CHAPTER 2: RETAIL TRADE

Retail trade is the selling of goods in small quantities.

A retailer is a person or organization who buys goods in bulk and sells them in small quantities, usually to final
consumers.

FUNCTIONS OF THE RETAILER

 Providing goods in suitable sizes and quantities

 Providing goods in a suitable place for customers
 Providing a variety of goods for their customers
 Providing goods at convenient times
 Giving advice to consumers on goods.
 May provide credit facility to regular customers
 Offering delivery services for some goods
 Providing pre-sale and after-sale services
 Acting as a channel of communication between consumers and manufacturers

TYPES OF RETAILERS
There are two types of retailers namely:
 Small scale retailers
 Large scale retailers

DIFFERENCE BETWEEN LARGE SCALE AND SMALL SCALE RETAILERS

SMALL SCALE RETAILERS LARGE SCALE RETAILERS

Less capital needed to set up Large amount of capital needed to set up

Less goods offered Wide range of goods

Less stock More stock

Personal contact with customers Self service method used

SMALL SCALE RETAILERS

1MOBILE SHOPS:

These are traders that take their goods to the customers in vans, trucks and bicycle, e.g. Milkman, bakery vans etc.

ADVANTAGES

 They can reach isolated areas where there are no shops.

 Their operation costs are low, so they tend to be cheaper.
 Helpful to people who are busy to find time to go out shopping.

2. HAWKERS:

They are traders who sell goods by moving from one house to another. They operate in urban centers. Hawking is
formal way of selling as it is properly licensed.

ADVANTAGES

 They give their customers personal attention and maintain a close contact with them
 Their operation cost and prices are much lower.
 No advertising costs
1
DISADVATAGES

 Hawkers can be attacked by thieves or criminals

 People go to work , hawkers hardly find anybody at home
 They are not reliable sometimes because If the hawker falls sick then customers would go without bread for
their morning tea

3. STREET MARKET OR MARKET STALLS HOLDERS:

Many towns have street markets usually stalls are erected in these markets from which traders sell their goods. At
Gaborone/Francistown railway stations and taxi part street market have developed. Street markets do not accept to
refund customers in case the goods purchased are not satisfactory, do not offer guarantee and Criminals and bad
weather.

4 ITINERANTS’ TRADERS:

These are people who move from door to door carrying a handful of things for sale. They do not have trading
licenses. They are commonly seen around with large boards with few items such as watches, earrings, shaving blades
etc.

5 ROADSIDE TRADERS:
These are roadside sellers. They have no trading licenses. They sell a few vegetables sweets. Their main problem is
weather and no guarantee on goods they are selling

6 DISCOUNT SHOPS:

These are retail outlets, which work on the principle of low mark up but large turnover. They usually offer specialize
in branded durables such as Furniture, fridges, electrical appliances etc. pawn shops can be an example of discount
shops

7 TIED SHOPS:

Tied shops specialize in selling the products made by only one manufacturer. Filling stations like Total, Caltex, Engen,
Shell and BP. They only sell petroleum products made by their manufacturers.

8 SOLE TRADERS OR INDEPENDENT RETAILER

These are commonly known as generally dealers in Botswana. They usually have fixed shops and operate under
license, examples: Saloon, Plumber, Television repairers, Hotels, bars etc.

FEATURES OF THE SOLE TRADER

 This is a business owned by only one person

 The sole trader contributes capital.

 Sole trader takes the profit as his/her reward.

 The sole trader uses his/her lab our often assisted by one or two employees of his/her family members.

ADVANTAGES OF A SOLE TRADER

 The business is easy to set up, control and manage.

 It requires a small amount of capita to set up.

 The owner makes independent and quick decisions.

2
  The owner has personal contact with his/her workers as well as customers.

 The owner takes all the profits made by the business.

 The business can easily adapt to changing circumstances, so it is very flexible.

DISADVANTAGES OF A SOLE TRADER

 The owner personal assets are at risk because the business has unlimited liability.

 The business cannot do without the owner, it might end when the owner dies

 Difficult for the sole trader to borrow money so expansion is difficult.

 The size of business is rather small. So it cannot benefit from economies of scale.

 As a retailer you have to work long hours and sole trader is jack of all trade.
WHY THE NUMBER OF SMALL INDEPENDENT RETAILERS HAS DECLINED IN RECENT YEARS.

The rapid decline of the independent traders is largely caused by the following factors: (Large Scale Retailers).

Competition: The large-scale retailers buy their stock in bulk direct from the producers at factory price and get
discount. As a result they can afford to pass these benefits to the consumers in the form of lower prices. For this
reason the small retailers who obtain their supplies from the wholesalers at higher price and whose operation costs
are higher, cannot complete with items. As a result many independent retailers are losing customer.

