Retail Trade
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RETAILER A retailer is a middleman who buys goods from the manufacturer or from the wholesaler and sells to the many consumers. A retailer’s functions are numerous: FUNCTIONS OF A RETAILER: Provides goods in convenient quantities. Provides goods in convenient locations. Provides goods in convenient times. Provides a variety of goods. May provide pre-sales and after-sales services. May provide credit facilities. May provide delivery service for some goods. Deals with customers’ complaints. Provides advice and information to customers. May provide self-service. Acts as a channel of distribution between customers and the manufacturers of goods TYPES OF RETAILERS LARGE SCALE REATILERS General features 1. A large-scale retailing business is normally run as a public limited company. 2. The capital needed is very large. 3. The large assets owned make it easier for the company to raise money from the bank or the public in the form of debentures. 4. The retailers normally buy in bulk direct from the manufacturers. 5. Some retailers may even have their own factories. 6. As such, the retailers can do away with the services of the wholesalers.
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MULTIPLE SHOP or CHAIN STORES: Examples: Halfords, Richard Shops, W.H. Smith, Tesco, Boots The Chemists, Marks and Spencer, H. Samuel, Burtons. Features: •
It consists of many similar branch shops in different areas or under one roof.
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Each shop is under the direct control of a branch manager.
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The head office controls all the branch shops.
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Every shop is decorated in the same manner, has the same name and sells the same goods at the standard prices fixed by the head office.
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The chain stores mostly deal in one line of goods (clothes, food, shoes & medicine).
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The stores mostly operate as public limited companies.
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The head office sends out inspectors to make regular checks on all the branches.
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There is centralized buying and administration and decentralized selling through the branches.
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The terms of sale are normally for cash.
Advantages: •
The stores buy goods from the manufacturers in bulk and hence get discounts. So they are able to sell goods to consumers at competitive prices.
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They have large capital and are able to employ specialists in such matters as buying, publicity, window display, etc,
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Losses sustained in one branch can be absorbed in the profits made by other branches.
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There is economy in advertising as all the branches are included in one advertisement.
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Slow-selling lines and surplus stock in one area can be transferred to more promising areas, instead of clearing it off at a loss.
Disadvantages: •
There is too much centralized control from head office. So branch managers do not have any freedom.
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Credit facilities are not offered. So the stores may lose their customers.
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There is lack of personal touch between the branch shops and the customers.
DEPARTMENTAL STORES: Examples: Harrods, Selfridges, Debenhams. Features: •
It consists of many departments all in one building.
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Department stores are located in the centre of large cities.
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Each department is under the control of a manager and the head office controls all the departments.
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Each department specializes in one line of goods, for example, furniture, hardware, clothes, foodstuff, etc.
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Many conveniences to the shoppers including toilets, restrooms, saloons, telephone booths, car parking facilities, etc, are provided.
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Goods are pre-packed and the prices are clearly marked.
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Many department stores are owned by very large firms.
Advantages: •
The department stores buy goods from the manufacturers in bulk and are able to get discounts. Hence they can sell goods to consumers at competitive prices.
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They have large capital and are able to employ specialists in such matters as buying, publicity, window display, etc,
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There is economy in advertising as all the departments are included in one advertisement.
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Losses sustained in one department can be absorbed in the profits made by other departments.
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More customers are attracted as conveniences such as lounges, restaurants, car parking facilities, etc, are provided.
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Shopping can be done under one roof. This makes it very convenient for customers.
Disadvantages: •
There are high overheads because of the many facilities provided. This increases the price of goods.
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As departmental stores are located in the centre of towns and cities, high rental charges increase the unit price of goods.
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There is very little freedom for individual departments as there is strict control from the head office.
3. SUPERMARKETS: Features: •
These are self-service shops with floor space of more than 186 square metres.
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They sell mostly foodstuff and household goods.
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Goods are pre-packed, well displayed and self-service is encouraged.
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Amenities such as car parking, toilets, restaurants, etc are provided.
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Supermarkets sometimes brand their own goods.
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Prices are very competitive because of the high rate of sales.
Advantages: • The supermarkets buy goods from the manufacturers in bulk and are able to get discounts. Hence they can sell goods to consumers at competitive prices. • Self-service reduces the wage costs of the supermarket. • Customers benefit from quick service as the goods are pre-packed and well displayed. • Supermarkets buy from the manufacturers who brand the goods using the supermarkets’ own labels. • Customers are attracted because of the amenities and the large variety of goods that are provided by the supermarket. Disadvantages: • Self-service encourages pilfering and shop lifting. • Customers do not enjoy any personal service. HYPERMARKETS: Examples: Asda, Tesco, Sainsbury. Features: • Hypermarkets usually have more than 5000 square meters of selling space. • Hypermarkets offer a great variety of foodstuff and a wide range of other goods. • They buy directly from manufacturers and sell at competitive prices. • Hypermarkets are usually found outside towns and cities. • They provide large car parking space.
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Goods are pre-packed, well displayed and self-service is encouraged. To encourage non-car owners, they provide free bus service to and from the hypermarkets. Amenities such as lounges, swimming pools, toilets, restaurants, child care centers, etc, are provided to make shopping comfortable for customers.
Advantages: •
The hypermarkets buy goods from the manufacturers in bulk and are able to get discounts. Hence they can sell goods to consumers at competitive prices.
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Self-service reduces the wage costs of the hypermarket.
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Customers benefit from quick service as the goods are pre-packed and well displayed.
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Amenities such as lounges, swimming pools, toilets, restaurants, child care centers, etc, are provided to make shopping comfortable for customers.
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Customers are attracted because of the amenities and the large variety of goods that are provided by the hypermarket.
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They provide free bus service to and from the hypermarkets.
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They provide large car parking space for customers.
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Shopping can be done under one roof.
Disadvantages: •
Hypermarkets lead to a decline of business in the town centers.
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Self-service encourages pilfering and shoplifting.
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Customers do not enjoy any personal service.
FRANCHISING: Examples: The Wimpy, Kentucky Fried Chicken, Body Shop, and MacDonald’s. Features: •
This is a process whereby the owners of a business allow others to run branches in return for certain payments.
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The owner of the business is called a franchiser and the people who operate the retail outlets are called franchisees.
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The franchisee has to rent or buy his business premises.
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The franchisee has to pay the franchiser a certain sum of money for the permission to run the retail outlet.
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The franchisee also has to pay royalty to the franchiser for the purpose of using his name.
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All the shops selling the particular franchised products are decorated in the same style and use the same name.
Advantages to the Franchiser: •
The franchiser has the advantage of attracting more capital from the franchisees.
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The franchiser also receives a share of the franchisee’s profit (royalty).
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As the number of retail outlets increase, the franchiser’s name spreads more.
Advantages to the Franchisee: •
The franchisee has the advantage of selling a product that is well established in the market.
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Franchisees benefit by having an easily recognizable shop, which is well advertised.
Advantages to the Customer: •
The customer knows he is buying a known product whose quality is guaranteed when he buys from a franchised outlet.
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It is very easy for a customer to identify a franchised outlet.
Disadvantages to Franchiser: •
The franchiser loses his customers who go away to the franchised outlets for their convenience.
Disadvantages to Franchisee: •
It is very expensive to buy a franchise.
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The franchisee has to pay the franchiser royalty.
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The franchisee has no freedom regarding decorating his shop, etc.
VOLUNTARY CHAINS: Example: Wavy Line, Spar. Features: 6
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These groups are organized by wholesalers and they allow small retailers to join and enjoy the benefits of large-scale retailing.
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The retailers buy goods from the wholesalers within the group at agreed prices.
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The retailer has to keep his premises and services up to a standard specified by the organization.
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All the retailers have the same name given by the group.
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Advertising is done nationally by the whole group.
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These chains are found mostly in grocery trade.
Advantages: •
The retailers place orders with wholesalers within the group and can get discounts.
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Advertising expenses are reduced as the whole group is nationally advertised.
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The retailer can get loans from the group for renovation and decoration.
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The group lays down standards for retailers to follow, thus making them more efficient.
Disadvantages: •
The retailer does not have much freedom as the group makes most of the policy decisions.
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The representatives of the group decide upon even the advertising, window display, selection of goods, etc.
RETAIL CO-OPERATIVE SOCIETIES: Definition: A cooperative is a non-profit making voluntary organization where members associate on the basis of equal rights to obtain economic and social benefits for themselves. Features: •
Membership is opened to anyone prepared to buy a share in the society.
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Control is vested among the members. The members elect a management committee by the principle of “One man-One vote”.
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The societies must be registered with the Registrar of Societies under the Cooperative Ordinance.
