Introduction
Every year, millions of products are manufactured for consumption. These products vary from daily consumption items to high priced purchases. The selling of goods to the final consumer is termed Retail Trading. Retail trade is usually the final step that takes place in a distribution channel. After a product is manufactured, wholesalers buy bulk quantities of these products. Next, the retail traders buy from these wholesalers or sometimes directly from the manufacturers depending on the scale of the enterprise.
Retail trading is a business activity that involves the sale of finished goods and products to consumers. Traders involved in a retail business, buy the required goods from wholesalers who, in turn, collect from the factories. They can also buy the products directly from the manufacturers, thus, acting as a link between manufacturers or wholesalers and customers.
In the retail business, traders generally buy products in bulk quantities and sell them to the customers at relatively higher prices than when they were bought. Thus, the profit margin is also maintained by the retail trader. In this article, categories and importance of retail trading for wholesalers and manufacturers as well as the services provided by the traders will be discussed ahead.
Classification
Retail business/trade means purchasing the goods from the wholesalers/manufacturers and selling them to the final consumers for a profit. Usually, retail businesses buy bulk quantities at a lower price and then sell them to the customers at a higher price to make profits. Generally, retail traders are classified into two categories:
Itinerant Traders: The selling point, in this case, is not fixed. Itinerant traders move to different places to sell their products. For example, the vegetable vendors, weekly markets, peddlers and hawkers. Generally, in this case, traders come to consumers and make their sales. These traders sell usually lower-priced products and products of daily use like vegetables etc. These kinds of traders cannot set a fixed price of the commodity and will sell the same product at different prices at different places. For example, vegetable vendors who sell door to door will sell at higher prices than the vendors at a market. Usually, these are low price items and readily consumable.
Fixed Shop Traders: Shops are set up in designated places for carrying out the trading of goods and products. Shops are usually set up near residential areas for attracting customers easily or in marketplaces. These kinds of retail traders have an additional benefit of providing customer satisfaction by various means of services such as giving them guarantees, discounts, etc. Grocery stores, clothing retailers, departmental stores, supermarkets are typical examples of such trading places. This is the more common type of retail trading where traders set up shop in a marketplace or near residential areas. Consumers can come up to these retail traders or shops as they are commonly mentioned and purchase the goods they need. For example, Supermarkets, Departmental stores, General stores, Speciality stores, malls etc. These traders provide more services to the customer. Customers also prefer to buy products from these traders as they are more reliable than itinerant traders and they build a relationship with them. These retail traders give customer satisfaction by giving them guarantees, repairs, discounts and credit facilities to their customers.
Importance for Manufacturers/Wholesalers
Distribution of Goods - Manufacturers need not worry about distributing their products in the country themselves. They can set up plants in a particular place and the retail traders and wholesalers will take care of selling their products to the final consumer.
Personal Selling - Some products require selling them to the customers personally. For example, garments are something the customers need help with. So the retail traders bring in their expertise of selling them to the customers.
Enabling Large Scale Operations - Retail traders take their place in the market by acting as a middle man between the manufacturers and their customers thus enabling the manufacturers to produce large quantities.
Market Information and Feedback - Retail traders also play an important role in the feedback mechanism. Retail traders are usually the point of contact with the customers. So any defect or improvement that can be brought upon the product can be conveyed by the retail traders to the manufacturers.
Promotional Activities - Sellers also definitely help in promoting any product. How they arrange their products in their showcase is very important for manufacturers. Product placement is given utmost importance in any supermarket for this reason as part of their promotional activity for a product of some brand.
Services Provided to Consumers
Availability - The need for a particular product may arise anytime. So to fulfil that need, products are available with the retail traders. Whenever the consumer needs something, he can go to his local store and purchase that product.
New Products - Retail traders can help the customers also by telling them about newer available products which could be more suitable to the consumer needs. Here, this is subject to the sellers’ desire to sell a particular product because it is more suitable or maybe because his profit margin on that product is higher.
Convenience in Buying - As a consumer, there is a limit to how much we can store at our houses and even then we might need something urgently or at an odd hour. Retail traders give the consumer convenient buying time so that the consumer can purchase what he needs when he needs it.
A Wide Selection of Goods - The options available at retail traders are wide-ranging giving the customer the freedom to purchase a product of whatever brand or quantity he wishes to.
