TOPIC :TRADE

OBJECTIVES:

At the end of this lesson, I should be able to;

(i) Explain trade by barter

(ii) Mention the problems faced by trade by barter.
(iii) Define trade;
(iv) Explain the division of trade
(v) State the similarities between home trade and foreign
(vi) List the differences between home trade and foreign trade

TRADE BY BARTER
This is the exchange of goods for goods without the use of money.

Problems of trade by barter

(i)Double coincidence of wants: Problem of looking for someone who is in need of what you
want and at the same time has what you need.

(ii)No fixed rate of exchange: How and what to use in order to determine the rate of
exchange e.g quantity of gari to be used to exchange for a tuber of yam.

(iii)Waste of time and energy: Searching for someone to exchange goods with leads to
wastage of time and energy.

(iv)Does not encourage the divisibility of goods

(v)It discourages borrowing and lending

(vi)It does not encourage deferred payment

(vii)It discourage large scale production

(viii)It is very difficult to store wealth

Class exercise

(i)Define trade by barter

(ii)Mention four problems faced by trade by barter.

TRADE

Trade is the buying and selling of goods and services for profit.

Division of Trade
Trade is divided into:
(a)Home Trade
(b)Foreign Trade

(a)Home Trade: Home trade is the buying and selling of goods and services to make profit within a country. It is also known as
internal or domestic trade. Home trade is divided into
(i) Wholesale trade
(ii) Retail Trade

(i)Wholesale trade: This is concerned with buying in bulk / large quantity from the producers and selling in smaller quantities to
the retailers.

(ii)Retail Trade: This is concerned with buying in smaller quantities from the wholesalers and selling in unit to the final
consumers.

RETAILERS
A retailer is a trader who buy goods in small quantities from the wholesaler and sells in unit to the final consumers.

Functions of a retaler
(i)Sells in unit to the consumers
(Ii)Grant credit facilities to the consumers.
(iii)He provides after sales services e.g like repair,servicing and installation.
(iv)Renders door to door services
(v)Retailers stocks mainly consumer goos
(vi)Stock varieties of products
(vii)Location of business is very close to residential apartment.
(viii)Buys in small quantity from the wholesaler

TYPES OF RETAILERS
(i)SMALL SCALE RETAILERS
(II)LARGE SCALE RETAILERS

(I)SMALL SCALE RETAILERS :These are retailers that trade in small varieties of goods.

TYPES OF SMALL SCALE RETAILERS

(I)Hawkers/Itinerant/peddling: This is a form of retail trade where sellers move from one place to another displaying goods on
their head, shoulder, wheelbarrow etc.

Caracteristics of hawking
(i)Sells different types of goods
(ii)create personal contact
(ii)requires little amount of money
(iv)Prices of goods are low
(v)sell mostly consumable goods
(vi)Render door to door services
(vii)There is no cost of advertisement involved.
(ix)There is no payment of rent.
Advantages of hawking
(I)It requires little amount of capital
(ii)There is flexibility in operations
(iii)Leads to increase in sales and profit
(iv)Provision of employment opportunity
(v)Prices of goods are generally low.
(vi)Low cost of running the business.

Disadvantage of hawking
(i)It leads to environmental pollution
(ii)Difficulty to return damaged goods.
(iv)Young hawkers are exposed to bad influence
(iii)Deprives young people of education
(iv)Exposes sellers to road accident

MOBILE SHOPS
This is the use of motor vehicle to display goods while moving from one place to another.

Characteristics of mobile shops

(i)They can reach many customers
(ii)Display goods on head, shoulder, tray etc
(iii)Its operation can be affected by weather.
(vi)Uses special motor van
(iv)They play music to attract customers

Advantages of mobile shops

(i)Increase in sales
(ii)Prices of goods ae low
(iii)It stocks different goods

Disadvantages of mobile shops

(i)Motor van may breakdown.
(ii)High cost of vehicle maintenance
(iii)Exposure to thieves.

STREET/ROAD SIDE TRADER

These are traders who display their goods along roads, streets or outside the gate of buildings

Advantages of road side trading

(i)Stocks different varieties of goods
(ii)Requires little capital to set up
(iii)Mostly found on busy roads
(iv)Sometimes display their wares in stalls

Disadvantages of road side trading

(i)Goods are in limited quantity
(ii)May lead to wastage of goods if there is low patronage

MARKET TRADING
These are retailers that are located in market with constructed sheds and stalls found in rural and urban centres.

Features of market trading

(i)Opens at specific time of the day
(ii)Availability of stalls where goods can they can stock their goods
(iii)Zoned according to the types of goods sold.