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The members enjoy limited liability.
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They have separate legal entity of their own, separate from the owners.
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Retail co-operatives buy a variety of goods from the wholesale co-operatives.
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Activities include retailing and giving a range of benefits to members like educational aid, youth camps and assistance for funeral expenses.
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The profits are distributed among members as dividend stamps, exchangeable for cash.
Advantages to the Co-operative: •
It can raise a large capital at low interest rates.
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It is exempted from paying taxes on profit.
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Members buy goods from the cooperative as they enjoy patronage dividend based on their purchases. Thus the cooperative is ensured of a regular clientele.
Advantages to the Members: •
Members receive interest on capital, which they have invested in the cooperative.
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Each member receives rebates, patronage dividends or trading stamps in proportion to their purchases.
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Members receive other benefits like educational aid, group insurance, etc.
Disadvantages: •
With the separation of management from ownership, members lose interest, as they do not participate in the running of the business.
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There is inefficiency in the business as the elected management committee consists of ordinary people.
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There are a limited variety of goods offered by the cooperatives.
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Sometimes in order to pay patronage dividend, the prices of goods are increased.
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Many of the retail cooperatives are too small to take advantages of large-scale retailing. SMALL SCALE RETAILERS
General features 1. A small-scale retailing business is normally run as a sole proprietorship or as a partnership. 2. The small amount of capital needed is raised from personal savings, or borrowed from friends and relatives. If the retailer has some collateral security (e.g. house, land, lucrative business), he might be able to obtain some money from a bank in the form of a loan or an overdraft. 3. Small retailers obtain a great variety of goods in small quantities from wholesalers. They are not able to go direct to the manufacturers since purchases are not made in bulk. 4. The sole proprietor normally serves his customers with the help of some assistants. Therefore, he has the opportunity to get to know his regular customers well. 5. Small-scale retailers usually operate only one outlet, normally at a convenient location. Some very successful ones may open branches in other parts of the city. 6. Most small-scale retailers work very long hours and lack retailing know-how’s. 1. STREET MARKETS: Features: •
These markets are operated by owners of shops who wish to increase their sales and by producers of agricultural goods.
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These owners and producers rent stalls at a number of different markets on different days.
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Mostly agricultural goods are sold in a fresh condition.
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They are opened mostly on holidays.
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The overheads are very low.
Advantages: •
These shops are opened mostly on holidays to enable customers to do their shopping conveniently.
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Customers can get goods very cheap as goods are sold mostly by producers of agricultural goods.
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Customers can get goods in a fresh condition.
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As overheads are low, the goods are sold very cheap.
Disadvantages: •
Damaged, stolen or second-hand goods may be sold.
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No credit facilities are allowed.
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There are no after-sales services provided.
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These markets are not opened everyday.
2. Hawkers Hawkers are the small-scale traders who carry the goods by using some form of transport like handcart. They are also selling the goods like vegetables, fruits, etc. 3. Peddlers Peddlers are the small-scale retailers who carry the goods on their heads or bags. They are selling the goods, which have low unit valve like pen, pencil, etc. 4. Vending Machines: Features: •
These machines are placed at the entrance of public places like cinemas, parks and supermarkets.
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The customer has to insert the correct amount of money into the machine, press a button or turn a lever and the goods come out.
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Such machines are either bought or hired by the operator.
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Goods like cold bottled drinks, hot drinks, cigarettes, sweets, etc, are sold in this way.
Advantages to the Operator: •
The machines provide great savings in labour cost.
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They can be located in convenient spots and do not need a shop.
Advantages to the Customer:
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Customers can get these goods at any time.
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They do not have to depend on going to a shop and are relieved of pressure from shop assistants.
Disadvantages: •
The cost of installing the machine is considerable.
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The machine can be easily broken into and the money pilfered.
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It causes an inconvenience to the customers if the machines break down.
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Prices are high.
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Machines are sometimes jammed and it is often difficult to find anyone that can help or to get a refund.
5. Market Traders A local market is usually held on the same days each week and consists of number of stalls, which cover a wide range of products. Advantages to the Customers: 1. Prices are very low, because market trader has few expenses. 2. Bargaining can take place. 3. Goods are sometimes “Sold off” at cheaper prices at the end of a day. Disadvantages to the Customers: 1. It may be difficult to exchange goods. 2. In bad weather, shopping can be uncomfortable in open markets.
SELLING TECHNIQUES, TREND IN RETAILING AND IMPLICATIONS OF E-COMMERCE 1. BRANDING AND PACKAGING: Features: •
Branding means the selling of goods under a trademark or brand name of the manufacturer, wholesaler or retailer. The trademark is clearly displayed on the package or the container.
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The aim is to differentiate the goods of one manufacturer from those of others.
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Branded goods are of uniform size, weight, and quality and sometimes price.
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Packaging of goods serves as a protection for the products gives them an attractive appearance and helps to identify branded products.
Advantages to Manufacturer: •
The manufacturer is able to create brand loyalty amongst consumers for his brand of products.
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It increases turnover and results in economies of scale.
Advantages to the Retailer: •
The retailer does not have to weigh or pack the goods.
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As instructions are printed on the labels of goods, there is no need for the retailer to have specialized knowledge.
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The retailer need not advertise branded goods.
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The retailer can offer self-service as the goods are already branded and packed.
Advantages to the customer: •
The customers need not waste time inspecting the goods as they are already branded and packed.
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Customers may be able to enjoy a wider choice of goods.
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Customers are well informed about the product as the instructions are printed on the labels of the products.
Disadvantages: •
Manufacturers have to spend large amounts of money on competitive advertising.
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A retailer has to stock different brands of the same product to meet consumers’ demand.
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Branding and packaging increases the price of goods for consumers.
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Branding leads to imitation of goods, which affects customers.
2. SELF SERVICE:
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Features: •
The customer is allowed to choose the products by himself with a trolley or a basket.
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This system is widely used by large retailers.
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Self-service is impossible without branding and packaging.
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This service has been developed to make shopping convenient for the modern busy housewives.
Advantages to the Retailer: •
It is very economical as it cuts down the cost of employing shop assistants.
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Self-service increases turnover as it encourages impulsive buying.
Advantages to the Customers: •
The customer can select the goods he needs quickly as they are already prepacked.
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The customer can take his own time to select the goods without pressure from shop assistants.
Disadvantages: •
Much capital is needed, as shops must be large and spacious.
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More variety of goods is needed. This result in capital tied up in stock.
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Self-service leads to pilfering and shoplifting.
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Customers are deprived of personal service.
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Customers may be tempted to buy goods they do not require.
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Safety measures like cameras, mirrors, etc, have to be installed to avoid pilfering.
3. AFTER-SALES SERVICE 1. After-sales service is an undertaking made by the retailer, or sometimes the manufacturer or its agent, to repair any faults which occur to the article sold within a certain time. Sometimes, the undertaking could also be to provide some maintenance service at regular intervals for a definite period of time from the time of sale of the article to ensure the efficiency of the article.
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2. Sometimes, this undertaking is known as a warranty and the period that such an undertaking holds is the warranty period. 3. After-sales services are normally provided for permanent or durable goods such as machinery, motor cars, television sets, and other domestic electrical appliances. 4. Since durable goods and machinery are highly technical and complex, retailers who are normally trained agents of the manufacturer, or the manufacturer's sole agent undertake the all-important task of providing after-sales service, for a fixed charge. Positive effects of after-sales service On the manufacturer and the retailer 1. Good and efficient after-sales service gives the product a good image and increases its competitiveness with its rivals (i.e. the same type of product, but of a different brand). Thus, its sales may increase. For example, consumers would certainly hesitate to buy a particular make of car if it is reputed to come with poor after-sales service. On the consumer 1. He is assured of an efficiently working product at least within the warranty period. 2. Should mechanical faults become apparent after the article is in use, the consumer is assured of getting it repaired free of charge if it is still within the warranty period. If the fault is still not rectified, he may get a replacement. 3. He is assured of expert technical advice with regard to maintenance and use of the article since the manufacturer would ensure that the technical staff providing the aftersales service are properly trained. Negative effects of after-sales service On the manufacturer and the retailer 1. High overheads are needed to maintain a technically-trained staff. Sometimes, there is the need to maintain workshops fitted with proper equipment at strategic points throughout the country. 2. Sometimes, there is the need to replace a defective article if the fault cannot be detected or is beyond repair. The replacements have to be written off as losses.