Lack of capital: Many small retailers have difficulties in raising enough capital to expand their business. They use old
and inefficient equipment. So they are losing business to large retailers most of which are run as companies who can
easily raise additional capital.

Poor business location: Due to lack of capital, the small retailer cannot afford prime sites on main streets. Therefore
they are restricted to areas in the outskirts of towns and villages, which have little business.

Range of goods and services offered: Large-scale retailers deal with wider range of goods. Besides they provide
additional services such restaurants and other amenities. The small retailers cannot provide such services as well as a
wide range of goods. (Car parking, free delivery services, facilities)

Poor management: Many of the small retail stores are poorly managed. There is very little accountability. The
owners draw cash from the till without proper records and shoplifting is common. As a result many find themselves
eating up all their capital until and business closes down.

OTHER REASONS INCLUDE

 Overcharging or raising prices. Unnecessarily may drive people away from a shop.
 Selling outdated goods may force people to buy from competition.
 Shop lifting and employee theft is a very serious for retail shops.
 Failure to offer credit may drive people away from a shop.
 Lack of advertising or promotion may lead to low sales.

WHY SOME SMALL RETAILERS HAVE CONTINUED TO TRADE SUCCESSFULLY

Some small retailers have continued to trade successful even though the larger retailers seem to be taking over the
entire business of retailing. This has been true for small retailer who:
 Are dealing in highly specialized goods requiring specialized services such as doctors, jewelers. (Personal
advice is also given by the small retailer as he knows his customer well)
 Are well placed near their customers.
3
  Offer personal services and attention to their customers.
 Offer wider range of right goods and services required by their customer
 Some markets are small enough to suit small retailers. Eg. Key cutting, shoe repair.
 Those who can open long hours and offer services such as credit, delivery.

LARGE SCALE RETAILERS

These are retailers operating on large scale and offering a wider range of goods and services to the customers.
Examples of large scale retailers are as follows: Supermarket, hypermarket, retail co-operative societies, chain store,
department stores and mail order firms.

TYPES OF LARGE SCALE RETAILERS

SUPERMARKETS
A supermarket is a self-service retail outlet with over 200 square meters of selling space e.g. Shoprite, Spar, and
Checkers supermarkets.

CHARACTERISTICS OR FEATURES OF SUPERMARKETS

 They are usually located in busy shopping centres.
 They buy in bulk direct from producers, so operation costs are lower.
 Check outs or pay desks are setup near the exit where cashiers collect payments from the customer.
 They sell a wide range of fast moving customer’s goods such as groceries, meat, vegetables, cosmetics,
kitchen utensils, toiletries general household goods etc.
 Goods attractively displayed and within the easy reach of shoppers. Customers serve themselves, so a small
number of sales assistants are required.
 Facilities like trolleys and shopping baskets are provided for customers.

ADVANTAGES OF THE SUPER MARKET TO THE CONSUMER

 A wider range of goods is available.
 Customer makes a device without being rushed by a sales assistant.
 Customers can serve themselves quickly and they save their time.
 Social amenities like music, car parks, air conditioning etc provides pleasant shopping.
 Goods are neatly displayed. So they are easy find.

DISADVANTAGES OF SUPERMARKET TO THE CUSTOMER

 Most goods are pre-packaged. So they cannot be closely inspected by customers.
 Lack of personal attention to customers can be a problem especially to illiterate people.
 It is possible that there can be delays at the check outs, if there are many customers.
 Credit and delivery services are usually not provided.
 Impulse buying may tempt the customers to overspend.

ADVANTAGES OF THE SUPER MARKET TO THE RETAILER (SHOP OWNER)

 Clever display of goods by retailer leads to impulse buying which leads to increased sales and possibly profits
 Customers serve themselves, it is labour saving
 Their purchase prices are lower as they buy in bulk
 Lower costs enable the retailer to offer lower prices

DISADVANTAGES OF THE SUPER MARKET TO THE RETAILER (SHOP OWNER)

 Shoplifting this is the stealing of goods by customers which can lead to losses to shop owner.
 Require lots of space and located in town centres their rents are very high.
 Equipment such as trolleys, camera, shopping baskets etc means additional costs
 Shopping trolleys are sometimes stolen

4
HYPER MARKET
Hyper markets are very large retail outlets with over 5000 square meters of selling space. Example of hypermarket
Sefalana hyper store (Metsef)

FEATURES OR CHARACTERISTICS OF HYPERMARKET

 They are self-service stores.
 They offer a wider range of goods than supermarkets.
 Goods are neatly displayed in different sections.
 Goods are sold on a cash and carry basis.
 Facilities like restaurants, car parks etc may be provided.
 These are normally located outside town.

ADVANTAGES OF HYPERMARKETS TO THE CONSUMER

 Goods are offered at cheaper prices.
 There is plenty of parking area for customers
 The customer enjoys amenities like restaurants, music etc.
 They sell a wide range of goods.
 They provide long opening hours.
 Facilities like trolleys and baskets are provided.
 Hyper markets are self-service stores.

