Read this article to learn about the 15 different types of retailers with their advantages, disadvantages and other details.
Learn about the various types of retail trade, stores, outlet and channels you can open in the market.
Also learn about: 1. Mobile Retailers 2. Fixed Retail Shops 3. Survival of Small Traders 4. Department Store 5. Multiple Shops or Chain Stores 6. Supermarkets 7. Shopping Centres;
8. Discount Houses 9. Tied Shops 10. Mail-Order Sale 11. One-Price Shop 12. Consumers Co-Operative Stores 13. Itinerant Traders 14. Small-Scale Retail Shops 15. Large-Scale Retail Shops.
Retailer Types: Learn about the 15 Different Types of Retailers (with Advantages and Disadvantages)
Retailer Type – 1. Mobile Retailers:
They are represented by hawkers, peddlers, street vendors, stall holders at fairs and exhibitions. In this form of retail trade, the seller has no fixed locality to operate from, but carries his goods from place to place. This form of retail trade is very old. The hawker is a very familiar figure in our villages and towns. Sometimes he carries goods in wheeled carts (shops on wheels).
The following are the prominent features of such mobile retailers:
(i) They have no fixed place of business.
(ii) They require little capital and have a limited organising power,
(iii) They have limited stocks on hand and their turnover is very quick,
(iv) They offer the greatest convenience to consumers,
(v) They have minimum establishment expenses,
(vi) They are specially suitable for the sale of perishables, such as vegetables, fruits, milk, eggs, etc., and for giving after-sales service, such as repair work for household equipment.
These mobile retailers offer a very keen competition to small- scale fixed retail shops which look upon them with disfavour. The hawkers and peddlers will exist for a long time, and it is not possible to displace them totally, whatever nuisance they may create. There are some reasons for their existence.
(i) They give the highest local convenience to purchasers.
(ii) They can quote lower prices, for they have no establishment charges to bear and they buy from wholesalers at wholesale rates,
(iii) They are the best agencies for the sale of perishable goods, house-to-house canvassing, and home deliveries,
(iv) Street and pavement hawkers are now a permanent feature of retail trade in big cities like Bombay, Calcutta, Delhi and Madras.
The organisation of a mobile retailer is very simple. He may purchase goods on his own account from a local supplier or from a wholesaler. He may work on account of some dealer and receive a wage plus a share in the profit. Temporary street stalls and street vendors sell a wide range of consumer goods (anything from garments and fast foods to footwear and electronic goods as well as sophisticated smuggled goods) at markedly lower prices than those selling at fixed retail shops. These small retailers are doing extremely well in big cities and towns. Street shops offer good bargains.
(i) Hawkers and Peddlers:
Hawkers themselves carry their goods from place to place in wheeled vehicles and sell them at the very door of the customers. Peddlers carry the goods on their persons/heads and sell them in the same way as hawkers. Both these retailers do not have any fixed place of business.
Goods like readymade garments, pens, toys, towels, etc., are sold by them. There cannot be any guarantee for the quality of the goods. The price is low. They are found in busy cities, at exhibitions, fairs, etc.
Cheap Jacks are a type of retailers who have their small shops in a business locality. But their hired shops have no permanent location. As long as he operates from the place he will do his best to attract customers. He shifts his business from locality to locality. Generally speaking he deals in household articles, ready-made garments and other cheap goods of inferior quality.
(iii) Market Trader:
Market traders are those retailers who open their shops at different places on fixed days, known as market days. Such days may be fixed on a weekly or monthly basis. They do their business when other shops are closed during week-ends. Market traders also act as mobile retailers at fairs and festivals.
(iv) Street Traders:
Such retailers carry on their business on the busy streets or footpaths of big cities and towns. They carry on their business usually at bus stops, railway stations, near cinema houses, near government and commercial offices, schools and colleges. They generally deal in one kind of goods at one time.