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On the consumer 1. More often than not, the cost of after-sales services is included in the selling price of the article. To that extent, the consumer is paying a higher price for the good, especially if he does not avail himself of such services. 2. After-sales service is only available during the warranty period. If the fault is only detected after this period, the consumer has to pay the repair bill himself. 4. BAR CODING Instead of using price tags for each item of good, bar codes are used nowadays. A bar code consists of parallel black stripes of different widths with different spacing between the stripes, printed on the wrapper itself. The arrangement of the stripes can be read by using special scanners. The information is then sent to a computer to be processed. Information as to type of goods, its price and weight can be readily accessed. For example, the UPC (Universal Product Code) bar code system is widely used in the supermarket industry for standard recognition for goods sold and manufactured.
Positive effects of bar coding: On the retailer 1. It saves time and hence labour cost, since vital information such as price, type of good can be read accurately, easily and quickly by special scanners that are linked to computers at the checkout points. This avoids the possibility of human error if the counter personnel have to key in vital information. Such information will then be passed on to a central computer. The retailer can make use of the data thus collected to manage his business efficiently. 2. It helps management greatly in controlling and supervising the movement of inventory in the premises. The retailer will be able to know at the end of the day how much of each type of good was sold. New inventory can then be ordered whenever the need arises. The retailer saves because he need not hold excess stock.
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On the customer The time taken by the cashier to arrive at the total amount payable by the customer is shorter. Thus, the customer can check out faster. Negative effects of bar coding On the retailer 1. A high initial capital outlay in terms of buying equipment and training of staff is needed. The whole retail outlet has to be fully computerized. On the customer 1. He does not remember the cost of each item he intends to buy since the bar code can only be read by the special scanner. He is then not able to do a quick calculation of the prices before he pays at the cash counter. 5. SHOPPING COMPLEXES OR PRECINCTS: Features: •
A shopping complex is a large multi storied building located in the town centre, consisting of many shop units, each owned by different individuals.
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Each shop may sell different types of goods.
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A wide range of goods and services are available in a shopping complex.
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Shoppers can enjoy ‘one stop’ shopping, as they buy all goods they require under one roof.
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Amenities such as car parking, lifts, air-conditioning, restaurants, etc, are provided.
6. LOYALTY CARDS Loyalty Cards are plastic cards issued by large—scale retailers to their customers to try to keep the customers rather than let them go to the competitors. This is often used by supermarkets. In this technique, customers are given cash back on purchases when the customer has gained sufficient points. Sometimes, the customers with loyalty cards are given special offers. This technique is often used by airlines who give ‘air miles’ and reward loyal customers with free flights.
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7. ELECTRONIC POINT OF SALE (EPOS) EPOS system is a device at the point of sale which has the capability to identify each item the retailer sells. It will also provide the price for the item and record the sale of the item. In addition it should be able to provide the retailer with information on sales and profitability of each item. EPOS enables a retailer to find out the shopping habits of its customers - type of goods bought, quantity purchased so that the retailer can then make decisions about what to stock.
Advantages of EPOS 1. The prices charged are accurate - no under-ringing. 2. The retailers can give quick services to the customers. 3. The retailers do not have to price mark every item. 4. The retailer can identify any item which is under priced. The system can work out and apply margins for the retailer without a calculator. 5. The retailer can charge different prices for different types of customers without calculators, books, tables, or trained staff. 6. The retailers do not have to count stock to re-order. 7. EPOS system will increase the retailer’s margins, optimize the retailer’s stockholding and save the retailer’s time. E-COMMERCE (ELECTRONIC COMMERCE) E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the Internet, especially the World Wide Web. In practice, this term and a new term, "e-business," are often used interchangeably. For online retail selling, the term e-tailing is sometimes used. HOME SHOPPING 1. MAIL ORDER FIRMS: Features:
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Mail order business is run by manufacturers or specialist mail order warehouses.
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They sell goods to customers by sending expensive catalogues or by local parttime agents (housewives).
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Goods are ordered with the help of post or with the help of the part-time agents.
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Goods ordered are sent to the buyers by parcel post.
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The method of payment is cash on delivery (C.O.D.) or cash with order (C.W.O.).
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Payments can be made in installments if the part time agents are collecting the money.
Advantages: •
The mail order firms buy goods in bulk directly from the manufacturers and sell at competitive prices.
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There is no need for expensive large buildings.
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There is no need to employ qualified sales staff.
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The catalogues and part-time agents act as a permanent advertisement.
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Customers can buy goods on credit and pay in installments.
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Customers can return unwanted goods, but they must do so within a time limit.
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There is no need for the customers to visit the shop as the goods are sent to the customers’ doorstep.
Disadvantages: •
The high cost of catalogues and advertising increases the cost of sales per unit.
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There are high operational expenses in the form of commission to agents, cost of packaging and postal charges.
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There is a risk of bad debts as customers may default in their payments.
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There is a lack of personal contact between the mail order firm and the customer.
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The mail order firm has difficulty in selling goods that are returned by customers.
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Customers cannot inspect the goods if payment is by C.O.D or C.W.O.
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No after sales service is provided.
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Sometimes there may be a delay in the delivery of goods.
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The mail order firms take a long time to refund money for goods returned by customers.
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2. SHOPPING BY PHONE Telephone marketing is a convenient way to learn about and buy products and services without leaving the comfort of your home. Some of the benefits of telephone shopping include: •
Shopping 24 hours per day, seven days a week;
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Buying goods and services with credit;
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Comparison shopping with a variety of merchants;
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Locating hard-to-find items — this can be especially convenient for those with unusual hobbies or interests;
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Getting help and information before and after a sale;
3. SHOPPING BY TELEVISION TV has become nowadays an effective media not only for advertisement but also for effective sales through live product demonstration. Consumer durables, consumer goods, home appliances are demonstrated on TV. The consumers who watch the advertisements and the product demonstration can place orders by phone SMS, E-mail or by fax. The goods will be delivered by Post. 4. TELESALES It is the recent development in large scale retailing trade. The large scale retailers send SMS to the customers’ mobile phones and advertise the product thereby sell the goods. It is the current trend that the expertised sales staff talks over the phone to the customers, detail about the product, convince them, and make them to buy the product or service. Telesales deliver the goods to the door step of the customers. Telesales have become more popular with selling of electronic goods, electrical goods, home appliances, offering car loan, housing loan, credit cards etc., Advantages of telesales to the large scale retailers/manufacturers •
Cost of advertising is very less.
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Sales promotion over phone is very easy.
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Expenditures to be incurred on salesmen are cut-off.
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Expanding of market to regional or national will be so easy.
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Advantages of telesales to the customers •
Shopping becomes so easy
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Customers get their goods/services at their door step.
Disadvantages of telesales to the large scale retailers/manufacturers •
Persuading the customers will be so difficult since there can be no product demo or exhibit.
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It is difficult to cover huge customers over a region or across the country.
Disadvantages of telesales to the customers •
Telesales products or services are not subject to trustworthy since the retailer has no permanent selling place.
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Customer satisfaction over product/service offered through telesales may not be 100% since the products may not be according to the specifications.
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Telesales firms take a very long time to refund the amount to the customers when faulty/damaged/dissatisfied goods are returned.
5. ELECTRONIC SHOPPING 1. As the population of a country becomes more and more computer-literate, this form of shopping has the potential to become very popular in the future. In 1996, more than US$1 billion was transacted over the Internet, making it a good potential platform for electronic shopping. In 1998, this had tripled to more than US$3.5 billion. 2.
In electronic shopping over the Internet, or a local on-line network via the Internet,
the customers can order goods direct to the on-line retailer in any part of the world via the Internet E-mail. On-line retailers or warehouses can develop their own websites to advertise their products to potential customers. Payment can be made by cash or by the use of credit cards. The goods will then be sent by post or courier direct to the customer's doorstep after confirmation of payment. Warranty claims, if any, may be made on the on-line retailer or the supplier of the product itself within a specified period. Positive effects of electronic shopping
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On the retailer 1. The 'shop' can be open 24 hours a day to customers all over the world. 2.
It is not very expensive to set up. Only a personal computer, a web browser, a
modem, an Internet account and a telephone line are needed to start. 3. It is convenient, time and cost saving because the e-mail system sent to any part of the world, including the home country, costs the same. 4. Since all information is processed electronically, there will be less room for error. 5. It allows for quick exchange of information and feedback from customers. 6. Small businesses can now compete as effectively as the larger ones in the larger marketplace. 7.
The Internet allows for the testing of new services and products in the media.
Electronic shopping is very suitable to market information technology (IT) related products like banking, purchase of airline tickets, making hotel or travel arrangements, purchase of books, stocks, bonds, flowers and greeting cards. 8. High overheads of maintaining a normal retail shop such as high rental in a good location, shop decoration and display need not be incurred. The location can be anywhere convenient and economical to the retailer. His customers normally do not visit him personally. On the customer 1.
