What is Retail Trade?
Trade plays an important role in the industrial development of a country. Trade includes buying and selling goods and services with the view of earning profits. Trade can broadly be classified into (i) internal trade and (ii) external trade. Trade that is carried on within the boundaries of a country is called internal trade, whereas trade between two or more countries is called external trade. Further, internal trade can be categorized into (i) wholesale trade and (ii) retail trade. Wholesale trade refers to the trade in which goods and services are sold in large quantities. Retail trade refers to the sale of goods and services to final consumers in small quantities. The present article discusses the detailed meaning of retail trade and explains its various type.
Retail trade refers to the trade under which goods or services are brought in large quantities from a wholesaler and sold to the ultimate consumers in small lots.
Retail trade is the last link in the distribution system. It is the final stage in the distribution process where goods are transferred from the wholesaler or manufacturer to the final consumers. The goods are sold to the ultimate consumers for their personal use and not for commercial use. Various methods can be used to sell goods in retail trade, such as door-to-door, over the phone, television, vending machines, or through Internet, etc. Retail trade can be carried in a different location, including a store, the customer’s home, or any other location. For example, the sale of a pen or a book on a roadways bus, the sale of detergent powder on a door-to-door basis.
A person who sells goods in this way according to the need of consumers is called a retailer. A retailer means a person who purchases goods and services in large quantities and sells them repeatedly in small quantities. A retailer performs different functions in the distribution process, like purchasing goods from wholesalers, arranging the storage of goods, selling them in small lots, and providing credit to the buyers, etc.
Features of Retail Trade
- It is the last link in the distribution channel.
- Retailer purchases goods from wholesalers and sells them to consumers.
- Retailer deals in a variety of goods.
- The retailer sells goods to customers in small quantities.
- Retailers usually sell goods to consumers for their personal use and not for further sale.
- Retailers generally have a personal relationship with their customers.
- Retailers can contact their customers through TV, the Internet, or phone.
- Retailers are typically found in residences.
Types of Retailers/Retail Trade
From the viewpoint of the convenience of study, retail trade can be categorized as under:
1. Itinerant
Itinerants refer to retailers who have no definite selling point and sell their goods by visiting various places. They wander from one location to another in search of customers. They are also known as mobile vendors.
Characteristics of Itinerants:
- Deal in low-price, daily use, and nonstandard items, like fruits and vegetables.
- Simple business setup.
- Maintains personal contact with the customers.
- Minimal investment is required.
- Sells goods on a cash basis.
They can further be classified into:
(i) Hawkers and Pedlars
These traders are the smallest unit of retailers. They carry their goods on wheel carts, on their heads, on the back of animals, or shoulders, and move around bazaars, streets, and mohallas to sell them. The hawkers carry goods in wheeled vehicles while the pedlars carry the goods on their heads or backs. Their things are low-priced and provide entertainment. They generally include sweets, toys, artificial jewellery, fruits, and vegetables.
Features of Hawkers and Pedlars:
- They offer a wide range of goods for sale including fabrics, sweets, toys, fruits, and vegetables.
- Their price varies according to the bargaining strength of the customers. Thus, they do not have a fixed price policy.
- They deal with non-branded and local items.
- They provide goods at the doorstep of the customer.
- They can also be found in buses, trains, railway stations, etc.
(ii) Periodic Market traders
They sell their goods on fixed days in various places. In big cities, weekly markets are held in different parts of the city. These retailers sell their goods at periodic markets such as weekly, monthly, or annually. For example, weekly markets are held on a fixed day and are popularly known by the name of the day. Monday Market in Karol Bagh, Wednesday in Rohini.
Features of Periodic Market traders:
- They sell low-cost consumer goods like fabrics, vegetables, crockery, toys, etc.
- They set up their shop with a temporary structure.
- They cater to the needs of lower-income customers.
- They market goods at gatherings at special events like annual fairs, festivals, etc.
- They deal in low prices and low low-quality goods.
(iii) Street vendors
They sell their goods from the footpath on the roadside, on busy street corners, on pavements, on bus stands, etc. They place their goods in crowded places. It is very easy for customers to purchase things from them. They sell things of daily use. For example, selling newspapers or magazines on the stand.
Features of Street vendors:
- They are very popular. It is convenient for people to pick up items on their way back home from work.
- They deal in a variety of products such as towels, mirrors, newspapers, handkerchiefs, etc.
- They generally operate close to public places such as railway stations, cinema halls, temples, etc.
- They sell low-priced, daily-use items.
