may be resorted to or to achieve his aims. Due to this, it may lead to financial losses



Devices Used in Advertising


 These are tools used by the advertiser in his promotion campaign to appeal to the certain group of consumers

 The advertiser influences the consumers into believing that they will realize these needs and desires upon the purchases of certain products

 These are some of devices used in advertisements to influence consumers purchases



1. Sex appeal – e.g. Cosmetic

2. Romance appeal – e.g. Perfume

3. Economy appeal – e.g. Fuel savings and second – hand car

4. Appeal for manliness – e.g. Cars

5. Appeal for motherly love – e.g. Cute babies promoting a certain milk product

6. Appeal for cleanliness – e.g. The effective using a certain detergent to wash soiled cloths

7. Appeal to safety – e.g. The safety features of an machine

8. Appeal to prestige or status – The advertisement may relate well known person with the use of a certain product or service like credit card, shampoo

Advertising Media



The main types of media used by advertisers to carry the advertising message are as follow:



1. Newspapers

2. Magazines

3. Radio

4. Television

5. Films

6. Direct Mail

7. Outdoor hoardings and signs

8. Pamphlets and samples

9. Travelling salesmen

10. Window displays and exhibitions

Advertising

Advertising

 Advertising consists of all the activities involved presenting to a group an oral or visual message regarding a product, service or idea

 Advertising is spread through one or more media and paid by the advertiser who is usually the producer of the product or service



Important of Advertising



1. To the consumer

It helps to inform the consumer about the wide range of products and services available in the market and also their competitive price



2. To the advertiser

 It helps to create market for the advertiser goods, maintained and extended.

 With markets expansion, the goods can be produced on a large scale at lower cost.

 Due to this, producers will earn higher profit while the consumers will benefit from lower consumer price



Purpose of Advertising



1. To Inform

a. Advertising serves to inform the public of the availability of a new product or service which is been sold in the market

b. This is aimed at creating demand for the new product where the new product has to make known to the public before the goods are actually available for sale

c. This type of advertising is called informative advertising where it is not only used to inform people of new product but it is also use to inform people about price change or even how the product works

d. However, it make no attempt at influence people to buy but merely informs the public of the availability of the products, its uses and advantages, price, quality, terms of sale, etc



2. To persuade

a. Advertising also severs to persuade the public to buy some good or services

b. This type of advertising is called persuasive advertising where it is not only informs but also persuades the public to using subtle techniques, into purchasing the product. Its aims at extending the demand of the good or service advertised.



3. To remind

a. Advertising also serves to remind consumers of existing products where the product may be needed in the near future and where to buy the product

b. It is necessary for the advertiser to constantly draw the attention of consumers to his product and away from other competitive brands

c. This type of advertising is called reminder advertising or reinforcement advertising

d. Reminder advertising aims at sustaining the demand for the goods or service advertised



Types of advertising



1. Classified according to the purpose for which it is intended

a. Informative advertising, e.g. informing the public that a certain beverage has been developed with a new taste with additional flavours

b. Persuasive advertising, e.g. persuading consumers that Brand A is superior to other brands because of certain qualities it possesses

c. Reminder advertising, e.g. informing and reminding the public that a certain beverage is the only health drink for children approved by the authorities



2. Classified according to what is being advertised

a. Product advertising is the promotion of a particular product or service e.g. advertising a certain brand of toothpaste

b. Institutional advertising is concerned with the promotion of the image or goodwill of the company that sells the product or service e.g. a certain company informs the public through an advertisement of its contribution to government efforts in keeping the city clean by installing rubbish bins near bus stop



3. Classified as collective or competitive

a. Collective advertising is undertaken by a trade association or an organization of producers for a particular product as a whole, e.g. the milk manufacturers group together to promote their milk as an important nutritious drink for children



The aim of collective advertising is to increase sale of the product as a whole. The cost of collective advertising is low because the whole cost is bear by all the members of their business associations



b. Competitive advertising is carried out by the different producers of the different brands or names of the same product or services. Each producer tries to compete with the other to get a share of the market using techniques that are persuasive and aggressive to achieve his target.