Advantages of market trading

(I)There is competition among traders
(ii)The market saves time of buyers moving round the market
(iii)Stock wide varieties of goods
(iv)prices of goods are low
(v)Attracts more customers

Disadvantages of market trading

(i)Exposure to thieves due to distance and the constant carrying of cash
(ii)The distance of the market and traders’ places of resident.

STALL HOLDERS
These are traders who display their goods in stalls. These stalls are usually built by stall holders
themselves or the local Government authority. Local Government charges stall holders’ little
amount of money for rent.

ADVANTAGES OF STALL TRADING

(1)It reduces the number of times a consumer would need to travel to the cities.
(2) Stalls are not expensive to construct or rent.
(3)Stalls are built in convenient location to the consumers and to the holders.

DISADVANTAGES OF STALL TRADING.

(1)Stalls are restricted to items needed by local residents.
(2)Customers can change their mind and return some items.

*SMALL STORES
These are stores located in front of residential houses of the retailers. They are mainly sole
proprietorship business. They require small capital to establish.

*UNIT OR TIED SHOP

These are retail outlets located in residential building or any other place convenient for
prospective customers. This shop is tied to stock and sell goods of a particular manufacturer.

ADVANTAGES OF UNIT SHOP

(1) It reduces transportation cost for customers.
(2) Minimizes the need for advertisement.

DISADVANTAGES OF UNIT SHOPS

(1)The expansion of the business is difficult due to small capital.
(2)A limited choice of goods is offered to customers
(3) Customers are well known to shop owners and refusal to grant credit may lead to loss of
patronage.

REASONS FOR THE SURVIVAL OF SMALL SCALE RETAIL BUSINESS

(1)The capital requirement is very low
(2)They operate for long hours
(3)They promptly handle customers’ complaints
(4)They offered personal services and attention to customers
(5)They sell in unit to customers
(6)It is very convenient as the operate close to the people
(7)There is no special requirement In setting up the business
(8)It is easier for retailer to combine the business with other work.

ADVANTAGES OF SMALL SCALE RETAILERS

(1)The retailers operate for long hours
(2)It is a source of employment
(3) The expenses of the business is small
(4S)It is a platform to lunch into bigger business ventures
(5)It requires little capital to take off
(6)The size of the business makes it easier to provide personalized and efficient service

DISADVANTAGES OF SMALL SCALE RETAIL TRADE

(1)Profit is generally low due to the risk of the business.
(2)Expansion is quite difficult without external financial support.
(3)It cannot withstand economic hazards like loss of goods by fire or floods
(4)Problem of enough capital.

LARGE SCALE RETAILERS:These are retailers that trdae in large varieties of goods. They include:-

(A)CHAIN STORE/MULTIPLE STORES:- These are large retail units with similar store spread across the
country, selling the same range of product under one management .Chain stores have identical shop
design. They operate with one head office and different branches. Examples are Bata shoes, Leventis
and UTC.

FEATURES OF CHAIN STORES

(1)They have identical shop design layout and stock display.
(2)They have central administration and control
(3)They sell similar range of products.
(4)Staff of chain store wears identical dresses of uniforms.
(5)The head office buys in bulk and distribute to other branches.
(6)Chain stores use group advertising and promotion.
(7)They are found in towns and urban areas.

ADVANTAGES OF CHAIN STORES

(1)They buy in bulk which ensures cheaper prices.
(2)There is flexibility in the movement of staff from one branch to another.
(3)Customers can easily locate their shops anywhere.
(4) Losses suffered by one branch can easily be off-set by the profit of another branch.
(5)Stock can easily be transferred to branches where there is short supply.
(6)They provide after sales service.

DISADVANTAGES OF CHAIN STORES

(1)The operation of cash and carry does not facilitate credit transaction.
(2)They concentrate on limited range of products.
(3)The business require huge amount of capital.
(4)There is less personal relationship between the shop attendants and customers.
(5)Extra cost will be expended on transport and handling of goods from the head office.

(B)SUPERMARKETS
Supermarkets are self service business unit selling mainly food and household items under one
roof.Eamples of supermarkets in Nigeria are Twins Faja, Shoprite, Domino store,Justrite, Beach Town,
etc

CHARACTERISTIC OF SUPERMARKETS
(1)They are found in cities and major towns.
(2)They concentrate on food and household items.
(3)Items sold have fixed price tag.
(4)They operate on self service system.
(5)The goods are beautifully displayed to encourage impulse buying.
(6)They buy goods in bulk and sell in units.
(7)They use of baskets and trolleys are permitted to ease the carrying of goods.

