Trade: Retailers & Retail Trade – SS1 Commerce Lesson Note (First Term)

Retail trade is the buying of goods in small quantities from wholesalers or manufacturers and the selling of them in units or fractions to final consumers. It is part of home trade, which is the buying and selling of goods and services within a country. The retailer is the last link in the distribution chain.

Behavioural objectives

By the end of the lesson, students should be able to:

• define retail trade and state its characteristics;
• explain the functions of the retailer to the manufacturer, the wholesaler and the consumer;
• list the factors to consider when setting up a retail business;
• state the factors a retailer should consider when making purchases;
• give reasons why a retail business may fail.

What is trade?

Trade (trading) is the buying and selling of goods and services. It is divided into home trade and foreign trade.

Home trade involves the exchange (i.e. buying and selling) of goods and services within a country. It is subdivided into wholesale trade and retail trade.

What is retail trade?

Retail trade involves buying in small quantities from the wholesaler or the manufacturer and selling in units (bits or fractions) to the final consumers.

Characteristics of the retailer and retail trade

1. The retailer sells in units or fractions.
2. The retailer stocks and sells a wide variety (range) of goods.
3. Retailers sell directly to the ultimate consumers.
4. They buy in small quantities from the wholesaler or manufacturer.
5. The wares consist of fast-selling products, mainly consumer goods.
6. A large number of small shops are involved.
7. They are the final link in the distribution chain.
8. The majority of the goods they deal in are obtained from the wholesaler.

What are the functions of the retailer?

Functions to the manufacturer

1. He sells the goods produced by the manufacturer to the final consumer.
2. He helps in informing the manufacturer about the likes and dislikes of the consumers, either directly or through the wholesalers.
3. He advises the manufacturer.

Functions to the wholesaler

1. He provides information about consumer needs and changes in market trends to the wholesaler.
2. He advises the wholesaler.

Functions to the consumer

1. Provision of a variety of goods.
2. Granting of credit to credit-worthy customers.
3. Provision of useful information and advice.
4. Breaking the bulk, i.e. selling in the smallest quantities (units) to the consumer.
5. Provision of after-sales services, e.g. installation, servicing, etc.
6. Delivery of goods to the consumer’s door free of charge.
7. Preparing the goods for sale, e.g. packing or re-packing the goods to different sizes to suit the needs of the consumers.
8. Giving personal attention to the consumer.
9. Guiding the consumer in making their choices.
10. Completing the process of production, e.g. branding of goods.
11. Advertising the goods.
12. Providing door-to-door services, i.e. he brings the goods nearer to the consumer.
13. Opening for business and selling at convenient times.
14. Delivering goods to consumers on request.

What factors should be considered when setting up a retail business?

1. Amount of capital available.
2. Location (or the site) of the shop.
3. Experience and knowledge of the retail job.
4. Layout of the shop, i.e. the plan or design of the shop must be attractive.
5. Source of supply of the goods the retailer intends to deal in.
6. The pricing policy and terms of trade, i.e. whether to grant discounts, credits or sell solely for cash.
7. The type or nature of goods to be sold.
8. The details of the operating plans, e.g. hours of business, opening time, trading days, etc.
9. How records will be kept.

What should a retailer consider when making purchases?

1. Quantity of goods to be bought.
2. The extent of the credit facility available to him.
3. Quality of goods, which must conform to consumers’ needs and tastes.
4. The terms of payment, i.e. discount given.
5. The cost of transporting the goods.
6. The method of delivery of the goods to him, e.g. by road, rail or sea.
7. Any additional charges for packing or off-loading the goods.

Why may a retail business fail?

1. Wrong purchases.
2. Poor record-keeping techniques, i.e. inability to keep proper accounting records.
3. Failure to insure the business.
4. Extravagance and overspending, i.e. spending the business money on personal expenses.
5. Lack of experience or knowledge of the trade.
6. Poor credit administration, i.e. indiscriminate granting of credit facilities to customers.
7. Inadequate capital for running the business and for expansion.
8. Competition from bigger businesses.
9. Inability to plan properly and forecast the future.
10. Insensitivity to current market trends.

Evaluation

1. Define retail trade.
2. State five characteristics of the retailer.
3. Explain five functions of the retailer to the consumer.
4. List four factors a retailer should consider when making purchases.
5. Give four reasons why a retail business may fail.

Assignment

1. State five factors to consider when setting up a retail business.
2. Explain how a retailer helps the manufacturer and the wholesaler.