DISADVANTAGES OF HYPER MARKET TO THE CONSUMER

 The shops are too big and there are too many goods. So it may be difficult to find some items.
 They are too large and impersonal customers are not given personal attention.
 They are destroying the small local shops most of which are conveniently located near the customers.

ADVANTAGES OF HYPER MARKETS TO THE RETAILER

 The retailer enjoys economics of sale.
 Self-service promotes impulse buying which leads to higher turnover.
 Hyper markets sell large volumes of goods every day.

DISADVANTAGES OF HYPER MARKETS TO THE RETAILER

 They are expensive to set up and need too much land.
 They are out of town so they rely mainly on people with private cars.
 Shop lifting is also a problem of hyper market.

MULTIPLE STORES OR CHAIN STORES

These stores sell identical and limited range of goods under centralized ownership and control. They are actually a
group of shops owned by the same company with branches all over the country and all over the world.

Types of multiple stores:

There are 2 types of multiple stores namely:
 Variety chain stores e.g. Woolworth - (Cloths and foods)
 Specialist chain stores e.g. Supreme furniture variety stores sell a variety of goods where as specialist stores
sell only a limited range of goods.

CHARACTERISTICS OF CHAIN STORES

 They consist of a number of branches, all over the country.
 Each branch is headed by a branch manager
 The branches are controlled from the head office.
 All stock is bought centrally by the head office and sent to all branches for sale.
 Stock can be moved between branches.
 All branches sell the same line of goods.
 All branches usually use the same name.

5
  They provide uniform quality products.
 They advertise in newspapers, T.V. etc

ADVANTAGES OF CHAIN STORES TO THE CONSUMERS

 They offer at competitive prices to the consumers.
 Goods bought at one branch may be returned at another if not satisfactory
 Shops are identical so they can be easily recognized by customers
 There is some degree of customer attention as sales assistants help the customers.

DISADVANTAGES OF CHAIN STORES TO THE CONSUMER

 They sell similar and limited sale of goods in all branches.
 They rarely sell on credit, except for those in furniture trade.

ADVANTAGES OF CHAIN STORES TO THE RETAILERS

 They buy in bulk directly from manufacturers.
 Chain stores are owned by large companies who employ highly qualified workers.
 Uniformity of chain stores has publicity value.
 Shortage on one branch can quickly be met by calling on another branch.
 Even if one branch makes a loss the company can still absorb it, as long as the other branches make profits.
 Staff can be moved around (transferred) as and when necessary.
 Their advertising, accounting and purchasing are done from the head office which save overhead.
 They can afford to attract customers by giving free gifts.

DISADVANTAGES OF MULTIPLE STORES TO THE RETAILER

 Very large capital is required
 Management of a large group is difficult.
 They are controlled from head office
 The company pays double transport cost since goods have to go to the central depot first and then to the
branches.
 They face severe competition from other large scale retailers.

RETAIL CO-OPERATIVE SOCIETIES

These stores are formed and run by group of consumers on the principle ownership, operation and distributions of
profits. They are therefore owned and financed by their members who buy from the stores. Membership is open to
anyone who buys on the society. Stores are democratically controlled. The main objective is to provide goods to the
members at affordable prices. Each member has one vote regardless of the amount of shares held by him. Examples
of retail cooperatives: Donga Cooperatives by Donga shops

CHARACTERISTICS OF CO-OPERATIVE SOCIETIES

 The members or owners are the people who have bought shares in the society and are also the main
customers.
 Profits are divided as dividends to members in relation to the amount of goods purchased from the store.
They do this by issuing dividend stamps.
 They purchase then stocks from co-operative wholesale societies.
 These stores are run by a committee elected by the members.
 They sell a wide range of goods.
 Members have one vote irrespective of the number of shares they hold.

ADVANTAGES OF RETAIL CO-OPERATIVE SOCIETIES TO THE CONSUMER

 The members enjoy lower prices.
 The stores are nearer to the customers.
 They sell to everybody and not to members only.
 They are democratically controlled in the interest of customers.
 A wide range of goods are usually offered.

6
ADVANTAGES OF RETAIL CO-OPERATIVE TO THE RETAILER
 Large scale operation means they enjoy the economies of scale.
 Payment of dividends tends to encourage regular customers.
 They obtain a share of profits from co-operative wholesale societies.
 They may have their own brand through co-operative wholesale societies.

DISADVANTAGES OF CO-OPERATIVE SOCIETIES

 The stores are in inefficient as the issuing of dividend stamps is a slow process.
 It involves too much paperwork for the staff
 Many co-operative stores have had to merge in order to withstand competition.
 Some people argue that members are matured to remaining loyal customers of the society for fear of losing
the benefits of membership. This restricts their choice of shops and members are forced to buy from the
society even if they could get such goods move coequally elsewhere.
 Many members do not attend meetings. So societies are dominated by a few members.
 Lack of qualified management team retards the progress of the societies.
 There is restriction on the number of shares an individual can buy.