In the big cities, selling on the streets and footpaths has increased considerably and is a great nuisance to the public. Street sellers deal in goods of lighter weight and smaller bulk. Goods having a large demand are preferred. They also sell smuggled goods. They do not have fixed prices.
Retailer Type – 2. Fixed Retail Shops:
A majority of retail shops are fixed retail shops. They are usually family organisations carrying on the retail trade with the help of family members. A retail shop or a unit shop is often a side- business and a supplementary source of income for many families. It offers the maximum local convenience, for it is generally situated near about the residential quarters of consumers. A small retail shop requires a limited amount of capital and organising power.
Fixed small retailers may be:
(i) Stall-holders on busy streets;
(ii) Second-hand goods dealers;
(iii) General shops and specialty shops; and
(iv) Vending machines,
(i) Street Stall Holders:
A stall is a stand or a booth displaying and selling goods. It may be found on a busy street. It can also be located at an exhibition or fair for a limited period.
Street stallholders have their stalls on streets where the traffic is heavy. These stalls are more or less of a permanent nature. They get their supplies from wholesalers and from local suppliers. They try to keep the stall well-decorated. The area of business is very small. They deal in many different types of articles—pens, banians, pencils, etc.
(ii) Second Hand Goods Dealers:
These are the dealers in secondhand goods, such as books, furniture, radios, clothes, etc. These goods are purchased by those who cannot buy new goods. Secondhand goods dealers get their supplies mainly at private and public auctions. They do not give any guarantee or take responsibility for the goods sold. Their customers are mainly drawn from the middle class or lower middle class.
(iii) General and Specialty Shops:
A small retail shop may be a general shop displaying a wide variety of goods, or it may specialise in a particular line of goods. Grocery shops and provision stores are general retail shops, while radio and jewellery shops are specialised ones. Independent small retail shops accounted for more than 70 per cent of all the retail organisations in India.
However, with the growth of large-scale retailers like multiple shops, supermarkets and department stores, they now account for hardly 60 per cent of the total volume of retail trade. The remaining 40 per cent is carried on by large-scale retail organisations. A majority of retail shops are usually organised as sole traders or partnerships, and are generally owned by households.
Some mobile retailers offer a very keen competition to small- scale fixed retail shops, which look upon them with disfavour.
(iv) Vending Machines:
The coin-operated vending machines are used as a complementary form of retailing many goods and services, e g. sale of cigarettes, soft drinks, hot beverages, candy chocolates, platform tickets, milk, etc., and services such as laundering and insurance policies. Well-known pre-sold, pre-packed brands with a high rate of turnover can be sold successfully by vending machines. The goods should be reasonably low in value, small and uniform in size and weight.
The initial cost is quite high. The expenditure on regular maintenance and repair, too, has to be incurred. Consumers cannot feel or see a product before buying it. Nor do they have an opportunity to return unwanted goods. Packaging requires special attention. The owners have to develop special packs to suit the machines. The machine must present an attractive appearance and must be reliable in its operation.
It is frequently used to supply a certain service to employees and to get night-time business. The vending machines have a promising future in retail sales with the growth of the economy.
Retailer Type – 3. Survival of Small Traders:
The traditional retail shopkeeper has a few selling points:
(i) He offers great local convenience to customers, personal attention and services, and temporary credit, (ii) He offers longer shop hours, (iii) He gives free home-delivery service, (iv) He offers guidance to customers in making a wise selection of goods.
A small retail shop or unit store requires a limited amount of capital and organising power as well as limited managerial skill. It has low establishment charges. It hardly requires much publicity, as the manufacturer or wholesaler advertises the product which is known to customers.
The proprietor has a flexible selling policy. He makes concessions and allowances to please a good customer. This is not possible for a branch manager of a multiple shop. That is why the unit shop still survives even against big retailers.
Large-scale distribution techniques cannot reap all the advantages of large-scale operations because, in distribution, we have to satisfy millions of people who are also widely scattered over in all countries. Hence, there are two unique demands of customers, viz. (i) Local convenience in purchases; and (ii) Personalised services to satisfy the ever-changing psychology of the customers.