- They are different from market traders as they do not change their business place so frequently.
(iv) Cheap Jacks
They take some temporary shop or some open space on rent for a temporary period and carry out their trade. They deal in low-priced, household articles. They deal with consumer items and services like the repair of watches, shoes, etc.
Features of Cheap Jacks:
- They hire small shops where they display goods.
- They offer household articles, readymade garments, and other low-priced products.
- They move from one locality to another based on business opportunities. However, they do not change as frequently as in the case of hawkers or market traders.
2. Fixed Shops Retailers
These retailers have a fixed place of sale. They do not move from one location to another in search of customers. They have shops in the market or residential areas. These retailers do not move from one place to another. Customers come to their shops to purchase goods and services.
Characteristics of Fixed shops retailers:
- They deal with different products like durables and non-durables.
- They operate on a larger scale than itinerants.
- Provide various services to their customers, like home delivery, credit facilities, repairs, etc.
On the basis of the size of the operation, they can further be classified into:
(i) Small-scale Fixed shops
Small-scale retailers are the most common form of retailer. They are found on every corner of most cities. To fulfil the needs of the people residing in the local areas, they are situated in the localities. Small-scale retailers are of five types:
1. General Stores
General Stores sell goods of daily use which are of good quality. They are located at such places which are visited by a large number of people. The things sold in the stores include bread, butter, toothpaste, stationery, socks, etc.
Features of General Stores:
- They are mostly found in residential colonies.
- They have a large variety in each line of products.
- They provide free home delivery, credit card facility, and other services.
- They create a personal relationship with the customers and keep them happy and satisfied.
2. Specialty Stores
These are Single-line stores that deal with one line of products. For example, stores dealing in garments have ladies’ garments, children’s garments, and gent’s garments, etc.
Features of Specialty Stores:
- These stores deal with one line of products like garments line, stationery line, textiles, medicines, shoes, etc.
- They offer a wide choice to their customers in the selection of a particular product.
- They are generally located in central places in order to attract a large number of customers.
- They specialize only in one product of a certain line instead of all products of that line.
3. Street Shops
These are situated at road crossings or on main roads. They are also known as street stalls. An individual entrepreneur runs such shops under his own close supervision.
Features of Street Shops:
- They deal in a wide range of low-priced products such as hosiery items, toys, magazines, etc
- These shops have limited space.
- These are temporary platforms used to display the goods for sale.
- Nowadays, they keep better quality products.
4. Second-hand Goods
These shops deal with second-hand goods, such as furniture, books, utensils, etc.
Features of Second-hand Goods:
- These shops sell used goods.
- These shops are mainly for poor people, who cannot afford to buy new goods.
- They buy goods from private and public auctions.
- The goods are generally priced low because these are used goods.
5. Second Shops
These shops sell goods that have some manufacturing defects. Thus, goods are sold at heavy discounts.
Features of Second Shops:
- Goods are sold at a heavily discounted price.
- These shops deal in products which have some manufacturing defect.
- Many manufacturers have their own seconds shops to clear their defective stocks.
- Sometimes these shops are set up temporarily by taking premises, halls, and banquets on hire.
(ii) Large-scale Fixed shops
They manage the vast collection of goods and make bulk purchases of goods. They require heavy investment. These shops enjoy various benefits of centralization, specialization, and storage. Large-scale retailers are of six types:
1. Departmental Stores
Departmental Stores include dividing a large retail showroom into many departments. Each department sells some particular things. For example, Shoppers Shop includes cosmetics, clothing, fragrances, etc.
Features of Departmental stores:
- It is generally located at a central place in the city so that people living in different areas may reach them easily.
- These offer a large variety of goods and customers can purchase almost all their requirements from these stores.
- It purchases goods directly from manufacturers, which sells them to the ultimate customers.
2. Chain Stores
These stores include numerous shops selling the same kind of goods owned by a single business enterprise.
Features of Chain stores:
- These shops are located in populated localities, where a sufficient number of customers can be approached.
- The head office normally appoints inspectors, who inspect the retail shops with the respect to the quality of customer service provided, adherence to policies of the head office, and so on.
3. Mail-order houses
This business sells goods from catalogues without any personal contact with its consumers. It represents that form of retailing in which business transactions are conducted through postal communication, without any personal contract with the buyers.
Retailers can sell their products through stalls, footpaths, wheel carts, shops, malls, TV, phone, or the Internet. Thus, if the sales are made directly to the consumers, it will be considered retailing irrespective of the ‘how‘ the products are sold or ‘where‘ the sale is made.