ADVANTAGES OF SUPERMARKETS
(1)They encourage impulse buying.
(2)Supermarkets provide wide varieties of goods.
(3)There is less labour cost as few attendants are employed.
(4)Customer has freedom of choice.
(5)They offer cheaper prices for goods.

DISADVANTAGES OF SUPERMARKET
(1)Pilferage rate is higher.
(2)There is no personal relationship between the attendants and customers
(3)Prices of goods are not negotiable.

(C)DEPARTMENTAL STORES
This is the collection of different shops under one roof and under one management. With each shop
selling special range of goods. Each department has it own manager, with the group of managers under
one general manger. Payless Departmental store, Citrus Lifestyle stoe,etc.

FEATURES OF DEPARTMENTAL STORES

(1)Each department is managed by a manager.
(2)They are located in major cities and towns.
(3)They occupy large building.
(4)Goods old are tagged with prices.
(5)Each department deals in one line of product.
(6)Buying and selling is decentralized.
(7)Provision of wide range of goods in one location.

ADVANTAGES OF DEPARTMENTAL STORES

(1)Provision of special services, like telephone and restaurant.
(2)They ensure bulk buying.
(3)Profit of one department can be used to offset the loss of another department.
(4)It helps in the provision of more job opportunities.
(5)They allow for free movement of customers.

DISADVANTAGES OF DEPARTMENTAL STORES.

(1)It requires large capital to set up
(2)Running cost may lead to high prices.
(3)They do not offer credit to their customers.
(4)They operate on a fixed time frame.
(5)It is not easily accessible to customers outside major towns.

(D)MAIL ORDER BUSINESS

This is a form of retail business in which buying and selling is carried out by post. They contact customer,
receive Order and deliver goods by mail. It involves the use of specially prepared catalogue, showing
their products with prices. Payment can be on cash with order(C.W.O), cash on delivery(C.O.D) and
installments.

FEATURES OF MAIL ORDER BUSINESS

(1)It is shopping by post
(2)Customer are generally in distant location
(3)It requires few staff for operation
(4)It relies heavily on advertisement
(5)It operates by having a large warehouse where the goods can be stored.

ADVANTAGES OF MAIL ORDER BUSINESS

(1)It requires few staff to op3erate efficiently
(2)The business does not require expensive pr3eemises and fittings.
(3)There are opportunities for advertising through catalogue.
(4)They buy in large quantity directly from the producers which help to reduce prices
(5)It eliminate middlemen as goods can be sold directly to the customers
(6)It is an effective and efficient way of reaching those living in distant places and rural areas.
DISADVANTAGES OF MAIL ORDER BUSINESS
(1)The pictures and description in the catalogue may be misleading.
(2)There is absence of personal contact between buyer and seller.
(3)Time is wasted while waiting for the arrival of goods.
(4)There Is absence of physical inspection of goods before purchase is made.
(5)It involves large amount of capital
(6)There is high risk of loss of goods when sent by post.

(E)HYPERMARKET
These are large supermarkets offering wide range of products with self service and free car parking lot.
They are usually situated outside the town and are common in America. Examples are Mallmart
Hypermarket and SPAR hypermarket .

(F)RETAIL CO-OPERATIVE SOCIETY

This is a form of co-operative in which many small independent retailers pool their resources together to
enable bulk purchase and then sell at lower prices. Profits are shared based on members patronage.

MODERN TRENDS IN RETAILING

(A)SELF SERVICE:
This is a system that allows a customer to go round and select the products he/she wants to buy without
the help of the shop attendants. Baskets and trolleys are provide3d to ensure effectiveness.

CHARACTERISTICS OF SELF SERVICE

(1) Trays and baskets are provided for carrying goods
(2)There goods are well arranged and displayed on shelves.
(3)Cashiers are provided with automatic cash register to receive cash and issue receipt.
(4)The items sold are pre-packed and labeled with prices.

ADVANTAGES OF SELF SERVICE

(1)Customers have freedom of selection
(2)It encourages impulse buying
(3)It brings about increase in sales.
(4)It saves time and energy since bargaining is avoided.
(5)It ensures the convenience of customers.

DISADVANTAGES OF SELF SERVICE

(1)It creates opportunities for pilfering.
(2)It increases running cost as large space is required.
(3)Less personal assistance is given to customers.
(4)It is targeted at upper and middle class.
(5)The use of trolley, trays and baskets increases running cost of the organization.