It is convenient, time and cost saving. The consumer does not need to face traffic
jams and parking problems to go to the particular shop to buy the goods that he wants. He shops from the convenience of a computer that is connected to the Internet. 2. Goods can be bought from any part of the world. 3.
He is able to 'shop' anytime at his own convenience.
Negative effects of electronic shopping On the retailer 1. There is only a small clientele since not every household in the country has a personal computer. According to Fortune Magazine (March 18 1996), about 12 per cent of American households own a computer. Moreover, the general public is still quite wary of electronic shopping which is something quite new. 2. At the time of writing, the Internet is still not really ready for the 'Home Shopping Network' for the average household. Electronic shopping is mainly engaged between
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businesses for the distribution of high-value information and IT-related products and software. 3. On-line retailers need to employ specialized personnel who are experts not only in marketing but also in computer technology in order to participate in this type of retailing. 4. It takes time for a potential on-line retailer to implement an Internet strategy properly. This sort of marketing over the Internet requires close coordination. Sales and customer service has to be involved 24 hours a day. Sales staff may feel overwhelmed at having to answer queries by e-mail and the fact that customers have direct access to information. On the customer 1. The customer has no way to verify the authenticity and integrity of the on-line retailer. He actually does not get to see the retail outlet. Moreover, he has to give the retailer his credit card number and pay for the good before he even receives it. 2. There is a lack of privacy and lack of security since there is the possibility of someone 'intercepting' his credit card number. 3. There is likely to be no after-sales service. ADVANTAGES OF LARGE SCALE RETAILING TO THE RETAILER •
Retailers can get better trade and cash discounts when they buy from manufacturers in bulk quantities.
•
Large retailers can afford to employ specialists for each department. Hence goods and services are of better quality and standard.
•
Some large retailers are able to brand their goods using their own labels and thus are able to create brand loyalty among consumers.
•
Large retailers buy in bulk and so have their own fleet of transport vehicles.
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Large retailers provide self-service and so are able to cut down expenses of hiring shop assistants.
•
As large retailers buy in bulk they are able to sell at competitive prices. This increases sales and the profit of the retailer.
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Large retailers can afford to carry out sales promotions in order to increase their sales.
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•
Large retailers are able to afford to use the latest sophisticated cash tills and computer terminals to making shopping convenient for the retailer and the customers.
ADVANTAGES OF LARGE SCALE RETAILING TO THE CUSTOMERS •
Customers are able to get goods at competitive prices as the large retailers buy in bulk directly from the manufacturers.
•
Customers find it convenient to do their shopping under one roof as large retailers provide a great variety of goods.
•
Self service and the various amenities provided by large retailers make it even more convenient for the customers to do their shopping.
DISADVANTAGES OF LARGE SCALE RETAILING TO THE RETAILER •
Large capital is needed as large retailers need to buy a large variety of goods direct from the manufacturers in bulk quantities.
•
As the shop expands and the branches and departments increase, control becomes more difficult and expensive.
•
There are high operating expenses and these can be covered only by a high turnover in sales.
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There is a greater risk of loss through pilfering and shoplifting as self-service is provided.
DISADVANTAGES OF LARGE SCALE RETAILING TO THE CUSTOMERS •
Customers do not enjoy personal services from these large retailers.
•
Large retailers normally do not provide credit facilities.
•
As large retailers provide many amenities, consumers may get the goods at higher prices.
HOW WHOLESALERS ARE AFFECTED BY THE GROWTH OF LARGE SCALE RETAILERS? The establishment and popularity of large retail outlets like the multiple and the variety chain stores which have the financial and technical resources to buy in bulk direct from the manufacturer have contributed to the decline of the wholesaler. Nowadays most of
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the manufacturers prefer to sell goods direct to the large scale retailers. By selling direct to the large scale retailers, the manufacturers are able to sell goods on bulk consignment where the payment is made for the consignment by the large scale retailers immediately. The manufacturers get the benefits of more profit percentage as the wholesalers are eliminated in this way. Manufacturers also get in touch with the final consumers through large scale retailers as they perform the function of customers personal service through pre-sale and after-sale service. Most importantly a large scale retailer can deal with many manufacturers’ goods at wide range. As these functions cannot at all be performed by wholesalers, the wholesale trade has become of less importance. SURVIVAL OF THE SMALL RETAILER In spite of the intense competition from the large retailers and the proliferation of large shopping centres or shopping malls, a number of small independent retailers have still managed to survive even though their numbers have fallen greatly in recent years. This is due to certain advantages that the small retailer still enjoys over the larger and less personal retailers. However, the small retailer still predominates in certain trades such as jewellery and bespoke tailoring in which a large outlet is not exactly suitable.
The reasons for the survival of the small retailer are as follows: (a) Since the small retailer knows his customers well, he is able to give better personal advice and service. This is extremely important in some branches of retailing, e.g. jewellery and made-to-measure clothing. As a result, consumers prefer going to one shopkeeper to others because of the 'personal touch' which puts them at ease. (b) Since most small retailers cater for regular customers, they are in a position to assess the credit-worthiness of each customer and may be willing to give credit. (c)They might undertake delivery of goods - e.g. daily newspaper, fresh bread, daily provisions. (d) The small retailer's shop is normally close to the homes of his customers, making it very convenient for them to call whenever they run out of supplies. (e) The small amount of capital needed makes it easy for people to enter the retail trade. Not much skill and expenses are needed to start a business. (f)
The small shop does not have as many overheads as a large retailer, and hence 24
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can sell most items at a slightly lower price. (g) The small shop is easier to manage. The small retailer is helped by members of his family. The owner and other members of his family have every incentive to work very hard since they reap all the profits. (h) By becoming a member of a voluntary chain (see Glossary) the small retailer may be able to get his supplies on more favourable terms from the wholesalers in his chain as well as enjoy other benefits like advertising, credit and insurance. Advantages of the small retailer (Note that the above points from (a) - (h) may be used in the discussion on the advantages of the small retailer.) Disadvantages of the small retailer 1. Jack of all trades and master of none The small retailer does not employ any specialist buyer. He himself undertakes the tasks of buying as well as selling, store-keeping and display, not to mention bookkeeping and administration. Since he cannot be an expert in every field, it is very likely that he is less efficient and hence, his costs in relation to turnover are higher than those of the larger retailers. 2. Lower trade discount Since the small retailer gets his goods from the wholesaler, it is natural that he will have to pay a higher price for his goods since he gets a lower trade discount. REASONS WHY A SMALL RETAILER BUYS FROM THE WHOLESALER 1. Small capital The small retailer has only a small capital and cannot afford to buy in bulk from the manufacturer. He can only make small orders at a particular time.
2. Limited market The small retailer has mainly a regular clientele. The market for his goods is only limited
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to the people living in the vicinity of his shop. This does not warrant bulk buying, even though he can get better prices if he were to buy in bulk from the manufacturer. 3. Small turnover The total volume of his sales per month is small. Bulk buying would mean that he will have his limited capital tied up in stocks for too long a time. This not only involves a loss of interest but also the payment for rental on storage space. Goods lying around for too long would go bad in the case of foodstuff or may go out of fashion in the case of goods like clothing and furniture. He only needs to pay in small amounts for a great variety of goods produced by many manufacturers. And this is exactly what the wholesale does for him. 4. Need for credit Trade credit is one of the greatest sources of funds for a small retailer. Manufacturers are often unwilling to give credit. However, the wholesaler is often willing to give credit to the small retailer in order to secure business.
5. Variety of goods A manufacturer only sells one or a few major related items of goods, e.g. soap, shampoo, washing detergent and other cleansing agents. The number of brands manufactured by a particular manufacturer is also limited. However, a wholesaler stocks a great variety of brands of a particular good, e.g. Lux, Palmolive and Imperial Leather soaps. He also stocks a wide range of related goods, e.g. all kinds of foodstuff and household items. 6. Regular visits from the wholesalers The small retailer gets to know the latest products in the market through salesmen from wholesaling companies who visit him periodically. The small retailer may also get advice as well as prospective prices of certain product lines from these people who can help him choose the types of goods to stock. 26
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HOW A SMALL RETAILER CAN MAKE HIS BUSINESS MORE SUCCESSFUL •
Location: The small retailer can change the location of his shop if his business is not good in terms of competition and demand.
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Service: The small retailer can improve his services in order to earn more goodwill and secure a regular market.
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Prices: The small retailer may be buying goods at very high prices. So he can change the wholesaler from whom he is buying goods.
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Quality: The quality of his goods may not be very good and hence he may be loosing his customers. So the retailer must buy better quality goods.