Services - In addition to these, consumers can also avail themselves of services like repairs or credit facilities if you are a regular customer at retail traders.
Importance of Retail Trading
Retail traders play a significant role in the channelling of the distribution of goods from manufacturers to consumers.
For manufacturers and wholesalers
Manufacturers only think about the production process and manufacturing of useful goods, distribution of those products are handled by the retailers. Products are collected from the factories and distributed in different places before finally selling to the customers.
Some products such as garments may need to be marketed to the customers properly for selling the product. This is also taken care of by the retail traders.
Retail traders come in direct contact with the customers, therefore, they act as the feedback mechanism for the manufacturers and also act as advertisers to the customers on behalf of the manufacturers. They desirably help present products to the customers so that they are noticed.
To customers
In grocery stores and departmental stores, products for daily use are always available for customers to be worry-free, as well as new or updated products are also available for the customers to try out. Also, when customers are out to buy, they buy in small quantities and often take much time as per convenience which is provided by the retailers, they also undertake the needs of the customers and provide them with better products that may bring customer satisfaction and also result in higher profit margin for the traders. Since retailers keep a wide variety of products, customers can shop according to their needs based on the choice of quantity, brand, flavours, etc. Retail traders also give them the benefit of repairs, credit, guarantees and other services that bring customer satisfaction.
FAQs on Retail Trade: Concepts and Importance
1. What is meant by retail trade?
Retail trade is the business activity of selling goods or services directly to the final consumers for their personal use. A retailer buys products in large quantities from a manufacturer or wholesaler and then sells them in smaller quantities to the public. Think of your local grocery store or a clothing shop—they are both engaged in retail trade.
2. What are the main features of a retail business?
A retail business has several distinct features:
- It is the final link in the distribution chain between the producer and the consumer.
- It deals directly with the end customers.
- Retailers typically buy in bulk and sell in small quantities.
- They deal in a wide variety of goods to meet diverse customer needs.
- Most retail businesses are located in residential areas for customer convenience.
3. What are the different types of retail traders?
Retail traders are broadly classified into two main categories:
- Itinerant Traders: These are traders who do not have a fixed place of business. They move from place to place to sell their goods, like hawkers and street vendors.
- Fixed Shop Traders: These traders operate from a permanent establishment or shop. They can be small-scale (like a local general store) or large-scale (like a supermarket or department store).
4. Can you give some examples of retail businesses we see every day?
Certainly! Everyday examples of retail businesses include your local kirana store, vegetable vendors, supermarkets like Big Bazaar, department stores like Shoppers Stop, exclusive brand showrooms like Nike or Apple, and online stores like Amazon and Flipkart.
5. Why is retail trade important for the economy?
Retail trade plays a crucial role in the economy by acting as a vital link. For manufacturers, it ensures their products reach a wide audience. For consumers, it provides easy access to a variety of goods and services. It also generates significant employment and helps gauge consumer demand, which influences future production.
6. How is a retailer different from a wholesaler?
The main difference lies in who they sell to. A wholesaler buys goods in very large quantities from manufacturers and sells them to other businesses, like retailers. A retailer, on the other hand, buys from the wholesaler and sells those goods in small quantities directly to the final consumer. The wholesaler is a link between the manufacturer and the retailer, while the retailer is the link between the wholesaler and the customer.
7. Why do some brands sell their products only through their own exclusive stores?
This strategy, known as exclusive distribution, is used to create a premium brand image and control the customer experience. By selling only through their own stores, companies can ensure high-quality service, maintain price consistency, and present the product exactly as they intend. This is common for luxury goods, high-end electronics, and designer apparel.
8. How has online shopping or e-commerce affected traditional retail trade?
E-commerce has dramatically changed retail trade by removing the need for a physical store. It offers consumers greater convenience, wider selection, and competitive pricing. This has forced traditional retailers to innovate, either by creating their own online presence (an omnichannel approach) or by focusing on providing unique in-store experiences that cannot be replicated online.
9. Can a manufacturer sell directly to consumers and still be considered a retailer?
Yes. When a manufacturer sells its products directly to the final consumers, bypassing wholesalers and traditional retailers, it is engaging in a form of retail known as direct-to-consumer (D2C). In this case, the manufacturer performs the role of the retailer. This model has become very popular with the rise of the internet, allowing brands to build a direct relationship with their customers.