Each producer claims that his product or service is better than the other in terms of quality, performance, durability and economy of use. Example, a motor car company claims that the car it producers is superior to other makers in terms of performance, safety, durability and economy



4. Classified according to the way in which the product or service is advertised

a. Direct advertising is on a person to person basis. It usually used when the advertiser wishes to appeal to a limited number of users of a product
b. Indirect advertising is directed at the general public. It is used when the advertiser does not wish to appeal to a particular group of consumers but rather to the masses through the various media



Methods of Direct Advertising



1. Personal demonstration

To group of consumers at a particular place e.g. holding parties in private homes with the purpose of demonstrating a certain household product or some brand of cosmetics



2. Direct mail advertising

By sending personal letters together with pamphlets to potential customers of a certain product e.g. list of publications of reference books may be sent to schools and libraries or catalogues on surgical instruments may be sent to doctors and hospitals





3. Door to door canvassing

Demonstrate household products like vacuum cleaners, cosmetics, encyclopaedia and so on



Method of Indirect Advertising



1. Press i.e. newspapers, magazines, periodicals which are widely read so that the advertisement will reach a large group of people

2. Radio and television advertisements will have a wide distribution as they are brought into home through daily broadcasts

3. Displays in shop windows and in trade fairs or exhibitions to attract the eye of the general public

4. Outdoor advertisements like signboards, neon lights, posters and hoardings are used to appeal to the public in general

cheques

Cheques

 Cheques is only available for current account holders

 The commercial bank acts an agent for payment for its current account holder

 Through the use of cheques, he authorizes his bank to pay cash or transfer money from his account to the payee

 Cheques are usually valid for a period of six months and after its expiry is called a stale cheque

 A cheque that is dated in the past is called an antedated cheque

 A cheque that is dated in the future is called a post – date cheque where it can’t be cashed until the date written on the cheque



Parties of Cheque



There are three parties to a cheque:

1. The drawer – The person who writes and signs the cheque

2. The drawee – The bank where the drawer has an account and the bank to which the cheque belongs to

3. The payee – The person named on the cheque who is going to receive the money



Drawer --------------- Drawee ------------------------- Payee


Advantages of using cheques



1. Convenience – where no notice of withdrawal is required. A cheque can be made for any sum and it eliminates the need for counting or carrying bank-notes

2. Safety – where it can be safeguarded by crossing the cheques that can be traced as it is numbered. In case of doubt or suspicion, it is easy to stop payment. It also reduce the risk or carrying large amount sum of money around

3. Proper record – cheques serves as a record of receipts and payments since each cheque has a counterfoil in which particulars are recorded. In addition, the monthly bank statement sent to the current account holder shows his deposit, receipts and payment during the month

4. Relatively cheap – where the cost of each cheque is low in most countries



Types of Cheques

1. Open Cheque

2. Crossed Cheque

3. Dishonoured Cheques

Open Cheque

 An open cheque is a cheque which is cashable over the counter of the particular bank on which it is drawn

 There are two kinds of open cheques:

1. Bearer Cheque

• Cheque which is written “pay” or “bearer” and can be cashed at the bank by anyone who has the cheque.

• It is risky and unsafe



2. Order Cheque

• Cheque which is written “pay” or “order” which is payable to order of a specified payee or to any other person as ordered by the payee to the bank to make payment by endorsement of the cheque



Types of Endorsement

1. General – sign his own name

2. Special – sign his name as well as name of a particular person

3. Restricted – Payee sign and adds the following words “payee…only” on the order cheque



Crossed cheque

 To make a cheque safer it can be crossed by drawing two parallel lines across the face of the cheque

 There are two type of crossed cheque

1. General crossing

2. Special Crossing


General Crossing



 Cheque with general crossings can be paid into any bank

 Consists of two parallel lines drawn across the face with or without the words

a) “not negotiable” – Protect the rightful owner of the cheque

b) “Act payee only” – must be paid only into the account of the payee

Special Crossing



 Consists of two parallel lines draw across the face with the name of the bank

 Must be paid into the bank named in the crossing


Dishonoured Cheque



 Dishonoured cheques are those which, when presented to the bank, are refused payment



Reasons for Dishonoured Cheque



1. The drawer may not have sufficient funds to meet the amount written on the cheque. He may have exceeded the overdraft limit

2. The drawer’s signature may be missing or not the same as the specimen signature held by the bank

3. The cheque is post – date

4. The cheque is stale (old)

5. There is difference in the amount written in words and numeric

6. The cheque is defaced or torn

7. Alterations and corrections in the cheque not endorsed or signed

8. The drawer has closed his account

9. The drawer instructs the bank not to pay

10. The drawer is dead, bankrupt or insane

Types of Deposited services or Account

Saving Account

• It can be opened with a minimum deposit of $50


• Person who open this account will be given a pass book

• Will be given low rate of interest

• Can withdraw at any time they like where they need to fill in withdrawal slip or use the ATM and use the deposit slip to keep money

• Suitable for depositors who wish to save small amount of money



Current Account
 
• It can only be opened with a certain minimum sum ($500 in some banks)


