THE RETAIL TRADE
Retailing is the buying and selling of goods and services on a small scale basis (or in small
quantities).
Traders who sell goods in small quantities are known as Retailers.
FUNTIONS OF A RETAILER
(i) A retailer provides a variety of goods to his or her customers.
(ii) Provides goods to customers at convenient times.
(iii) Acts as a link or middlemen between the consumer and the manufacturer.
(iv) Provides transport or delivery services to customers who buy bulky and expensive goods.
(v) Locates the retail shop near the customers so as to satisfy their local needs.
(vi) May offer personal attention (advice) to customers on the goods they intend to buy.
(vii) The retailer may offer goods on credit to trusted customers.
(viii) Provides pre-sales and after-sales services to customers.
Pre-sales service: Allows customers to check the goods, especially the electrical
appliances, so as to prove whether they are in a workable condition before being
sold to the customers.
After-sales service: The maintenance and repair service offered to customers
after the transaction has already taken place. Goods that develop faults are taken
back to the retailers for repair, for free or at a cost, depending on whether the
fault is within the guarantee period or not.
(ix) Retailers such as supermarkets and Hypermarkets offer self service to customers.
FACTORS TO CONSIDER WHEN ESTABLISHING A RETAIL OUTLET
To set up your own business you must be dedicated, hardworking, adaptable and above all, willing
to take risks and to overcome problems. For this reason, there are several factors to consider when
you want to start your own retail business.
Experience or know how – Before starting your won retail shop, you should have an idea of how a
shop is run. You will also need some basic administrative or management skills such as general
organisational, correspondence, filling and financial recording skills. This experience could be gained
by having worked as an employee of a retail shop or from a business school or even from a friend or
relative who has a similar business.
Capital or Money – The Importance of initial capital for a new business is only too obvious. For
example capital or money is required to build or rent the premises, buy stock, pay the bills (i.e.
water, electricity, telephone and rates), and wages. Borrowing either from a bank or friends or
relatives may raise such capital. In addition, a sole trader may also obtain finance from personal
savings or sale of one’s properties or assets.
The range of goods to sell – Another important factor to consider is what range of goods to sell. A
prospective trader has a wide range of goods to sell. It ranges from sports equipment to fast foods,
groceries, hardware etc. Before a decision is made you need to consider what goods are suitable for
the area where your shop is going to be located, to avoid stocking slow moving items. You might
find it more realistic to stock fast moving consumer goods such as groceries, toiletries, and general
small household goods.
Method of sales – The method of sales is also another to consider. One can choose to personally
serve the customers across the counter or use some degree of self-service. Using sales assistance
1
would raise the question of hired labour, which means more costs. Whatever the case this
consideration l, of course, depends on the size of the shop anticipated.
Location or site – After carefully examining the above-mentioned factors, then you should consider
the site where you are going to locate the shop. The cost of the site must be looked at in relation to
expected profits or turnover. Before choosing the site, you should consider whether the building is
the right type i.e. single or multi storey and big enough.
Other factors to consider are-
What advertising will be used
The manner in which the display will be
Quantities of stock in relation to demand
Basis of trade whether cash or credit sale
What mark up to put on the goods in relation with purchase power of community
o Transport and communication network of the area
o Safety of money, goods and workers (Police and Insurance)
o Legal requirements for the type of business and goods
TYPES OF RETAILERS
There are basically two types of retailers, namely; Small Scale Retailers and Large Scale
Retailers.
1. SMALL SCALE RETAILERS
These are retailers who sell a limited range of goods/services, invest a smaller
amount of capital in the business and whose business premises are relatively smaller.
There are many small scale retailers, some trading formally whole others are involved
in informal trade usually without license.
Small scale retailers can also be divided into two groups namely, small retailers
without shops and small retailers with fixed shops.
SMALL RETAILERS WITHOUT SHOPS
(a) Mobile shops
These are motor vehicles that have been converted into shops. They take goods to their
customers using vans, caravans, trucks or on bicycles
Usually sale perishables like milk, fresh vegetables etc.
Have the advantage of reaching isolated places
offer door to door delivery services
Operation costs are low hence tend to be cheaper
Mostly prices are negotiable
(b) Hawkers
Make sales by moving from one place to another
Carry their merchandise in boxes and baskets
Obtain a trading license from local authorities
Prices are negotiable
Do door to door delivery
Have personal attention of their customers
(c) Itinerants
2
Carry a handful of merchandise
Move from place to place with or without appointments
Maybe agents of large organisations
Have no trading license
Use large boards on which they stick there merchandise
(d) Roadside Traders
Sit under a tree to do the selling of their merchandise
They are in the informal trade and have no blessings of the local authorities
Have a big problem of weather
Sell perishables like vegetables, fruits etc
(e) Street Markets or Vendors
Sell their merchandise along busy streets
Merchandise range from foodstuff to household goods
Have no trading license
Prices are negotiable
Do business near to offices and residential areas
Goods are relatively cheaper, sometimes sell stolen goods
(f) Automatic Vending Machine
These are automated retail machines
Sale items like ice cream, canned drinks
Have the advantage of cost saving because they need no attendants
No bad debts can be incurred
Saves customers’ time because they are normally placed in convenient places, e.g. offices,
airport, bus stations etc.
Do not provide personal service and hence no change is expected, usually programmed to
specific coins or tokens
SMALLRETAILERS WITH SHOPS
(a) Tied Shops
These are shops that sell products made by only one manufacturer
Filling stations are a typical example of tied shops Caltex, B.P
May provide fast food or mini marts for the motorists convenience
B Discount Shops
These are retail outlets which work on the principle of low mark up, but large turnover
They specialise in durable items that are branded such as furniture electrical appliances
Located in the outskirts where overheads are low
Do not usually allow credit
Operate on self service
C Franchising
This is an arrangement that allows a retailer to trade in another company’s name
They sometimes look like multiple stores with interior and exterior decorations being the same
The retailer who operates a retail shop in another company’s name is called a franchisee
The mother company allowing its name to be used is called the franchiser
The amount paid for using another company’s name is called royalty
Advantages of franchising to the franchisee
3
o Have owned premises in prime site and are now not affected by the current rise in
the cost of such premises
o Try to offer a wide range of goods and services to their customers
o Are well placed near their customers e.g. in housing estates, villages and so on
o Offer personal service and attention to their customers, some people prefer the
personal services offered by the smaller trader