DEPARTMENT STORES
They are large shop with different departments under one roof. Each department specialises in one type of goods.
The aim is usually to provide everything a customer might need in on building which may have many floors. Examples
of Department store Game store.

CHARACTERISTICS OF DEPARTMENT STORES

 The stores are divided into a number of independent departments each stocking only in one kind of good.
 Each department is under the control of a departmental manager who reports to general manager.
 Department stores are owned by large companies and run by a general manager.
 They are usually located in towns or central shopping areas.
 They may provide other amenities like restaurants, bank, music etc to entertain their customers.
 They offer a wide range of goods through their different departments.
ADVANTAGES OF DEPARTMENT STORES TO THE RETAILER
 They buy in bulk usually direct from the producers at factory price.
 Their central location is convenient to customers and attracts trade.
 Losses in one department can be absorbed as long as the other department continues to make profits.
 Each department advertises the others service customers usually pass through more than one department.
 Supervision of department stores is easier as all departments are in one building.

DISADVANTAGES OF DEPARTMENT STORES TO THE RETAILER

 It is costly to provide elaborate amenities as it takes away part of the profits.
 Goods are slightly expensive.
 The cost of staying open beyond normal trading hours is very high as the workers have to be paid overtime
wages.
 Competition with other retailers like hypermarkets, supermarkets is often severe.
 It requires more labour. This leads to higher operation costs.
 Shop lifting may also occur.

ADVANTAGES OF DEPARTMENT STORES TO THE CONSUMER

 They provide a wide range of goods. The customers have the convenience of one-stop shopping.
 Specialisation by the department enables that to provide specialist services suitable to local needs.
 The customers are treated to services such as restaurants, music, banks which make the shopping enjoyable.
 Credit and delivery services are provided.
 Sales assistants are available to help customers in each department.

DISADVANTAGES OF DEPARTMENT STORES TO THE CONSUMER

7
  Department stores are mainly found n towns where many people do their shopping. This is due to heavy
capital investment required to set them up. As a result people from rural areas have to travel long distances
to shop in these stores.

MAIL ORDER FIRMS

Mail order selling is done through the post office. It is common in countries with efficient postal services. It is only
suitable for selling high value, light weight and low volume goods such as watches, jewelers, shoes etc; which can be
sent cheaply through the post.

FEATURES OF MAIL ORDER FIRMS

 Goods are extensively advertised in newspapers, magazine, journals and catalogues are sent free of charge
to customers.
 Some mail order firms advertise their products on televisions and ask for order through telephone numbers.
 Mail order firms have no shops in the literary sense. They only have warehouses and offices through which
they process order. This is because their customers do not physically visit their premises.
 They rely on the post offices to deliver goods to their customers. Their orders are received and goods
dispatched by post.

ADVANTAGES OF MAIL ORDER FORMS TO THE CONSUMER

 Goods are delivered to the customers door by the postman. This is a convent way of shopping because
customer enjoys shopping from his/her own home.
 Credit facility used often help many people who would otherwise not afford the customer to buy.
 Unsatisfactory goods are returnable
 The catalogues provided help customers to select the items they want to buy.

DISADVANTAGES OF MAIL ORDER SELLING TO THE CONSUMER

 The quality of goods is difficult to assess from the catalogues as customers do not have the chance of
inspecting goods before buying them.
 This type of trading is not available in all countries especially where post offices do not deliver mails and
parcels from door to door.
 The price of the goods tend to buy high considering the costs of packing postage etc, which have to be paid
by the customer.
 It can be inconvenience when returning unsuitable goods and wording still, they have to return
unsatisfactory goods at their own expense.
ADVANTAGES OF MAIL ORDER SELLING TO THE RETAILERS
 The trader does not need expensive high street premises. He can locate his shop in old buildings, out of town
and pay relatively low rents.
 Mail order firms enjoy economics of scale.
 The forms employ only a few skilled workers for packaging of goods before posting.
 The operation cost is lower as the form does not need any shop assistants and such facilities as high street
premises, display counters etc.

DISADVANTAGES OF MAIL ORDER SELLING TO THE RETAILER

 Lack of personal contact between buyer and the seller
 The need to hold large stocks in warehouses is very risky as may fall any time.
 The high cost of printing catalogue and commissions paid to post offices drive up operation costs.
 The growth of large scale retailing

GROWTH OF LARGE SCALE RETAILING

The number of large scale retailers has increased. The reasons to this may be due to:
 The end of resale price maintained by producers
 The introduction of self-service method of selling
 Branding and packaging of goods
 Improvement in technology