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Variety: The retailer must try and provide better variety of goods in order to increase his number of customers.
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Shop Layout: The retailer must keep his shop clean and display his goods very neatly. This will attract more customers.
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Publicity: The retailer must advertise more in order to attract more customers.
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MULTIPLE SHOP or CHAIN STORES: Examples: Halfords, Richard Shops, W.H. Smith, Tesco, Boots The Chemists, Marks and Spencer, H. Samuel, Burtons. Features: •
It consists of many similar branch shops in different areas or under one roof.
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Each shop is under the direct control of a branch manager.
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The head office controls all the branch shops.
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Every shop is decorated in the same manner, has the same name and sells the same goods at the standard prices fixed by the head office.
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The chain stores mostly deal in one line of goods (clothes, food, shoes & medicine).
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The stores mostly operate as public limited companies.
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The head office sends out inspectors to make regular checks on all the branches.
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There is centralized buying and administration and decentralized selling through the branches.
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The terms of sale are normally for cash.
Advantages: •
The stores buy goods from the manufacturers in bulk and hence get discounts. So they are able to sell goods to consumers at competitive prices.
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They have large capital and are able to employ specialists in such matters as buying, publicity, window display, etc,
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Losses sustained in one branch can be absorbed in the profits made by other branches.
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There is economy in advertising as all the branches are included in one advertisement.
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Slow-selling lines and surplus stock in one area can be transferred to more promising areas, instead of clearing it off at a loss.
Disadvantages: •
There is too much centralized control from head office. So branch managers do not have any freedom.
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•
Credit facilities are not offered. So the stores may lose their customers.
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There is lack of personal touch between the branch shops and the customers.
DEPARTMENTAL STORES: Examples: Harrods, Selfridges, Debenhams. Features: •
It consists of many departments all in one building.
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Department stores are located in the centre of large cities.
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Each department is under the control of a manager and the head office controls all the departments.
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Each department specializes in one line of goods, for example, furniture, hardware, clothes, foodstuff, etc.
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Many conveniences to the shoppers including toilets, restrooms, saloons, telephone booths, car parking facilities, etc, are provided.
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Goods are pre-packed and the prices are clearly marked.
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Many department stores are owned by very large firms.
Advantages: •
The department stores buy goods from the manufacturers in bulk and are able to get discounts. Hence they can sell goods to consumers at competitive prices.
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They have large capital and are able to employ specialists in such matters as buying, publicity, window display, etc,
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There is economy in advertising as all the departments are included in one advertisement.
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Losses sustained in one department can be absorbed in the profits made by other departments.
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More customers are attracted as conveniences such as lounges, restaurants, car parking facilities, etc, are provided.
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Shopping can be done under one roof. This makes it very convenient for customers.
Disadvantages: •
There are high overheads because of the many facilities provided. This increases the price of goods.
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As departmental stores are located in the centre of towns and cities, high rental charges increase the unit price of goods.
•
There is very little freedom for individual departments as there is strict control from the head office.
3. SUPERMARKETS: Features: •
These are self-service shops with floor space of more than 186 square metres.
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They sell mostly foodstuff and household goods.
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Goods are pre-packed, well displayed and self-service is encouraged.
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Amenities such as car parking, toilets, restaurants, etc are provided.
•
Supermarkets sometimes brand their own goods.
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Prices are very competitive because of the high rate of sales.
Advantages: • The supermarkets buy goods from the manufacturers in bulk and are able to get discounts. Hence they can sell goods to consumers at competitive prices. • Self-service reduces the wage costs of the supermarket. • Customers benefit from quick service as the goods are pre-packed and well displayed. • Supermarkets buy from the manufacturers who brand the goods using the supermarkets’ own labels. • Customers are attracted because of the amenities and the large variety of goods that are provided by the supermarket. Disadvantages: • Self-service encourages pilfering and shop lifting. • Customers do not enjoy any personal service. HYPERMARKETS: Examples: Asda, Tesco, Sainsbury. Features: • Hypermarkets usually have more than 5000 square meters of selling space. • Hypermarkets offer a great variety of foodstuff and a wide range of other goods. • They buy directly from manufacturers and sell at competitive prices. • Hypermarkets are usually found outside towns and cities. • They provide large car parking space.
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• • •
Goods are pre-packed, well displayed and self-service is encouraged. To encourage non-car owners, they provide free bus service to and from the hypermarkets. Amenities such as lounges, swimming pools, toilets, restaurants, child care centers, etc, are provided to make shopping comfortable for customers.
Advantages: •
The hypermarkets buy goods from the manufacturers in bulk and are able to get discounts. Hence they can sell goods to consumers at competitive prices.
•
Self-service reduces the wage costs of the hypermarket.
•
Customers benefit from quick service as the goods are pre-packed and well displayed.
•
Amenities such as lounges, swimming pools, toilets, restaurants, child care centers, etc, are provided to make shopping comfortable for customers.
•
Customers are attracted because of the amenities and the large variety of goods that are provided by the hypermarket.
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They provide free bus service to and from the hypermarkets.
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They provide large car parking space for customers.
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Shopping can be done under one roof.
Disadvantages: •
Hypermarkets lead to a decline of business in the town centers.
•
Self-service encourages pilfering and shoplifting.
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Customers do not enjoy any personal service.
FRANCHISING: Examples: The Wimpy, Kentucky Fried Chicken, Body Shop, and MacDonald’s. Features: •
This is a process whereby the owners of a business allow others to run branches in return for certain payments.
•
The owner of the business is called a franchiser and the people who operate the retail outlets are called franchisees.
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•
The franchisee has to rent or buy his business premises.
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The franchisee has to pay the franchiser a certain sum of money for the permission to run the retail outlet.
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The franchisee also has to pay royalty to the franchiser for the purpose of using his name.
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All the shops selling the particular franchised products are decorated in the same style and use the same name.
Advantages to the Franchiser: •
The franchiser has the advantage of attracting more capital from the franchisees.
•
The franchiser also receives a share of the franchisee’s profit (royalty).
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As the number of retail outlets increase, the franchiser’s name spreads more.
Advantages to the Franchisee: •
The franchisee has the advantage of selling a product that is well established in the market.
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Franchisees benefit by having an easily recognizable shop, which is well advertised.
Advantages to the Customer: •
The customer knows he is buying a known product whose quality is guaranteed when he buys from a franchised outlet.
•
It is very easy for a customer to identify a franchised outlet.
Disadvantages to Franchiser: •
The franchiser loses his customers who go away to the franchised outlets for their convenience.
Disadvantages to Franchisee: •
It is very expensive to buy a franchise.
•
The franchisee has to pay the franchiser royalty.
•
The franchisee has no freedom regarding decorating his shop, etc.
VOLUNTARY CHAINS: Example: Wavy Line, Spar. Features: 6
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These groups are organized by wholesalers and they allow small retailers to join and enjoy the benefits of large-scale retailing.
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The retailers buy goods from the wholesalers within the group at agreed prices.
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The retailer has to keep his premises and services up to a standard specified by the organization.
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All the retailers have the same name given by the group.
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Advertising is done nationally by the whole group.
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These chains are found mostly in grocery trade.
Advantages: •
The retailers place orders with wholesalers within the group and can get discounts.
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Advertising expenses are reduced as the whole group is nationally advertised.
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The retailer can get loans from the group for renovation and decoration.
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The group lays down standards for retailers to follow, thus making them more efficient.
Disadvantages: •
The retailer does not have much freedom as the group makes most of the policy decisions.
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The representatives of the group decide upon even the advertising, window display, selection of goods, etc.
RETAIL CO-OPERATIVE SOCIETIES: Definition: A cooperative is a non-profit making voluntary organization where members associate on the basis of equal rights to obtain economic and social benefits for themselves. Features: •
Membership is opened to anyone prepared to buy a share in the society.
•
Control is vested among the members. The members elect a management committee by the principle of “One man-One vote”.
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The societies must be registered with the Registrar of Societies under the Cooperative Ordinance.
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The members enjoy limited liability.
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They have separate legal entity of their own, separate from the owners.
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Retail co-operatives buy a variety of goods from the wholesale co-operatives.
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Activities include retailing and giving a range of benefits to members like educational aid, youth camps and assistance for funeral expenses.
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The profits are distributed among members as dividend stamps, exchangeable for cash.
Advantages to the Co-operative: •
It can raise a large capital at low interest rates.
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It is exempted from paying taxes on profit.
•
Members buy goods from the cooperative as they enjoy patronage dividend based on their purchases. Thus the cooperative is ensured of a regular clientele.
Advantages to the Members: •
Members receive interest on capital, which they have invested in the cooperative.