Large-scale retailers find it difficult to fully satisfy these two basic demands of consumers. But small unit shops can offer 100 per cent satisfaction. Under normal trading conditions, there is no doubt that large retailers are able to under-sell their unit-shop rivals. Even so, for the reasons, unit shops still survive and will survive for a long time in retail trade.
Retailer Type – 4. Department Store:
A department store is a huge retail shop situated in a central place in the city, divided into a number of small shops or departments, each dealing with one or two lines of goods and specialising in those lines. All such departments or specialty shops are under one roof and under one management and control.
Such a huge retail organisation, often looking like a miniature township, is usually owned by a big company because it requires a huge investment. In other words, a unit of a sales organisation assumes a very big size under a department store.
The department store is, therefore, a collection of shops all under the same roof, each shop dealing in a particular line of retail trade. This kind of shopping is often referred to us as one-stop shopping. Instead of increasing sales by opening branches to sell the same goods (multiple shops), a business may as well sell different kinds of goods in the same building.
(i) The basic principle of a department store is that it is easier to sell more goods to the same customer by keeping a wide variety of goods than to find many customers for the same kind of goods. A department store is, therefore, a universal supplier of a wide variety of goods. It tries to satisfy all the expected human wants under one roof. It offers the maximum shopping convenience so that a customer may make all his purchases in one place,
(ii) Management, control and sales are centralised,
(iii) The location of the store is in a central place. This is the most important factor in determining the success of the entire organisation. The store is usually situated in the city, where the largest number of people come for some purpose,
(iv) It caters to the needs of a richer and better class of the population. It lays greater emphasis on quality and a wider choice of goods, and on other services and comforts. Price is a secondary consideration; it cannot, therefore, suit the requirements of poor people,
(v) It has to pull the customers by continual advertisement, window displays, etc. In order to attract people to the department store, one of the departments may be used as a losing seller, i e., it may be run at a loss to boost the sales of other departments. Some departments are included for prestige reasons. This practice is common in the USA.
(vi) It maintains a very large number and variety of consumer goods and a wide range of designs, colour and styles,
(vii) The purchases of all the departments may be centralised, i.e., made by the Purchasing Department, or may be decentralised i.e., made by the individual department concerned. Under the system of decentralised purchases, each department manager is allotted a definite monthly sum; and he is given full liberty to make his own purchases within that fixed amount.
The advantages of a department store are:
(i) Shopping Convenience:
A department store enables a customer to purchase all his requirements in one place. He saves the time and labour spent on visiting different shops. Department store deals in everything required for daily consumption. For instance, a newly-married couple can set up their home purchasing all their requirements in one place.
(ii) Automatic Mutual Advertising:
One department advertises for the other. A customer, who enters the store to purchase a couple of articles, can easily be persuaded to purchase many other articles from other departments situated in the same building.
(iii) Offer of Complete Service:
The facilities and services offered by the store attract a considerable number of customers. One does not like to go to other retail shops. The courtesy, fair treatment and services, such as free home delivery, increase the sense of laziness, love of luxury and temptation of all kinds for comforts while making purchases. For durable consumer goods like the radio, or TV, video, tape recorders, refrigerators, washing machines, electric appliances, etc., the facility of hire-purchase is always offered to customers.
(iv) Central Location:
The store is housed in the heart of the city. It is, therefore, easily accessible to all those who live in the surrounding localities. The central situation, attractive window display, comforts and amenities, and intensive advertising attract a large number of customers than an ordinary shop situated in a corner of a street can entice.
(v) Wide Selection:
Since a department store stocks a very wide variety of goods of different designs, colours, styles, etc., a customer can make a much better selection of goods at the time of purchase.
(vi) Economies of Large Scale:
As it is a large-scale organisation, it enjoys all the advantages and economies of a large-scale organisation.