(B)AFTER SALES SERVICES

These are services a retailer provides to a customer after the purchase of a product. It includes home
delivery, installation, free maintenance and repair of faulty parts. After sales services is normally for a
short period and it is not automatic with all purchases. The purchaser must get a warranty or a
guarantee from the manufacturer/seller.

ADVANTAGES OF AFTER SALES SERVICES

(1)It creates confidence for buying.
(2)It helps retailers to retain their customers.
(3)Retailers get direct feedback on the performance of their product.
(4)It is used to cope with greater complexity of goods (New technology)

DISADVANTAGES OF AFTER SALES SERVICES

(1)Higher prices may be charged for extra service.
(2)Customers can fiddle with the product, hoping that when it spoils the retailer will repair it.

(C)BRANDING
This is a distinctive name a firm gives to its products to distinguish it from similar products of other
competitive manufacturers. Branding cover the name of the product, design and symbols. Branding
prevents product adulteration and helps in differentiating a product. Examples of brand names are Coca-
Cola, Joy soap, Omo, etc.

ADVANTAGES OF BRANDING
(1)Branded goods are easily recognized.
(2)Branding of goods makes self-services and pre-packaging of goods viable.
(3)It if a form of advertising
(4)It helps to maintain quality
(5)It reduces the incidence of fake products.
(6)It aids the description of goods.

DISADVANTAGES OF BRANDING
(1)It may create false buying.
(2)It brings about increase in the cost per unit of a product.

(D)PRE-PACKAGING
This is the weighing , measuring, wrapping and labeling of a product by the producer. Pre-packed goods
protect the goods from external contamination due to handling by retailers and consumers.

ADVANTAGES OF PRE-PACKAGING
(1)It makes branding and advertising possible.
(2)It makes it possible for manufacturer to provide written information about a product.
(3)It makes it possible for harmful chemical product to be packed for safety.
(4)False declaration of weights and measures is minimized since the product can be traced to the
manufacturer

DISADVANTAGES OF PRE-PACKAGING
(1)It does not allow for product examination by customers.
(2)Cost of packaging attracts higher prices for goods
(3)It contributes to the littering of the environment.
(4)False declaration o the quality of goods might be given by some manufacturer.

(E)VENDING MACHINE
This is a machine that automatically dispense pre-packed items stored in it when the appropriate value
coin is inserted in its slot. Items sold with vending machine include fuel, tickets, snacks, ice-cream, soft
drinks, etc.

ADVANTAGES OF VENDING MACHINE

(1)It provides twenty four (24) hours services daily.
(2)It ensures self service.
(3)It Is good for emergency situation.
(4)It saves time.
(5)Customers pays uniform price for same quantity of goods.

DISADVANTAGES OF VENDING MACHINE

(1)It is vulnerable to pilferage
(2)It attracts additional maintenance cost.
(3)There is no provision for balance collection after sales.

(B) Foreign Trade: This is the buying and selling of goods and services beyond the boundary of a country for profit. It is also
known as international trade or external trade. It is divided into:-
(i) Import Trade
(ii) Export Trade
(iii) Entreport Trade

(i) Import trade: This is the buying of goods and services from seller in other countries.

(ii) Export Trade: This is the sale of goods and services to buyers in others countries.

(iii) Export Trade: This is the process of importing goods for the purpose of re-exporting to other countries.

TYPES OF FOREIGN TRADE

(a)BILATERAL INTERNATIONAL TRADE:- This is the exchange, buying and selling of good and services
between two countries.

(b)MULTILATERAL INTERNATIONAL TRADE:-This is the exchange, buying and selling of good and services
among different countries.

SIMILARITIES BETWEEN FOREIGN TRADE AND HOME TRADE

(1)Both trades involve the use of money as a medium of exchange

(2)Both forms of trade involve the buying and selling of gods and services.

(3)Both forms of trade involve the activities of middlemen

(4)Both trades arise due to the distribution of natural and productive resources.

(5)Both trades involve cost in the area of transportation.

 DIFFERENCES BETWEEN HOME TRADE AND FOREIGN TRADE
HOME TRADE FOREIGN TRADE

(1)The exchange , buying and selling of goods and (1)The exchange, buying and selling of
services does not exceed the boundary of a goods and services goes across the
country boundary of a country.

(2)Same currency is used for trade (2)It involves the use of two or mor3e
currencies.

(3)There is no restriction placed on trade (3)Restrictions are placed on trade like

embargo, quota, tarrifs,etc.

(4)Transport cost is lower in home trade (4)Transport cost is higher in foreign

trade

(5)The same weights and measures are in use (5)Different weights and measures are
in use.

(6)There is language barrier in home trade (6)There is language barriers in foreign

trade