•
Each member receives rebates, patronage dividends or trading stamps in proportion to their purchases.
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Members receive other benefits like educational aid, group insurance, etc.
Disadvantages: •
With the separation of management from ownership, members lose interest, as they do not participate in the running of the business.
•
There is inefficiency in the business as the elected management committee consists of ordinary people.
•
There are a limited variety of goods offered by the cooperatives.
•
Sometimes in order to pay patronage dividend, the prices of goods are increased.
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•
Many of the retail cooperatives are too small to take advantages of large-scale retailing. SMALL SCALE RETAILERS
General features 1. A small-scale retailing business is normally run as a sole proprietorship or as a partnership. 2. The small amount of capital needed is raised from personal savings, or borrowed from friends and relatives. If the retailer has some collateral security (e.g. house, land, lucrative business), he might be able to obtain some money from a bank in the form of a loan or an overdraft. 3. Small retailers obtain a great variety of goods in small quantities from wholesalers. They are not able to go direct to the manufacturers since purchases are not made in bulk. 4. The sole proprietor normally serves his customers with the help of some assistants. Therefore, he has the opportunity to get to know his regular customers well. 5. Small-scale retailers usually operate only one outlet, normally at a convenient location. Some very successful ones may open branches in other parts of the city. 6. Most small-scale retailers work very long hours and lack retailing know-how’s. 1. STREET MARKETS: Features: •
These markets are operated by owners of shops who wish to increase their sales and by producers of agricultural goods.
•
These owners and producers rent stalls at a number of different markets on different days.
•
Mostly agricultural goods are sold in a fresh condition.
•
They are opened mostly on holidays.
•
The overheads are very low.
Advantages: •
These shops are opened mostly on holidays to enable customers to do their shopping conveniently.
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Customers can get goods very cheap as goods are sold mostly by producers of agricultural goods.
•
Customers can get goods in a fresh condition.
•
As overheads are low, the goods are sold very cheap.
Disadvantages: •
Damaged, stolen or second-hand goods may be sold.
•
No credit facilities are allowed.
•
There are no after-sales services provided.
•
These markets are not opened everyday.
2. Hawkers Hawkers are the small-scale traders who carry the goods by using some form of transport like handcart. They are also selling the goods like vegetables, fruits, etc. 3. Peddlers Peddlers are the small-scale retailers who carry the goods on their heads or bags. They are selling the goods, which have low unit valve like pen, pencil, etc. 4. Vending Machines: Features: •
These machines are placed at the entrance of public places like cinemas, parks and supermarkets.
•
The customer has to insert the correct amount of money into the machine, press a button or turn a lever and the goods come out.
•
Such machines are either bought or hired by the operator.
•
Goods like cold bottled drinks, hot drinks, cigarettes, sweets, etc, are sold in this way.
Advantages to the Operator: •
The machines provide great savings in labour cost.
•
They can be located in convenient spots and do not need a shop.
Advantages to the Customer:
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•
Customers can get these goods at any time.
•
They do not have to depend on going to a shop and are relieved of pressure from shop assistants.
Disadvantages: •
The cost of installing the machine is considerable.
•
The machine can be easily broken into and the money pilfered.
•
It causes an inconvenience to the customers if the machines break down.
•
Prices are high.
•
Machines are sometimes jammed and it is often difficult to find anyone that can help or to get a refund.
5. Market Traders A local market is usually held on the same days each week and consists of number of stalls, which cover a wide range of products. Advantages to the Customers: 1. Prices are very low, because market trader has few expenses. 2. Bargaining can take place. 3. Goods are sometimes “Sold off” at cheaper prices at the end of a day. Disadvantages to the Customers: 1. It may be difficult to exchange goods. 2. In bad weather, shopping can be uncomfortable in open markets.
SELLING TECHNIQUES, TREND IN RETAILING AND IMPLICATIONS OF E-COMMERCE 1. BRANDING AND PACKAGING: Features: •
Branding means the selling of goods under a trademark or brand name of the manufacturer, wholesaler or retailer. The trademark is clearly displayed on the package or the container.
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•
The aim is to differentiate the goods of one manufacturer from those of others.
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Branded goods are of uniform size, weight, and quality and sometimes price.
•
Packaging of goods serves as a protection for the products gives them an attractive appearance and helps to identify branded products.
Advantages to Manufacturer: •
The manufacturer is able to create brand loyalty amongst consumers for his brand of products.
•
It increases turnover and results in economies of scale.
Advantages to the Retailer: •
The retailer does not have to weigh or pack the goods.
•
As instructions are printed on the labels of goods, there is no need for the retailer to have specialized knowledge.
•
The retailer need not advertise branded goods.
•
The retailer can offer self-service as the goods are already branded and packed.
Advantages to the customer: •
The customers need not waste time inspecting the goods as they are already branded and packed.
•
Customers may be able to enjoy a wider choice of goods.
•
Customers are well informed about the product as the instructions are printed on the labels of the products.
Disadvantages: •
Manufacturers have to spend large amounts of money on competitive advertising.
•
A retailer has to stock different brands of the same product to meet consumers’ demand.
•
Branding and packaging increases the price of goods for consumers.
•
Branding leads to imitation of goods, which affects customers.
2. SELF SERVICE:
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Features: •
The customer is allowed to choose the products by himself with a trolley or a basket.
•
This system is widely used by large retailers.
•
Self-service is impossible without branding and packaging.
•
This service has been developed to make shopping convenient for the modern busy housewives.
Advantages to the Retailer: •
It is very economical as it cuts down the cost of employing shop assistants.
•
Self-service increases turnover as it encourages impulsive buying.
Advantages to the Customers: •
The customer can select the goods he needs quickly as they are already prepacked.
•
The customer can take his own time to select the goods without pressure from shop assistants.
Disadvantages: •
Much capital is needed, as shops must be large and spacious.
•
More variety of goods is needed. This result in capital tied up in stock.
•
Self-service leads to pilfering and shoplifting.
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Customers are deprived of personal service.
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Customers may be tempted to buy goods they do not require.
•
Safety measures like cameras, mirrors, etc, have to be installed to avoid pilfering.
3. AFTER-SALES SERVICE 1. After-sales service is an undertaking made by the retailer, or sometimes the manufacturer or its agent, to repair any faults which occur to the article sold within a certain time. Sometimes, the undertaking could also be to provide some maintenance service at regular intervals for a definite period of time from the time of sale of the article to ensure the efficiency of the article.
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2. Sometimes, this undertaking is known as a warranty and the period that such an undertaking holds is the warranty period. 3. After-sales services are normally provided for permanent or durable goods such as machinery, motor cars, television sets, and other domestic electrical appliances. 4. Since durable goods and machinery are highly technical and complex, retailers who are normally trained agents of the manufacturer, or the manufacturer's sole agent undertake the all-important task of providing after-sales service, for a fixed charge. Positive effects of after-sales service On the manufacturer and the retailer 1. Good and efficient after-sales service gives the product a good image and increases its competitiveness with its rivals (i.e. the same type of product, but of a different brand). Thus, its sales may increase. For example, consumers would certainly hesitate to buy a particular make of car if it is reputed to come with poor after-sales service. On the consumer 1. He is assured of an efficiently working product at least within the warranty period. 2. Should mechanical faults become apparent after the article is in use, the consumer is assured of getting it repaired free of charge if it is still within the warranty period. If the fault is still not rectified, he may get a replacement. 3. He is assured of expert technical advice with regard to maintenance and use of the article since the manufacturer would ensure that the technical staff providing the aftersales service are properly trained. Negative effects of after-sales service On the manufacturer and the retailer 1. High overheads are needed to maintain a technically-trained staff. Sometimes, there is the need to maintain workshops fitted with proper equipment at strategic points throughout the country. 2. Sometimes, there is the need to replace a defective article if the fault cannot be detected or is beyond repair. The replacements have to be written off as losses.
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On the consumer 1. More often than not, the cost of after-sales services is included in the selling price of the article. To that extent, the consumer is paying a higher price for the good, especially if he does not avail himself of such services. 2. After-sales service is only available during the warranty period. If the fault is only detected after this period, the consumer has to pay the repair bill himself. 4. BAR CODING Instead of using price tags for each item of good, bar codes are used nowadays. A bar code consists of parallel black stripes of different widths with different spacing between the stripes, printed on the wrapper itself. The arrangement of the stripes can be read by using special scanners. The information is then sent to a computer to be processed. Information as to type of goods, its price and weight can be readily accessed. For example, the UPC (Universal Product Code) bar code system is widely used in the supermarket industry for standard recognition for goods sold and manufactured.