• Will be given a cheques book

• No interest will be paid

• Can withdraw anytime by using cheques

• Bank will sent bank statement every end of the month

• Suitable for businessman as it is a convenient and safe method of making payments and deposits

• It allow other services such as standing order, direct debit and credit transfer

 
Fixed Deposit Account
 
• It can be opened with a minimum of $500 (or $1000 in some banks)


• Account holder will be given a fixed deposit certificate of acknowledgement

• High interest will be paid

• Cannot withdraw at any time. Need to wait for certain date

• Suitable for depositors who have extra money and wish to earn high interest

Banking and Finance

Basic Functions of Banking


1) Safekeeping of cash

Banking facilitates deposit of cash safely in the savings, current and fixed deposit account



2) Means of making payment

Payment can be made conveniently and safely through the current account, or by way of bank drafts, bank transfers and bills of exchange



3) Financing

Banking also provides or lends funds in the form loans, overdrafts or discounted bills of exchange



4) Advice

Banking also provide advice on financial investments or on credit-worthiness of customers, local or abroad



Types of Banks



There are two types of banks

1. Central Bank

2. Commercial Bank



Central Bank

Central Bank of Brazil

 The Central Bank controls the operation of the whole banking system in the country and carries out its financial policy

 The main functions are

1. To issue, control and supply of money in the country

2. To act as banker and financial adviser to the government

3. To act as banker to the commercial banks

4. To promote monetary stability and a sound financial structure in the country



 However, Brunei Darussalam don’t have their own Central Bank but Brunei Darussalam have the Monetary Authority of Singapore (that Central Bank in Singapore) to act as the Central Bank of Brunei Darussalam



Commercial Banks

 These banks are privately-owned, profit seeking financial institutions

 Examples: Hongkong and Shanghai Banking Corporation (HSBC), Bank Islam Brunei Darussalam (BIBD), Baiduri etc



 They give different types of services:-

o Saving and ATM cards

o Credit and Debit Card

o Remitting services

o Loan and Overdraft

o Safe deposit box

o Standing Orders

o Foreign Currency exchange

o Transfer of money

o Travellers’ cheques

o Telebanking

o Night safe facilities

o Saving, Current and Fixed Deposit Account

o Cheques



Bank services



Saving and ATM (Auto Teller Machine) cards

 Banks provide Saving or ATM card to its customers who have either saving or current account

 The services enable the customers to perform banking transactions anytime in the day at ATM

 Examples of the banking transactions:-Withdraw of money, paying bills, deposit of cash or cheques, transfer of funds between accounts, check bank balance etc

 Some banks like Baiduri have extended services like buying Easi or B.Moblie recharge card at their ATM



Credit Card

 Credit Card enables holders to make credit purchases by the bank at local or overseas businesses (like shops, hotels, restaurant, etc) which accept these cards.

 The most common credit card in Brunei Darussalam are Visa and MasterCard

 Advantage of having a Credit card

1. Travellers don’t have to carry any traveller’s cheques or cash

2. Travellers can charge their expenses to the card and put his cash as reserves for better use

3. The holder is informed by monthly statement of the amount of credit they have taken and the due date for making the payment



Debit Card

 Debit card has the same function as credit card but instead of given credit, Debit card withdrawn the funds directly from the cardholder’s bank account




 Advantage of having a Debit card

1. Anyone who is above 16 years old can get it

2. Its acted like Credit Card

3. The cardholders can only spend what he/she have in his/her account



Remitting services



 Remitting services the sending of money from one place to another without the actual physical movement of cash.

 Example:- Bankers’ cheque, bank draft, mail transfer and telegraphic transfer

1. Banker’s cheque or cashier’s order is a bank’s cheque drawn upon itself. It can be used for payment of any amount within the same town.

2. Bank draft is an unconditional order in writing drawn by one bank on another bank requesting the drawee bank to pay a third party on demand a specified sum of money

3. Mail transfer is a written instruction given by a remitting bank to its brand or agent bank to pay a certain sum of money to a third party

4. Telegraphic is an instruction that is cabled or telexed to a branch or agent bank by the remitting bank to pay a certain sum of money to a third party



Loan



Personal Loan



 Bank may offer personal loans to customers who have an account with the bank

 The loan is discussed with a senior bank official and if the official is satisfied that the customer has a regular and dependable income, the loan is granted

 Example: To buy new car or computer, household repairs or improvement

 The loan is repaid monthly, usually over two or three years but longer in certain cases



Business Loan



 Business Loans are often granted to small traders or self-employed professional people

 This loan might be needed for modify present premises, buy new equipment or start a new business

 Collateral security is required for larger loans

 Collateral security is the name given to items of value, which the business agree to give the bank, if they can’t able to repay the loan.

