Retail Trade and its Classification
There are many types of retailers . For proper understanding, it would be useful, to classify them into certain common categories. Different classifications have been used by experts to categorise retailers into different types. For example, on the basis of ‘size of business’, they may be categorised into large, medium and small retailers. On the basis of ‘type of ownership’, they may be categorised into ‘sole trader’, ‘partnership firm’, ‘cooperative store’ and ‘company’. Similarly, on the basis of ‘merchandise handled’, the different classifications may be ‘speciality store’, ‘supermarket’ and ‘departmental store’. Another common basis of classification is whether or not they have a fixed place of business. On this basis, there are two categories of retailers: (a) Itinerant retailers, and (b) Fixed shop retailers.
- Itinerant Retailers: Itinerant retailers are traders who do not have a fixed place of business to operate from. They keep on moving with their wares from street to street or place to place, in search of customers. These vendors frequently sell low-cost items and items that are used on a regular basis, such as vegetables. These dealers are unable to set a fixed price for a commodity and will sell the same product at various rates in different locations. For example, vegetable merchants, selling door to door, will charge higher rates than market vendors. Typically, they are low-cost, easily digestible goods.
Characteristics
(a) They are small traders operating with limited resources. (b) They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and so on.
(c) The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers.
(d) As they do not have any fixed business establishment to operate from, these retailers have to keep their limited inventory of merchandise either at home or at some other place. Some of the most common types of itinerant retailers are:
(i) Peddlers and hawkers:
Peddlers and hawkers are probably amongst the oldest form of retailers in the market place who have not lost their utility even during the modern times. They are small producers or petty traders who carry the products on a bicycle, a hand cart, a cycle-rickshaw or on their heads, and move from place to place to sell their merchandise at the doorstep of the customers. They generally deal in non-standardised and low value products such as toys, vegetables and fruits, fabrics, carpets, snacks and ice creams, etc. They are also found in streets of residential areas, places of exhibitions or meals, and outside schools, during a lunch break. The main advantage of this form of retailing is the provision of convenient service to the consumers. However, one should be careful in dealing with them, as the products they deal in are not always reliable in terms of quality and price.
(ii) Market traders
Market traders are the small retailers who open their shops at different places on fixed days or dates, such as every Saturday or alternate Saturdays, and so on. These traders may be dealing in one particular line of merchandise, say fabrics or ready-made garments, toys, or crockery, or alternatively, they may be general merchants. They are mainly catering to lower-income group of customers and deal in low-priced consumer items of daily use.
(iii) Street traders (pavement vendors)
Street traders are the small retailers who are commonly found at places where huge floating population gathers, for example, near railway stations and bus stands, and sell consumer items of common use, such as stationery items, eatables, ready-made garments, newspapers and magazines. They are different from market traders in the sense that they do not change their place of business so frequently.
(iv) Cheap jacks
Cheap jacks are petty retailers who have independent shops of a temporary nature in a business locality. They keep on changing their business from one locality to another, depending upon the potentiality of the area. However, the change of place is not as frequent as in the case of hawkers or market traders. They deal in consumer items as well as services such as repair of watches, shoes, buckets etc.
(a) Fixed Shop Retailers
This is the most common type of retailing in the market place. As is evident from the name, these are retail shops who maintain permanent establishment to sell their merchandise. Shops are typically located near residential areas or in markets to attract clients. These types of retail traders also have the advantage of offering consumer pleasure through a variety of services such as warranties, discounts, and so on.
Examples of such trade locations are grocery stores, clothes merchants, department stores, and supermarkets. This is the most popular kind of retail business, in which merchants set up shop in a marketplace or near residential neighbourhoods. Consumers may approach these retail dealers, often known as stores, and acquire the things they require.
Characteristics
(a) Compared with the itinerant traders, normally they have greater resources and operate on a relatively large scale. However, there are different size groups of fixed shop retailers, varying from very small to very large.
(b) These retailers may be dealing in different products, including consumer durables as well as non-durables.
(c) This category of retailers has greater credibility in the minds of customers, and they are in a position to provide greater services to the customers such as home delivery, guarantees, repairs, credit facilities, availability of spares, etc.