Positive effects of bar coding: On the retailer 1. It saves time and hence labour cost, since vital information such as price, type of good can be read accurately, easily and quickly by special scanners that are linked to computers at the checkout points. This avoids the possibility of human error if the counter personnel have to key in vital information. Such information will then be passed on to a central computer. The retailer can make use of the data thus collected to manage his business efficiently. 2. It helps management greatly in controlling and supervising the movement of inventory in the premises. The retailer will be able to know at the end of the day how much of each type of good was sold. New inventory can then be ordered whenever the need arises. The retailer saves because he need not hold excess stock.
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On the customer The time taken by the cashier to arrive at the total amount payable by the customer is shorter. Thus, the customer can check out faster. Negative effects of bar coding On the retailer 1. A high initial capital outlay in terms of buying equipment and training of staff is needed. The whole retail outlet has to be fully computerized. On the customer 1. He does not remember the cost of each item he intends to buy since the bar code can only be read by the special scanner. He is then not able to do a quick calculation of the prices before he pays at the cash counter. 5. SHOPPING COMPLEXES OR PRECINCTS: Features: •
A shopping complex is a large multi storied building located in the town centre, consisting of many shop units, each owned by different individuals.
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Each shop may sell different types of goods.
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A wide range of goods and services are available in a shopping complex.
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Shoppers can enjoy ‘one stop’ shopping, as they buy all goods they require under one roof.
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Amenities such as car parking, lifts, air-conditioning, restaurants, etc, are provided.
6. LOYALTY CARDS Loyalty Cards are plastic cards issued by large—scale retailers to their customers to try to keep the customers rather than let them go to the competitors. This is often used by supermarkets. In this technique, customers are given cash back on purchases when the customer has gained sufficient points. Sometimes, the customers with loyalty cards are given special offers. This technique is often used by airlines who give ‘air miles’ and reward loyal customers with free flights.
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Retail Trade
7. ELECTRONIC POINT OF SALE (EPOS) EPOS system is a device at the point of sale which has the capability to identify each item the retailer sells. It will also provide the price for the item and record the sale of the item. In addition it should be able to provide the retailer with information on sales and profitability of each item. EPOS enables a retailer to find out the shopping habits of its customers - type of goods bought, quantity purchased so that the retailer can then make decisions about what to stock.
Advantages of EPOS 1. The prices charged are accurate - no under-ringing. 2. The retailers can give quick services to the customers. 3. The retailers do not have to price mark every item. 4. The retailer can identify any item which is under priced. The system can work out and apply margins for the retailer without a calculator. 5. The retailer can charge different prices for different types of customers without calculators, books, tables, or trained staff. 6. The retailers do not have to count stock to re-order. 7. EPOS system will increase the retailer’s margins, optimize the retailer’s stockholding and save the retailer’s time. E-COMMERCE (ELECTRONIC COMMERCE) E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the Internet, especially the World Wide Web. In practice, this term and a new term, "e-business," are often used interchangeably. For online retail selling, the term e-tailing is sometimes used. HOME SHOPPING 1. MAIL ORDER FIRMS: Features:
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Commerce – Students’ Guide of Business and Computing
Department
•
Mail order business is run by manufacturers or specialist mail order warehouses.
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They sell goods to customers by sending expensive catalogues or by local parttime agents (housewives).
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Goods are ordered with the help of post or with the help of the part-time agents.
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Goods ordered are sent to the buyers by parcel post.
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The method of payment is cash on delivery (C.O.D.) or cash with order (C.W.O.).
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Payments can be made in installments if the part time agents are collecting the money.
Advantages: •
The mail order firms buy goods in bulk directly from the manufacturers and sell at competitive prices.
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There is no need for expensive large buildings.
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There is no need to employ qualified sales staff.
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The catalogues and part-time agents act as a permanent advertisement.
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Customers can buy goods on credit and pay in installments.
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Customers can return unwanted goods, but they must do so within a time limit.
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There is no need for the customers to visit the shop as the goods are sent to the customers’ doorstep.
Disadvantages: •
The high cost of catalogues and advertising increases the cost of sales per unit.
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There are high operational expenses in the form of commission to agents, cost of packaging and postal charges.
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There is a risk of bad debts as customers may default in their payments.
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There is a lack of personal contact between the mail order firm and the customer.
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The mail order firm has difficulty in selling goods that are returned by customers.
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Customers cannot inspect the goods if payment is by C.O.D or C.W.O.
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No after sales service is provided.
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Sometimes there may be a delay in the delivery of goods.
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The mail order firms take a long time to refund money for goods returned by customers.
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Retail Trade
2. SHOPPING BY PHONE Telephone marketing is a convenient way to learn about and buy products and services without leaving the comfort of your home. Some of the benefits of telephone shopping include: •
Shopping 24 hours per day, seven days a week;
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Buying goods and services with credit;
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Comparison shopping with a variety of merchants;
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Locating hard-to-find items — this can be especially convenient for those with unusual hobbies or interests;
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Getting help and information before and after a sale;
3. SHOPPING BY TELEVISION TV has become nowadays an effective media not only for advertisement but also for effective sales through live product demonstration. Consumer durables, consumer goods, home appliances are demonstrated on TV. The consumers who watch the advertisements and the product demonstration can place orders by phone SMS, E-mail or by fax. The goods will be delivered by Post. 4. TELESALES It is the recent development in large scale retailing trade. The large scale retailers send SMS to the customers’ mobile phones and advertise the product thereby sell the goods. It is the current trend that the expertised sales staff talks over the phone to the customers, detail about the product, convince them, and make them to buy the product or service. Telesales deliver the goods to the door step of the customers. Telesales have become more popular with selling of electronic goods, electrical goods, home appliances, offering car loan, housing loan, credit cards etc., Advantages of telesales to the large scale retailers/manufacturers •
Cost of advertising is very less.
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Sales promotion over phone is very easy.
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Expenditures to be incurred on salesmen are cut-off.
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Expanding of market to regional or national will be so easy.
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Commerce – Students’ Guide of Business and Computing
Department
Advantages of telesales to the customers •
Shopping becomes so easy
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Customers get their goods/services at their door step.
Disadvantages of telesales to the large scale retailers/manufacturers •
Persuading the customers will be so difficult since there can be no product demo or exhibit.
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It is difficult to cover huge customers over a region or across the country.
Disadvantages of telesales to the customers •
Telesales products or services are not subject to trustworthy since the retailer has no permanent selling place.
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Customer satisfaction over product/service offered through telesales may not be 100% since the products may not be according to the specifications.
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Telesales firms take a very long time to refund the amount to the customers when faulty/damaged/dissatisfied goods are returned.
5. ELECTRONIC SHOPPING 1. As the population of a country becomes more and more computer-literate, this form of shopping has the potential to become very popular in the future. In 1996, more than US$1 billion was transacted over the Internet, making it a good potential platform for electronic shopping. In 1998, this had tripled to more than US$3.5 billion. 2.
In electronic shopping over the Internet, or a local on-line network via the Internet,
the customers can order goods direct to the on-line retailer in any part of the world via the Internet E-mail. On-line retailers or warehouses can develop their own websites to advertise their products to potential customers. Payment can be made by cash or by the use of credit cards. The goods will then be sent by post or courier direct to the customer's doorstep after confirmation of payment. Warranty claims, if any, may be made on the on-line retailer or the supplier of the product itself within a specified period. Positive effects of electronic shopping
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On the retailer 1. The 'shop' can be open 24 hours a day to customers all over the world. 2.
It is not very expensive to set up. Only a personal computer, a web browser, a
modem, an Internet account and a telephone line are needed to start. 3. It is convenient, time and cost saving because the e-mail system sent to any part of the world, including the home country, costs the same. 4. Since all information is processed electronically, there will be less room for error. 5. It allows for quick exchange of information and feedback from customers. 6. Small businesses can now compete as effectively as the larger ones in the larger marketplace. 7.
The Internet allows for the testing of new services and products in the media.
Electronic shopping is very suitable to market information technology (IT) related products like banking, purchase of airline tickets, making hotel or travel arrangements, purchase of books, stocks, bonds, flowers and greeting cards. 8. High overheads of maintaining a normal retail shop such as high rental in a good location, shop decoration and display need not be incurred. The location can be anywhere convenient and economical to the retailer. His customers normally do not visit him personally. On the customer 1.
It is convenient, time and cost saving. The consumer does not need to face traffic
jams and parking problems to go to the particular shop to buy the goods that he wants. He shops from the convenience of a computer that is connected to the Internet. 2. Goods can be bought from any part of the world. 3.
He is able to 'shop' anytime at his own convenience.