 Example: Share certificates, jewellery, cars etc



Bank Overdraft



 A bank overdraft is a cheque drawn on the bank itself and not on the individual customer’s account and it usually for large sum of money

 The money is taken out of the customer’s account and put into the bank account before the draft is issued



Safe deposit box

Banks offers security and safe-keeping for documents and valuables, which can be stored in the strong-rooms of the banks



Standing Orders



 The customer can instruct the bank to make monthly payments on his behalf by filling and signing a standing order

 These payment can be

1. Rentals

2. Installments

3. Insurance premiums

4. Subscriptions to trade journals, club, etc



Foreign Currency exchange

 Banks can change their loan currency to foreign currency, for example, Brunei dollar to US dollar, Brunei dollar to Sterling

 Bank can also change foreign currency to local currency, for example, Yen to Brunei dollar, Euro to Brunei dollar



Travellers’ cheques

 Bank can issues traveller’s cheques where these can be exchange for cash when they are signed in other countries

 They are safer to carry then money because its are valueless until they are signed by the person to whom they were issued



Transfer of money



Money can be transfer by this following ways

1. Mail transfer – where the bank sends a letter to the branch or agent requesting it to pay a certain sum to the person stated in the letter

2. Air mail transfer – where the bank send the letter by air

3. Telegraphic transfer where the bank send a telegram to its branch or agent if money is to be sent urgently



Telebanking

 Customers can pay bills or make loan payment, check bank balance, order cheques books and request statement of accounts through the use of their telephones

 Its operates 24 hours a day anywhere using the push-button telephone linked with the bank’s computer centre



Night safe facilities



 This can be used to deposit a trader’s daily takings after banking hours

 The money is put in a locked bag and dropped into the night safe, located outside the bank and goes through a chute leading to the vault



Saving Account



 This is an account which encourages people to save and earn interest

 The saving account holder can withdraw the money when needed



Fixed Deposit Account



 This is an account where the money is deposited in the bank for a period of time so its can earn interest



Current Account



 This is an account from which money can withdrawn for payments by means of cheques

 Other services available to the current account holder are overdraft, standing order, direct debiting and credit transfer services

Transport

Transportation



 The purpose of transport is to make possible the transfer of people and goods from one place to another, whether locally or across the world

 Transport is necessary in order to allow the exchange of goods between different parts of a country or between different countries

 A good and efficient transport is a key factor in mass production where the goods can reach the consumer from the production site or factory which situated many miles away

 For example, Padi have to be transfer from the padi field in Tutong to the processing plant in Muara and then the finished product need to be transported to the consumer within the country or to overseas



Importance of Transport



 Increased transport facilities have brought our world so close together which has resulted in an interdependent world

 Transport can opened new doors so that places which were once considered to be out of reach are easily accessible

 The construction of railways has further facilitated the transport of goods from one part of the country to another and all over the world

 Easy air transport has enabled the distribution of foodstuff from one part of the world to another in their fresh state

 Road transport has also made places within the reach of individuals with the increasing use of cars which offer convenience to the owner

 Due to the increase development in each type of transports, it provide a safe, speedy and cheap means of transport for goods thereby increasing their demand world wide and making it possible for producers to engage in mass production and specialization



Benefits for having good transport facilities for people and goods



1. Goods can be produced in the most suitable areas of the world, they can be provided more cheaply

2. There is a larger market, businesses can produce on a much bigger scale at a lower cost

3. Consumers can have a much wider variety of goods available

4. People have a wider choice of jobs and can earn more money

5. Better standard of living



Factors influencing the choice of transport



1. Distance

The distance of which the goods have to travel and the cost of carrying increases with distance whereas the cost of rail and shipping will not increase with the distance thus its more cheaper for long distance travel for rail and shipping but road transport is cheap and faster for short distance travel



2. Types of goods to be transported

- Perishable goods like vegetable and milk is transported by specially designed refrigerated trucks

- Goods like flowers is transported overseas is done by the use of air transport

- Heavy goods like coal is normally transported by sea or rail

- Some commodities like oil is transported by specially designed oil tankers or pipelines may have to be constructed in the case of transport of oil within the country



3. Quantity of bulkiness

Bulky goods (like timber, iron, etc) are normally transported by railway or canals in case of home trade and are transported by sea in case of overseas trade.