Classification of fixed shop retailers
The fixed-shop retailers can be classified into two distinct types on the basis of the size of their operations. These are: (a) small shop-keepers, and
(b) large retailers.
The different types of retailers falling under the above two broad heads are described as follows:
Fixed Shop Small Retailers
- General stores: General stores are most commonly found in a local market and residential areas. As the name indicates, these shops carry stock of a variety of products required to satisfy the day-to-day needs of the consumers residing in nearby localities. Such stores remain open for long hours at convenient timings and often provide credit facilities to some of their regular customers. The biggest advantage of such stores is in terms of convenience to the customers in buying products of daily use such as grocery items, soft drinks, toiletry products, stationery and confectionery. As most of their customers are residents of the same locality, an important factor contributing to their success is the image of the owner and the rapport he has established with them.
- Speciality shops: This type of retail store is, of late, becoming very popular, particularly in urban areas. Instead of selling a variety of products of different types, these retail stores specialise in the sale of a specific line of products. For example, shops selling children’s garments, men’s wear, ladies shoes, toys and gifts, school uniforms, college books or consumer electronic goods, etc. These are some of the commonly found stores of this type in the marketplace. The speciality shops are generally located in a central place where a large number of customers can be attracted, and they provide a wide choice to the customers in the selection of goods.
- Street stall holders: These small vendors are commonly found at street crossings or other places where flow of traffic is heavy. They attract floating customers and deal mainly in goods of cheap variety like hosiery products, toys, cigarettes, soft drinks, etc. They get their supplies from local suppliers as well as wholesalers. The total area covered by a stall is very limited and, therefore, they handle goods on a very small scale. Their main advantage is in providing convenient service to the customers in buying some of the items of their needs.
- Second-hand goods shop: These shops deal in second-hand or used goods, like books, clothes, automobiles, furniture and other household goods. Generally, persons with modest means purchase goods from such shops. The goods are sold at lower prices. Such shops may also stock rare objects of historical value and antique items which are sold at rather heavy prices to people who have special interest in such antique goods. The shops, selling second-hand goods may be located at street crossings or in busy streets in the form of a stall having very little structure—a table or a temporary platform to display the books or may have reasonably good infrastructure, as in the case of those selling furniture or used cars or scooters or motorcycles.
Fixed shop—Large stores
- Departmental stores: A departmental store is a large establishment offering a wide variety of products, classified into well-defined departments, aimed at satisfying practically every customer’s need under one roof. It has a number of departments, each one confining its activities to one kind of product. For example, there may be separate departments for toiletries, medicines, furniture, groceries, electronics, clothing and dress material within a store. Thus, they satisfy diverse market segments with a wide variety of goods and services. Some of the important features of a departmental store are as follows:
(a) A modern departmental store may provide all facilities such as restaurant, travel and information bureau, telephone booth, restrooms, etc. As such they try to provide maximum service to higher class of customers for whom price is of secondary importance. (b) These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
(c) As the size of these stores is very large, they are generally formed as a joint stock company managed by a board of directors. There is a managing director assisted by a general manager and several department managers.
(d) A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate separate warehouses. That way they help in eliminating undesirable middlemen between the producers and the customers.
(e) They have centralised purchasing arrangements. All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralised in different departments.
Chain Stores or Multiple Shops: Chain stores or multiple
shops are networks of retail shops that are owned and operated by manufacturers or intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country. These different shops normally deal in standardised and branded consumer products, which have rapid sales turnover. These shops are run by the same organisation and have identical merchandising strategies, with identical products and displays. Some of the important features of such shops may be described as follows:
(a) These shops are located in fairly populous localities, where sufficient number of customers can be approached. The idea is to serve the customers at a point which is nearest to their residence or work place, rather than attracting them to a central place.
(b) The manufacturing/procurement of merchandise for all the retail units is centralised at the head office, from where the goods are despatched to each of these shops according to their requirements. This results in savings in the cost of operation of these stores.
(c) Each retail shop is under the direct supervision of a Branch Manager, who is held responsible for its day-to-day management. The Branch Manager sends daily reports to the head office in respect of the sales, cash deposits, and the requirements of the stock.
(d) All the branches are controlled by the head office, which is concerned with formulating the policies and getting them implemented.
