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?