4. Value of goods

- Valuable and expensive goods which are small and light are transport by air which provide a cheap and safe means of transport and there is reduced risk of damage due to handling or theft

- Road transport also can be used because the latter is more impersonal without constant surveillance of goods

- In case of no alternatives but the use of sea transport the best type of sea transport will be ocean liner or passenger liner which stops at fewer ports



5. Risk of damage

The fragile and breakable goods are normally sent by sea or by air after careful packing and handling with a precaution and label of “Fragile – Handle with care”



6. Urgency or speed

The urgency with which the goods are needed will determine whether it will be transported by air or sea



7. Convenience

The type of transport which is most conveniently available to the consignor will be chosen. Of all the type of transport, road transport is widely accepted for its convenience due to the door to door delivery



8. Cost of transport

The type of transport which is most economical is the choice of the consignor unless the goods are urgently needed or when they’re fragile. Bulk cargo is normally sent by tramps and small parcels by post



Types of transport

There are several ways to transfer people and goods from one people to another and the following diagram shows the possibilities:

Types of transport

LAND

a) Road

 

 

b) Rail

 

 

c) Pipelines

 

 

AIR

 

 

 

 

WATER

 

a) Cargo Liner

 

b) Tramps

 

Road Transport

Road Transport is by far the most important type of transport been uses to transport both people and goods


Advantages


1. It’s much quicker than rail over short distance as there is no intermediate handling

2. Door to door delivery reduces the chance of damage or theft and is generally more convenient

3. It’s usually cheaper than rail for smaller loads and over shorter distances – lower operating costs and less handling

4. Delivery times and routes are more flexible compared with other forms of transport



Disadvantages


1. It is much less suited for carrying large quantities of bulk goods such as coal and iron ore

2. It can be slower than rail over long distances, because of traffic jam

3. Road vehicles can carry only a certain maximum weight

4. Road transport is more likely to be disrupted in bad weather conditions compared with rail

5. More pollution in term of air and noise and also they can damage to roads or buildings



Rail Transport



 Rail transport is the most economical and cheap type of transport of goods over long distance

 They are most suitable type of transport for heavy or bulky goods like coal, iron, timber

 They also provides the facilities of special containers for specialized items like oil, tin and livestock



Advantages



1. Bulky goods like coal and iron can be handle more cheaply than by road transport, where large number of vehicles would be needed to transport the same quantity carried by one train

2. Over long distance, rail can be faster than road

3. Rail routes go direct to the centre of cities and avoid road traffic jam

4. Less damage to the environment

5. Very bad weather conditions are less likely to halt rail transport than road



Disadvantages


1. Rail transport itself cannot generally make door to door delivery

2. They are slower in term of short distance delivery

3. The need to transfer goods increases the risk of theft and damage

4. Rail has very high fixed costs because of the need to operate and maintain its own permanent way and stations

5. Due to the cost of transfer and operation, rail tends to be more expensive than road especially over short distances

6. Rail transport has to run to fairly rigid timetables, whereas road transport is more flexible



Pipelines

A major use of pipelines is in the transport of crude oil, gas and water as this is safe means of transport



Advantage


1. Once they are built they cost very little to use since it requires little or no maintenance

2. A continuous flow of the product is more guaranteed as pipelines are not normally affected by the weather or labour strikes

3. There are less pollution compared to vehicles and there is greater safety especially for flammables



Disadvantages


1. It’s limited in use when considering the type of product which can be carried

2. Once built, they can be used only for one type

3. Installation costs are high as they are usually placed underground and its for long term use



Air Transport


 Air Transport plays a important role in the transportation of goods which is needed urgently

 Although the charges is high, it is a safe means of transport and prevents damage or loss and also keep the goods like flowers fresh



Advantages


1. A high traveling speed which makes air transport a very quick method over long distances

2. Both land and sea can be crossed in one journey without the need to transfer people or cargo

3. The speed of air transport over long distances makes it especially important for transporting perishable goods or live animals and urgent medical supplies or spare parts

4. Light valuable goods such as diamonds can be transferred with less fear of theft and therefore the insurance rates are low

5. Expensive delicate equipment such as computers can be carried with less fear of damage and less packing is needed

6. People can reach destinations very quickly thus saving time and energy



Disadvantages



1. Air is an expensive means of transport. especially for heavy bulky goods such as cement and coal

2. The carrying capacity of aircraft is limited in terms of weight and volume

3. Over short distances, the aircraft speed cannot make up the time lost getting to and from an airport and the longer checking in time

4. Bad weather conditions are more likely to delay or halt air transport compared with land or sea transport


Sea Transport

 An economical means of transport for bulky and heavy goods such as timber, iron and grains

 Has been aided and is made more rapid by introduction of containerization which has made loading and unloading easier and reduce the risk of damage of goods