Negative effects of electronic shopping On the retailer 1. There is only a small clientele since not every household in the country has a personal computer. According to Fortune Magazine (March 18 1996), about 12 per cent of American households own a computer. Moreover, the general public is still quite wary of electronic shopping which is something quite new. 2. At the time of writing, the Internet is still not really ready for the 'Home Shopping Network' for the average household. Electronic shopping is mainly engaged between
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Commerce – Students’ Guide of Business and Computing
Department
businesses for the distribution of high-value information and IT-related products and software. 3. On-line retailers need to employ specialized personnel who are experts not only in marketing but also in computer technology in order to participate in this type of retailing. 4. It takes time for a potential on-line retailer to implement an Internet strategy properly. This sort of marketing over the Internet requires close coordination. Sales and customer service has to be involved 24 hours a day. Sales staff may feel overwhelmed at having to answer queries by e-mail and the fact that customers have direct access to information. On the customer 1. The customer has no way to verify the authenticity and integrity of the on-line retailer. He actually does not get to see the retail outlet. Moreover, he has to give the retailer his credit card number and pay for the good before he even receives it. 2. There is a lack of privacy and lack of security since there is the possibility of someone 'intercepting' his credit card number. 3. There is likely to be no after-sales service. ADVANTAGES OF LARGE SCALE RETAILING TO THE RETAILER •
Retailers can get better trade and cash discounts when they buy from manufacturers in bulk quantities.
•
Large retailers can afford to employ specialists for each department. Hence goods and services are of better quality and standard.
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Some large retailers are able to brand their goods using their own labels and thus are able to create brand loyalty among consumers.
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Large retailers buy in bulk and so have their own fleet of transport vehicles.
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Large retailers provide self-service and so are able to cut down expenses of hiring shop assistants.
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As large retailers buy in bulk they are able to sell at competitive prices. This increases sales and the profit of the retailer.
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Large retailers can afford to carry out sales promotions in order to increase their sales.
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•
Large retailers are able to afford to use the latest sophisticated cash tills and computer terminals to making shopping convenient for the retailer and the customers.
ADVANTAGES OF LARGE SCALE RETAILING TO THE CUSTOMERS •
Customers are able to get goods at competitive prices as the large retailers buy in bulk directly from the manufacturers.
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Customers find it convenient to do their shopping under one roof as large retailers provide a great variety of goods.
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Self service and the various amenities provided by large retailers make it even more convenient for the customers to do their shopping.
DISADVANTAGES OF LARGE SCALE RETAILING TO THE RETAILER •
Large capital is needed as large retailers need to buy a large variety of goods direct from the manufacturers in bulk quantities.
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As the shop expands and the branches and departments increase, control becomes more difficult and expensive.
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There are high operating expenses and these can be covered only by a high turnover in sales.
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There is a greater risk of loss through pilfering and shoplifting as self-service is provided.
DISADVANTAGES OF LARGE SCALE RETAILING TO THE CUSTOMERS •
Customers do not enjoy personal services from these large retailers.
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Large retailers normally do not provide credit facilities.
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As large retailers provide many amenities, consumers may get the goods at higher prices.
HOW WHOLESALERS ARE AFFECTED BY THE GROWTH OF LARGE SCALE RETAILERS? The establishment and popularity of large retail outlets like the multiple and the variety chain stores which have the financial and technical resources to buy in bulk direct from the manufacturer have contributed to the decline of the wholesaler. Nowadays most of
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Commerce – Students’ Guide of Business and Computing
Department
the manufacturers prefer to sell goods direct to the large scale retailers. By selling direct to the large scale retailers, the manufacturers are able to sell goods on bulk consignment where the payment is made for the consignment by the large scale retailers immediately. The manufacturers get the benefits of more profit percentage as the wholesalers are eliminated in this way. Manufacturers also get in touch with the final consumers through large scale retailers as they perform the function of customers personal service through pre-sale and after-sale service. Most importantly a large scale retailer can deal with many manufacturers’ goods at wide range. As these functions cannot at all be performed by wholesalers, the wholesale trade has become of less importance. SURVIVAL OF THE SMALL RETAILER In spite of the intense competition from the large retailers and the proliferation of large shopping centres or shopping malls, a number of small independent retailers have still managed to survive even though their numbers have fallen greatly in recent years. This is due to certain advantages that the small retailer still enjoys over the larger and less personal retailers. However, the small retailer still predominates in certain trades such as jewellery and bespoke tailoring in which a large outlet is not exactly suitable.
The reasons for the survival of the small retailer are as follows: (a) Since the small retailer knows his customers well, he is able to give better personal advice and service. This is extremely important in some branches of retailing, e.g. jewellery and made-to-measure clothing. As a result, consumers prefer going to one shopkeeper to others because of the 'personal touch' which puts them at ease. (b) Since most small retailers cater for regular customers, they are in a position to assess the credit-worthiness of each customer and may be willing to give credit. (c)They might undertake delivery of goods - e.g. daily newspaper, fresh bread, daily provisions. (d) The small retailer's shop is normally close to the homes of his customers, making it very convenient for them to call whenever they run out of supplies. (e) The small amount of capital needed makes it easy for people to enter the retail trade. Not much skill and expenses are needed to start a business. (f)
The small shop does not have as many overheads as a large retailer, and hence 24
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Retail Trade
can sell most items at a slightly lower price. (g) The small shop is easier to manage. The small retailer is helped by members of his family. The owner and other members of his family have every incentive to work very hard since they reap all the profits. (h) By becoming a member of a voluntary chain (see Glossary) the small retailer may be able to get his supplies on more favourable terms from the wholesalers in his chain as well as enjoy other benefits like advertising, credit and insurance. Advantages of the small retailer (Note that the above points from (a) - (h) may be used in the discussion on the advantages of the small retailer.) Disadvantages of the small retailer 1. Jack of all trades and master of none The small retailer does not employ any specialist buyer. He himself undertakes the tasks of buying as well as selling, store-keeping and display, not to mention bookkeeping and administration. Since he cannot be an expert in every field, it is very likely that he is less efficient and hence, his costs in relation to turnover are higher than those of the larger retailers. 2. Lower trade discount Since the small retailer gets his goods from the wholesaler, it is natural that he will have to pay a higher price for his goods since he gets a lower trade discount. REASONS WHY A SMALL RETAILER BUYS FROM THE WHOLESALER 1. Small capital The small retailer has only a small capital and cannot afford to buy in bulk from the manufacturer. He can only make small orders at a particular time.
2. Limited market The small retailer has mainly a regular clientele. The market for his goods is only limited
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Commerce – Students’ Guide of Business and Computing
Department
to the people living in the vicinity of his shop. This does not warrant bulk buying, even though he can get better prices if he were to buy in bulk from the manufacturer. 3. Small turnover The total volume of his sales per month is small. Bulk buying would mean that he will have his limited capital tied up in stocks for too long a time. This not only involves a loss of interest but also the payment for rental on storage space. Goods lying around for too long would go bad in the case of foodstuff or may go out of fashion in the case of goods like clothing and furniture. He only needs to pay in small amounts for a great variety of goods produced by many manufacturers. And this is exactly what the wholesale does for him. 4. Need for credit Trade credit is one of the greatest sources of funds for a small retailer. Manufacturers are often unwilling to give credit. However, the wholesaler is often willing to give credit to the small retailer in order to secure business.
5. Variety of goods A manufacturer only sells one or a few major related items of goods, e.g. soap, shampoo, washing detergent and other cleansing agents. The number of brands manufactured by a particular manufacturer is also limited. However, a wholesaler stocks a great variety of brands of a particular good, e.g. Lux, Palmolive and Imperial Leather soaps. He also stocks a wide range of related goods, e.g. all kinds of foodstuff and household items. 6. Regular visits from the wholesalers The small retailer gets to know the latest products in the market through salesmen from wholesaling companies who visit him periodically. The small retailer may also get advice as well as prospective prices of certain product lines from these people who can help him choose the types of goods to stock. 26
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HOW A SMALL RETAILER CAN MAKE HIS BUSINESS MORE SUCCESSFUL •
Location: The small retailer can change the location of his shop if his business is not good in terms of competition and demand.
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Service: The small retailer can improve his services in order to earn more goodwill and secure a regular market.
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Prices: The small retailer may be buying goods at very high prices. So he can change the wholesaler from whom he is buying goods.
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Quality: The quality of his goods may not be very good and hence he may be loosing his customers. So the retailer must buy better quality goods.
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Variety: The retailer must try and provide better variety of goods in order to increase his number of customers.
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Shop Layout: The retailer must keep his shop clean and display his goods very neatly. This will attract more customers.
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Publicity: The retailer must advertise more in order to attract more customers.
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