(vii) Adequate Capital:
It has a huge capital and can spend a considerable amount of money in continual advertising to keep its name before the public. By periodical grand sales and reduction sales, it attracts the attention of the public, and becomes very popular.
(viii) Attractive Layout:
The layout of the store is generally attractive.
The disadvantages of a department store are:
(i) Absence of Local Convenience:
Since it is situated far from residential areas, suburban residents cannot take advantage of the facilities made available by the department store. The absence of local convenience is partly compensated for by the opening of a mail-order section in the department store.
(ii) Higher Operating Costs and Higher Prices:
Such stores have to draw customers, and hence they have to offer extra services and facilities. They have also to incur heavy expenditure on window displays, advertising, etc. The establishment and overhead charges of a department store are considerable. So the prices charged by it are higher than those charged by other small retail shops. Only comparatively rich persons, who care for quality and service and not for price, will take advantage offered by the department store.
(iii) Higher Risk of Loss:
As the purchases are made on a large scale, an error of judgement on the part of the buyer will involve the firm in a great financial loss. Changes in taste and fashion, and market fluctuations in prices will also adversely affect a big department store. There may be a constant danger of dead stock. Heavy expenditure on advertising as well as on the salaries of assistants and department managers reduce profits.
Such stores have a better future in a highly industrialised country like the USA, and the UK than in a developing country like India, where the general standard of living is low and where the bulk of the population resides in rural areas and small towns. About 40 per cent of the population live below the poverty line.
(iv) Limited Scope in Developing Countries:
The department store requires a huge amount of capital. It has, therefore, little scope in less advanced countries like India, where there is a shortage of capital. Furthermore, in a developing country like India, top priority is given to economic development, and investment on refined consumer goods is relatively discouraged. A department store in such a country, therefore, deals in a variety of common articles instead of ultra-modern and luxurious goods.
(v) Complex Administration:
There is a large number of departments, effective co-ordination, supervision and control of all the departments may not be possible due to shortage of competent and capable managers, salesmen and other staff. Unless it has qualified, sincere and trained employees, the management of a big organisation cannot realise even reasonable profits.
(vi) Absence of Personal Contact:
A large-scale retailer cannot give individual and personal attention to each and every customer. Mechanical behaviour or the impersonal treatment accorded to customers is unavoidable in a big retail organisation.
There are certain conditions for the healthy growth of department stores. These are – (i) People should have a higher income and purchasing power; (ii) There should be higher literacy and a craving for costly, durable and sophisticated goods; (iii) The department store should be in a well-developed country; (iv) It should have an adequate supply of capital, and trained, capable and sincere selling and managerial staff. Such pre-requisites are not present in India. Hence, department stores have a limited scope in this country (at least till 2000).
Retailer Type – 5. Multiple Shops or Chain Stores:
A multiple shop is a network of a number of branches situated in different localities in the city or in different parts of the country. All the branches are under central ownership and control. A multiple shop is a compromise between a large-scale and a small- scale organisation; it secures advantages of both and eliminates their disadvantages. For instance, management, purchases and control are centralised, while sales are decentralised and conducted on a small-scale.
Types of Multiple Shops:
(i) Manufacturer’s Organisation:
When a manufacturer wants to approach consumers directly, he starts his own retail branch shops either in different localities of the city or state or even in the whole country. A manufacturer undertakes all the three functions of the producer, wholesaler and retailer.
(ii) Retailer’s Organisation:
Chain stores may be owned by a big retailer and all the branch shops may be chained together and brought under unitary control. The multiple shop retailers can obtain their supplies directly from different manufacturers instead of from wholesalers. They buy in bulk, and perform the work of the wholesaler particularly in so far as transport, warehousing, risk- bearing and financing are concerned.