 Specially designed truck can carry the containers and deliver them right up to the consignee’s door

 Refrigeration facilities are also provided for meat and dairy products to prevent from getting spoil



Advantages


1. It has easy accessibility to most countries

2. It is suitable for heavy and bulky goods

3. It’s the cheapest mode of transport



Disadvantages

1. It’s quite slow

2. It can cause delays at the port due to shortage of labour

3. There are risk of deterioration due to the salt water

4. It depends on the weather and tide conditions


Containerization

 It’s a form of transporting goods by air, sea, road and rail where by the goods to be transported are packed into containers at the point of departure and unpacked on the point of destination



Advantages:



1. It decreased in handling therefore decreased in risk of damage

2. It make loading and unloading easier

3. It can be easily shifted from the ship to the trucks which going to carry them

4. It can reduce the cost of labour



Disadvantage

1. Labour unrest due to use of advance mechanization, which lead to increase in unemployment

2. The financial cost of adaptiong port, rail and rolling stock to the new techniques is very high

3. Equipment use to transport the containers are very expensive

WHOLESALE TRADE

HOME TRADE: THE WHOLESALE TRADE

 Wholesale Trade deals with the buying goods in larger quantities (bulk) from various manufactures and then breaking it down into small quantities which then sold to the retailers. The wholesaler acts as an intermediate link in the chain of production



Functions of the wholesaler



1. Searching out sources of supply

 The wholesaler buys goods in bulk from the producers locally or overseas in the hope that he will be able to resell them at a profit

 A wholesaler has specialist buyers who are in very close contact with the market and who know the various sources of supply



2. Risk bearing

 They buys good in advance of demand based on up-to date and reliable information on the likely tastes and preferences of consumers.

 He bears the risk of loss in cases of the products are damaged, spoilt or stolen and have to sell off the goods at a loss in the case of change in taste



3. Warehousing

 The wholesaler stores the goods which are purchased in advance before they are distributed to the retailers



4. Breaking bulk

 The wholesaler breaks bulk or divide the goods bought into small quantities and sells them in even smaller quantities to various retailers



5. Delivery

 The wholesalers provides transport for goods from the suppliers to suitable deports to the retailers’ shop



6. Finance

 The wholesaler finances the retailer by allowing him extended credit

 He finances the producer indirectly by paying him on time



7. Information

 The wholesaler acts as a link between the retailers and producers by informing producers of the retailers’ reactions about their goods and acquainting retailers with new products and other development in the market



Services of wholesalers to the Manufacturer



1. Finds new markets for the manufactures

 The wholesalers will find new markets for the manufactures since they will sell the goods to various retailers which can come from different areas of the country



2. Helps warehouse the goods

 The wholesaler stores the goods which are purchased in advance therefore the manufactures relieved from paying the expenses of storage like rent, insurances, wages and so on

 Manufacturer of goods in seasonal demand like winter clothing and greeting card is able to continue production throughout the year as the wholesaler are willing to absorb the products as they are being produce



3. Finances the producer by paying cash

 By paying the manufacturer on time, the wholesaler reduces the amount of working capital required by the manufacturer and allows the continuation of the production run smoothly



4. Helps to distribute the goods to the retailers in just the quantities needed

 The wholesaler breaks bulk or divide the goods bought into small quantities from the manufactures and sells them in even smaller quantities to various retailers



5. Passes information from retailers to the manufacturer

 The wholesaler acts as a link between the retailers and producers by informing producers of the retailers’ reactions about their goods



Services of the wholesaler to the retailer



1. Breaking bulk and sell in small quantities to the retailer

 A wholesaler willing to sell in small quantities to a retailer who only place a small orders and unable to get their stock directly from the manufacturer who only sell in bulk


2. Cash flow problems of retailers are reduced

 A wholesaler provides credit to a retailer therefore the retailers have time to sell the goods before they have to pay for them



3. Retailers are relived of preparing the goods for sale

 A wholesaler simplifies a retailer’s work since the goods are already graded and pre-packed into convenient quantities and sizes



4. Retailers are relieved of the risk and expenses of storage

 A retailer always assured of delivery of fresh stocks from the wholesaler’s warehouse if he runs short.

 This reduces the amount of stock he needs to hold at a time, hence saving on costs of storage, insurance and risk



5. Retailers are given a wide choice of related products, both local and foreign

 Wholesaler offers a variety of goods made by various manufacturers, both local and abroad.