(e) The prices of goods in such shops are fixed and all sales are made on cash basis. The cash realised from the sales of merchandise is deposited daily into a local bank account on behalf of the head office, and a report is sent to the head office in this regard.
Mail Order Houses: Mail order houses are the retail outlets that sell their merchandise through mail. There is generally no direct personal contact between the buyers and the sellers in this type of trading. For obtaining orders, potential customers are approached through advertisements in newspapers or magazines, circulars, catalogues, samples and bills, and price lists sent to them by post. All the relevant information about the products such as the price, features, delivery terms, terms of payment, etc., are described in the advertisement. On receiving the orders, the items are carefully scrutinised with respect to the specifications asked for by the buyers and are complied with through the post office. There can be different alternatives for receiving payments. First, the customers may be asked to make full payment in advance. Second, the goods may be sent by Value Payable Post (VPP). Under this arrangement, the goods are sent through post and are delivered to the customers only on making full payment for the same. Third, the goods may be sent through a bank, which is instructed to deliver the articles to the customers. In this arrangement there is no risk of bad debt, as the goods are handed over to the buyers only after he makes full payment. However, there is a need to ensure the buyers that the goods despatched are in accordance with their specifications. This type of business is not suitable for all types of products. For example, goods that are perishable in nature or are bulky and cannot be easily handled, are not recommended for mail-house trading. Only the goods that can be (i) graded and standardised, (ii) easily transported at low cost, (iii) have ready demand in the market, (iv) are available in large quantity throughout the year, (v) involve least possible competition in the market and (vi) can be described through pictures etc., are suitable for this type of trading.
Consumer Cooperative Store: A consumer cooperative store is an organisation owned, managed and controlled by consumers themselves. The objective of such stores is to reduce the number of middlemen who increase the cost of produce, and thereby provide service to the members. The cooperative stores generally buy in large quantity, directly from manufacturers or wholesalers and sell them to the consumers at reasonable prices. Since the middleman are eliminated or reduced, the members get products of good quality at cheaper rates. The profits earned by consumer cooperative stores during a year are utilised for declaring bonus to members and for strengthening the general reserves and general welfare funds or similar funds for social and educational benefits of the members. To start a consumer cooperative store, at least 10 people have to come together and form a voluntary association and get it registered under the Cooperative Societies Act. The capital of a cooperative store is raised by issue of shares to members. The management of the store is democratic and entrusted to an elected managing committee where one man one vote is the rule. The liability of the members of a cooperative store is generally limited to the extent of the capital contributed by them. To ensure fair management of funds, the accounts of the stores are audited by the Registrar of Cooperative Societies or a person authorised by him/her.
Super Markets: A super market is a large retailing business unit selling wide variety of consumer goods on the basis of low price appeal, wide variety and assortment, self-service and heavy emphasis on merchandising appeal. The goods traded are generally food products and other low priced, branded and widely used consumer products such as grocery, utensils, clothes, electronic appliances, household goods, and medicines. Super markets are generally situated at the main shopping centres. Goods are kept on racks with clearly labelled price and quality tags in such stores. The customers move into the store to pick up goods of their requirements, bring them to the cash counter, make payment and take home the delivery. Super markets are organised on departmental basis where customers can buy various types of goods under one roof. However, as compared to departmental stores, these markets do not offer certain services such as free home delivery, credit facilities, etc., and also do not appoint sales persons to convince customers about the quality of products. Some of the important characteristics of a super market are as follows:
(i) A super market generally carries a complete line of food items and groceries, in addition to non-food convenience goods.
(ii) The buyers can purchase different products as per their requirements under one roof in such markets.
(iii) A super market operates on the principle of self-service. The distribution cost is, therefore, lower. (iv) The prices of the products are generally lower than other types of retail stores because of bulk purchasing, lower operational cost, and low profit margins.
(v) The goods are sold on cash basis only.
(vi) The super markets are generally located at central locations to secure high turnover.
Conclusion
There are many different types of retail trading. Items are not required to be sold in a store; retail commerce can also take place over the phone, over the mail, or through door-to-door sales. As a result, the point of sale might be anything from a store to a supermarket to the customer’s home or even a vending machine. However, one thing that all of the aforementioned examples have in common is that the buyer of the items is the end customer. It will be retail commerce as far as this is true.