The organisation, management and governing principles of multiple shops (manufacturer’s organisation) and chain stores (retailer’s organisation) are similar. However, chain stores are, strictly speaking, retailer enterprises which eliminate the wholesaler whereas multiple shops are the manufacturer’s enterprise eliminating all the middlemen, including small retailers. In chain stores, we have a wide variety of goods, whereas, in multiple shops, we have only a particular line of goods.
(i) Multiple shops specialise in one or a couple of lines of goods. The range of articles is strictly limited. The articles sold by all the branches are of a like nature and are sold at uniform prices. Usually, a well-known article or service is sold by them.
(ii) They try to give maximum local convenience to the customers. In each residential area, we may have a branch shop,
(iii) Management and control are centralised,
(iv) Purchases are centralised and are made by the Head Office.
(v) They concentrate on a few standardized articles which require no special selling effort. These articles are usually necessaries of life, giving a quick turnover and having a steady demand,
(vi) Selling activity is completely decentralised. Branch shops are like ordinary retail shops,
(vii) The buyers do not have to be appreciably influenced by an advertising campaign.
(viii) Sales are strictly on cash basis and no credit is granted to customers,
(ix) All branch shops have uniform appearance. This facilitates easy identification.
The advantages of multiple shops are:
(i) Multiple shop owned by a manufacturer can eliminate all kinds of middlemen between the producer and the consumer.
(ii) Multiple shops have the advantage of specialisation in a particular line of goods,
(iii) Articles are sold at uniform prices in all branch shops. This creates public confidence. Goods are of standard quality,
(iv) Economies and advantages of a large-scale organisation can be achieved,
(v) The advantages of decentralised selling also can be achieved. The failure or closure of one or two branch shops will not adversely affect the entire organisation. The concentration of all business in one place and the consequent locking up of capital become very risky, because if, after a certain period, the situation loses its old importance, the future of the store is jeopardised,
(vi) They have common advertisement for all the branches, for they are under a single ownership,
(vii) All branch shops usually have a uniform -external and internal display. The furniture and fixtures, too, are -of uniform colour and design. This makes identification of the branch shop very easy; e.g., a branch shop of the Bata Shoe Company can be easily recognised in any locality,
(viii) Multiple shops try to give maximum local convenience like other retail shops. In every important locality, there is a branch shop,
(ix) A shortage of stock at one branch can be made good by a transfer of stock from branches having surplus stocks,
(x) As sales are strictly on a cash basis, there is no risk of bad debts.
(xi) As there is no extra cost of services and comforts (as in the department stores), multiple shops have more advantages. Similarly, there is saving in the middlemen’s commission. They can, therefore, pass on this benefit to customers in the form of reduced prices.
The disadvantages of multiple shops are:
(i) If branch shops are situated in the interior, they will not attract a large number of customers, and they will suffer from the same handicaps as a centrally situated department store,
(ii) Multiple shops deal only in/k few articles and only in well-known brands. Buyers, therefore, have a limited choice. They cannot make all their purchases in one place,
(iii) As purchases are centralised and made on a large scale, great care and judgement are required in purchasing goods. If market conditions go against expectations, or if fashions and tastes change suddenly, there will be no sales, and dead stocks at the head -office may lead to heavy losses,
(iv) As there are many branches, a system of strict supervision and control through district and regional inspectors becomes necessary. Even then, there is always the possibility of fraud,
(v) The Branch Manager of a shop is like a head salesman. He has no initiative. He has no voice in making purchases and fixing the prices of goods. A “buyer” in a department store has full voice in his purchases,
(vi) Multiple shops have to buy in bulk. They do the work of the wholesaler, provide large warehouses and transport to the various branches, and have to bear a considerable risk of loss. If they are manufactured as well, they have to perform all the functions themselves. This means that they cannot have the advantages of the specialised marketing services which are rendered by wholesalers and retailers. They may have a substantial gross profit. But their net profit may be modest,
(vii) There is no credit system. The cash-and-carry system may be burdensome for many customers,
(viii) Multiple shops sell standardised goods. They cannot satisfy peculiar local or individual demands.