 The retailer is also kept up to date on the latest products available

Small – scale retailing

Features of Small – scale retailing



1. They normally run as a sole proprietorship (sole trader) or a partnership

2. The capital is usually small and it is raised from personal saving, borrowed from friends or family or loan from banks

3. Small retailers obtain a great variety of goods in small quantities from wholesaler

4. The sole proprietorship (sole trader) normally serves his customers with the help of some assistants. Therefore, he has the opportunity to get know his regular customers well



Reasons why Small retailers buy from the Wholesaler


1. Small Capital

 The small retailer has only a small capital and cannot afford to buy in bulk from the manufacturer therefore he can only make small orders at a particular time


2. Limited market

 The small retailers has mainly a regular customers therefore the markets is only limited to the people living in the area near their shop

3. Small turnover

 The total sales per month is small

 If they buy in bulk, the goods will be laying around and have to pay the rental for storing the goods

 Furthermore they can go bad in the case of foodstuff or may go out of fashion in the case of goods like clothing and furniture

 That why they only needs to pay in small amounts for a great variety of goods produced by the manufacturers

 This is exactly what the wholesaler does for them



4. Need for credit

 Trade credit is one of the greatest sources of funds for a small retailer

 Manufactures are often unwilling to give credit but the wholesalers are willing to give trade to small retailer in order to secure business


5. Variety of goods

 A wholesaler stocks a great variety of brands of a particulars goods like Lux, Palmolive, Imperial Leather Soap

 And they also stocks a wide range of related goods, for example, foodstuff and household items



Types of Small – scale retailers


Pedlar

 The pedlar is a trader who walks from place to place carrying his wares or goods on his head or in baskets suspended at both ends of a pole slung over his shoulder

 The favourite places of trade for pedlars are at market area, outside the shops and on vacant lots during festivals



Hawker

 A hawker is a trader who goes from place to place or stays in a spot but uses some sort of vehicle to carry his goods

 There are two types of hawkers

o The itinerant hawker who moves from one place to another

o The non – itinerant hawker who sells his goods from a selected spot

 Festival hawkers are temporary hawkers who sells their goods during festive seasons

 Hawkers normally sell cheap goods and foodstuffs



Mobile shop

 Mobile shops or mobile retailers who sell direct to the consumers using vehicles e.g. vans

 These retailers mostly deal with foodstuffs like meat, fish, fruit, vegetables, groceries, ice cream and so on

 They are usually stay at one place at a given time each day and week and then move from one place to another



Stallholders

 Stallholders are traders will stalls

 Stalls are specially allotted places if trade found by roadsides, at corners of streets, in market – places, at bus terminals and even in shops

 They normally sell foodstuffs



Single shop unit within a shopping complex

 There are large multiple storied building and usually located in the town centre

 It consisted of many shop units where each shop owned by different individuals or owner

 Each shop may sell different types of goods and there also provided wide range of goods and services

 There also provide many facilities to the shoppers like air – conditional, car parks, toilets, music, etc

 Examples: Seria plaza, The Mall



Survival of small scale retailer



Although large scale retailers have more success and serve a great attraction to the customers then the small scale retailer but they still can survive.



The reasons are as follow:


1. Small scale businesses require a small capital with no need for knowledge and experience. Therefore it make easier for people to enter the retailing business

2. A small shop is easier to manage and usually the family members help in the running of the business, thus is no need for hiring assistants

3. Small scale retailers give personal advice and service. The customers prefer to buy goods from such retailer who provides a personal touch in the dealings

4. Many small scale retailers provide for home delivery services for example daily newspaper and fresh bread

5. They’re open for longer hours thus making it convenient for customers to buy goods at odd hours

6. They usually located close to the homes of his customers making it very convenient for them to call whenever they run out of supplies

7. They provide credit facilities to regular customers

8. The goods sold at lower prices as the overhead expenses are nil or minimal when compared to large retailer



How a small retailer can make his business more successful?



To be more successful means to increase one’s net profit. This could be achieved by increase turnover (increase in sale and reduce in expenses). Therefore the retailer has to re-examine the following points concerning his business



1. The location of the shop?

2. Can the service be improved in order to build up some goodwill to secure a regular market?

3. Are prices competitive enough?

4. Is the quality of his goods worth the prices charge for them

5. Does he have a good variety of goods to provide for the needs of all his customers?

6. Is there still room for improvement in the layout and display of goods and in the cleanliness of his shop?

7. Can he find better sources of supply where he is able to obtain better discounts and terms of credit?
8. Is it economically possible to increase the advertising expenses?



