Home trade is the buying and selling of goods (with the aim of making profit) among people of the same country
Home Trade is divied into:
Retail Trade and Wholesale Trade
Home trade is divided into two: Retail Trade and 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
Retail trade deals with buying goods in small quantities from the wholesaler or manufacturer and then breaks the goods into yet smaller units and sells them to the consumers. The retailer is the final link in the chain of production
Functions of the Retailer
1. Wide range of goods
The retailer provides the final consumer with the choice of a large variety of goods from many manufacturers, both local and foreign, which is convenient to the consumers
For each type of goods, the retailer provides the consumers with a choice from many brand
2. Storage
Usually the small-scale retailers will storage the goods at their premises, however, the large-scale retailer may even have their own depots or warehouses for stocking a lot of goods in bulk which they have purchase from the manufacturers
They are also responsible for breaking bulk where they ensure that the customers will be able to get the goods whenever he wants
3. Sale in very small units
Retailers sell in very small units to the final consumers whereas the wholesaler won’t sell in small quantity
4. Personal advice
Small retailer who serves a small but regular market may give personal advice to the final consumers where they will asked the consumer to buy a particular band which is better or cheaper
However, in the large scale retail shop, the advent of self-service has done away with this service. Furthermore , large-scale retailer don’t know every customers well since there are many, hence, it is not possible to give personal advice
5. Information service
Retailers may also pass on useful information and advice to the supplier of goods (whether wholesaler or manufacturer) as regards their customers’ reactions to certain type of products, their likes and dislikes
They may also pass on to the consumers information regarding the proper use and maintenance of certain products
This is important because the manufacturers hold the right to disclaim any liability for defects, if the consumer have misused the product or has failed to follow certain instruction
6. After-sale service
Some retailers, especially those selling goods such as television set, radio, cars and so on, may also provide after-sales and repair service
7. Credit
Some retailers who serve regular customers may allow short-terms credit and bills can be paid at the end of every month
Larger retailers usually deal with cash sales unless provision is made for credit card
Some which sells expensive goods like refrigerators, cars and television sets may arrange for sales on hire purchase terms
8. Branding and advertising
Some large retailers may undertake branding, advertising and warehousing activities
9. Delivery service
Small retailers undertake to deliver the goods orders received by telephone
The mobile shop such as the mobile vegetables seller and the hawkers who are licensed bring all their goods, right up to the very doorstep of the consumer where he may pick and choose the goods
Types of Retail Outlet
There are two main types:
1. Large – scale retailers
a. Multiple shop (chain store)
b. Department store
c. Variety chain store
d. Supermarket
e. Hypermarket
f. Mail order business
2. Small – scale retailers
a. Pedlar
b. Hawker
c. Mobile shop
d. Stall trader
e. Single shop – specialist shop, general store
f. Single shop unit within a shopping complex
Features of Large – scale retailing
1. Normally run as a public limited company
2. Capital needed is very large
3. Large Assets where it easier to raise money from the bank or public limited company can borrow from the public in the form of debentures
4. Normally buys in bulk direct from the manufacturers
5. Sometimes may even have their own factories
6. Stores in bulk doing away with the services from the wholesaler
Reasons why large retailers buy direct from Manufacturers
1. Sufficient capital
Manufactures who only sell in bulk normally do not entertain small order therefore large retailers must have large capital to enable them to buy in bulk
2. Better trade discount
Buying from manufacturers means that the large retailers can get better trade discount, hence, they pay a lower price for their goods
3. Cash payment
Since large retailers have sufficient capital, they can afford to pay in cash.
This means they can get even better terms than someone buying on credit
4. Enough resources to carry out functions normally undertaken by wholesalers
Large retailers normally have their own fleets of transport vehicles to sent goods to their various branches whenever the need arises
Large retailers can afford to employ expert specialist buyer who know from experience exactly what goods customers want and who have the knowledge to buy on the best terms, locally or overseas
Large retailers have their own warehouses and specialist staff to manage storing, bulk breaking, branding, stock keeping and so on to ensure that goods are not stored for an excessively long period until they are spoilt or out-of-date and that goods are not in shortage either
5. Larger turnover
The volume of turnover each month is so large that the large retailer can afford to buy in bulk
It is no use buying in bulk (and hence, enjoying lower prices) if the goods are not sold quickly enough
Types of Large – scale retailers
Multiple Shops (chain store)
Main feature
1. It consists of many similar branch shops distributed all over the country but under the direct control of a central headquarters
2. Every branch shop looks very similar since it is decorated in the same manner, has the same name and sells the same goods at standard prices which is fixed by headquarters
3. The kind of goods usually sold through multiples store are pharmaceuticals, clothing, food and shoes
4. Goods sold usually on open display so customer may personally examine and select the goods. Price usually market, sometimes it employs self –service or shop assistant
5. Terms of sale normally cash
6. In Brunei example of multiple shop are fast food chains like Kentucky Fried Chicken, MacDonald’s or shops specializing in footwear e.g. Bata
Advantages of the multiple shops
1. It can afford to sell at very competitive prices due to bulk purchases
2. It employs expert specialists in such matters as buying, publicity, shop layout and window display
3. The identical layout of branch premises, window displayed and shop fronts is to publicize the identity of the whole chain
4. Slow – selling lines and surplus stocks in one area can be transferred to more promising areas
5. The multiple shops spread its risks and are very flexible. Losses sustained in one branch can be absorbed in the profits made by other branches and new branches can be opened in areas of developing prosperity to replace unprofitable outlets
6. It economizes on advertising when all branches are included in one advertisement
Disadvantages of the multiple shops:
1. Too much centralized control from headquarters leaves branch managers with little scope for initiative to meet local conditions
2. Lack of the personal touch between staff and customers does not help in establishing a loyal customers
Department Store
Main Features:
1. It’s a large building divided into sections or departments, each selling one type of goods.
2. Each department store is run by a general manager and each section in the department store will be handle by a manager
3. The duties of a manager including buying goods for his department, fixing the prices and employing his/her staff
4. Department stores sell a wide range of goods for the whole family where each department specialises in a particular line of goods for example clothing, foodstuffs, hardware and so on
5. Most department stores are found in the centre of a busy shopping area in a big city
6. Department stores can also afford to advertise expensively in order to attract customers
7. Department stores also provide facilities for the convenience of their customers like escalators, lifts, car parks, trolleys, etc
8. Example of department stores in Brunei are Hua Ho
Advantages of Department stores
1. A department store is large and able to employ (take up) experienced and trained workers to handle the business efficiently
2. A department store is still able to sell its goods at competitive price because it buys in bulk at bigger discounts direct from the wholesalers or producers
3. It economizes on advertising when all branches are included in one advertisement
4. Trading losses in individual departments can be absorbed so long as the store as a whole continues to make a profit
Disadvantages of Department stores
1. It has a very high overhead expenses e.g. on rent, salary of workers, utilities like water and electricity bills
2. Normally departmental stores are located in the central part of the city, high rental adds to overhead cost which can eventually raise price of goods
3. There is the ever – present danger that market conditions in the neighbourhood may worsen or that population shifts may lead to fewer customers
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