Factors to consider in setting up a retail business
 
1. Experience and knowledge of the business in mind
 
Lack of such expertise may lower the success rate of the business as you would not be able to cope with the problems occur to that branch of retailing. Therefore it pays to work as an employee first
 
 
2. The brand of retailing contemplated
 
You have to bear in mind whether your financial resources are sufficient and whether you know enough about the business



For example, to set up a coffee house you may need something like $20,000 whereas to set up a small eating stall you may only need $2000


3. Location of premises
 
a) The demand for your product e.g. if you open a jewellery shop, it would be more profitable to have one in the town area


b) The competition from shops selling similar goods. Normally, it would be wiser to keep away from areas where there is competition unless you can offer a better service at lower prices or demand is likely to expand in the near future


4. Sufficiency of capital
 
a) Rent in the town area would be higher than in the suburbs. If you tend to buy the premises, then you would certainly need more capital


b) If you do not have the necessary capital, you can raise it through friends, relatives or banks


5. Sources of supply of goods
 
It is important that you are able to know which wholesalers to go to. Some may give better discounts and other may give longer credit
 
 
6. The law of comparative advantage
 
Is it more profitable to remain in your present job earning your monthly salary? Remember that if you become a retailer, you have to forgo your salary. Therefore your net profit from retailing must be greater than your salary
 

7. Laws and regulations
 
You should make a study of the commercial laws regarding the line of retailing you want to go into. Must you get a licence? Can you trade in the goods specified and in the place selected by you?

Modern Trends in Retailing

 It is a retailing which sends goods or stuffs in an easy and the fastest way to the customers. Therefore it’ll help the customers to save time


 There are four types under the modern trends in retailing

1. Mail Order Business

2. Internet shopping

3. Vending Machines



Mail Order Business

(taken from
http://www.facebook.com/home.php?#!/profile.php?id=100001456197476)

 Mail Order companies do not have retail shops and they deal directly and sends consumers’ goods through the postal services.

 The goods ordered are mainly from

o Catalogues

o Newspapers advertisements

o Part -time agents

o Internet

 People can become mail order agents by either applying directly to the companies or filling a form

 Part – time agents will approach friends or workmates and ask them if they are interested in buying the goods or joining the company

 Then the customers will let the agents know the exact goods they want, style, size, colours and so on

 Payments are can be made by instalments, cash with order (C.W.O) or cash on delivery (C.O.D)

 The agent will be paid commission on the goods they ordered and the agent is responsible for checking the goods ordered so it’ll be correct and satisfactory

 Example of goods sold: bag, costume, t-shirt, jewellery, books, shoes, etc

Advantages

To the producer:-

1. The mail order business buys on very favourable terms because it buy in bulk directly from the manufacturer

2. The premises can be sited in the less expensive areas of the country or town where wages and rentals are lower

3. There is no need to employ qualified sales stuff. Only unskilled cheap labour is needed like housewives

4. The business can tap a wide market via advertising and agents


To the customers:-
1. Customers can buy on credit

2. Customers may return unwanted goods easily



Disadvantages

To the producer:-

1. The high cost of catalogues and advertising

2. There are high operational expenses in the form of commissions to agents and costs of packaging and postage

3. There is the need to hold large stocks with the risk of losses from changes in taste and fashion or from falling price

4. There is the risk of bad debts

5. Lack of personal contract



To the customers:-
1. Customers can’t examine the goods before payment if it is by C.O.D or C.W.O

2. Customers may be cheated by unethical operators

3. Goods may be bought cheaper direct from the shops

4. Sometimes, there may be a delay in the delivery of the goods




Internet shopping

 The customer can order the goods directly from the retailer whom may be in any part of the world through the used of an internet or email

 The retailers can develop their own websites to advertise their products to potential customers

 Payment can be made by the use of credit or debit card or cash transfer


Advantages
 
- The shop can be opened 24 hours a day to the customers all over the world


- It is not very expensive to set up. Only a personal computer and a modem are required

- It is convenient, time and cost saving because sending the order through email will cost the same to any part of the world - Customer can’t see or check the product

- It allow quick exchange of information and feedback from customers
- Small business can compete as effectively as the larger ones

- Since all information is processes electronically, therefore there will less room for mistakes


Disadvantages

- Customers may be cheated by unethical operators

- There is likely no after sales service

- Someone may have intercepting the credit card number


Vending Machines

 A vending machines is a machine set up to provide goods for the consumers and it’s operated for 24 hours per day

 Vending Machines are located at convenient place where many potential customers gather such as at the shops, office, hospitals, park and so on

 They can be used to sell a great variety of goods like chocolate, soft drinks, pre-paid cards and so on

Advantages

- The machines can be operated 24 hours a day


- Both the machines and product are relatively portable

- No limit to what is sold by vending machines

Disadvantages

- Cost of maintenance is high


- Risk of been stolen

- Vandalism