Retailer Type – 6. Supermarkets:
A supermarket is a novel form of retail organisation specialising in necessaries and convenience goods. Usually, it concentrates on all food articles -groceries, meat, fruits, vegetables and tinned products Non-food items sold by these stores should satisfy a few conditions. First, they must be widely used and must appeal to the general mass of consumers. Second, a non-food article must be a branded product, i.e., pre-sold to customers through intensive advertising. Third, it should be a low-priced article.
The following are some distinctive features of supermarkets, which are very popular in the USA and Europe.
(i) A supermarket is a large, cash-and-carry store. It saves- in terms of credit facilities and delivery expenses,
(ii) A big supermarket may carry a very wide variety of articles, sometimes covering thousands of items,
(iii) There is no sales pressure. The buyer is at ease and gets sufficient time for his selections. The supermarket represents the most developed form of self-service retailing. The distribution is cheaper. Self-service is a general rule and the buyer may be provided with a wheeled trolley to carry his purchases from one point to another. In other words, it facilitates individual selection without the presence of a salesman,
(iv) Packaging plays a very important part. Immediate identification of contents, quantity, prices, etc., is provided by packages of products which are kept on self-service shelves. Transparent packing helps to meet these requirements,
(v) It has a minimum selling area of 1,600 sq. metres (40mts. by 40mts.). It must have a central situation and expert management to achieve a very high turnover,
(vi) Self-service combined with large buying power and a low percentage of profit margins means that supermarkets can sell goods at low prices. This low-price appeal is an important feature of supermarkets.
(vii) Modern packaging, labelling and branding devices have encouraged the growth of self-service shopping; and supermarkets provide a number of advantages, e.g., reduction in the sales staff, cut in establishment or running costs. Bulk purchases are always cheaper. Hence, sales prices can be pegged down at a low level.
(viii) Self-service shopping and supermarkets may be operated by co-operatives and department stores,
(ix) All supermarkets are run by limited companies. Supermarkets are also called Food Fairs or Pick Quick’s. Shopping is very quick. They give very keen competition to all types of retailers. They may also be self-service chain stores.
Advantages of Supermarkets:
1. As food fairs or pick quick, they have very high sales-turnover.
2. Low price appeal is a great selling point.
3. Self-service is the general rule and buyers are at ease in their purchases.
4. Lower operating cost combined with higher turnover gives maximisation of profits.
5. All economies of a large-scale enterprise can be easily secured.
1. Absence of personal salesmen leads to lack of personal attention to customers.
2. Huge capital is needed to run the show.
3. Danger of shop-lifting by unscrupulous buyers.
4. Chances of bad handling of packages by careless customers.
5. Need for very large shopping area which may be very difficult in big crowded city areas.
Retailer Type – 7. Shopping Centres:
The modern trend in retailing is towards increasing decentralisation. A shopping centre is a group of commercial establishments planned, developed, owned and managed as a big unit in relation to its location, size, and type of shop in the trade area it serves. It provides the necessary amenities to the shoppers in one place. The shopping centre concept is a natural evolution of urban expansion.
We have well-planned and organised shopping centres which offer the maximum shopping convenience in the form of one-stop shopping. A shopping centre is designed, developed and operated, usually by a company, near about large residential complexes so that shoppers may have an easy access to it. It may consist of numerous retail stores (small and large). These shopping centres or malls offer a very wide variety and assortment of consumer goods.
Such concentration of retail trade makes shopping very convenient, particularly for the ever-growing suburban customers in a big city like Bombay. Shopping centres are responsible for drawing away the retail trade from central metropolitan cities to suburban regions. The retail shops in the shopping centre evolve a joint promotion campaign to attract suburban customers. A consumer can save time, energy, and travel costs, and can make all purchases at one place or centre, viz., a shopping centre.
Retailer Type – 8. Discount Houses:
The latest addition to the-various types of retailers is the so- called discount house which has brought about a revolution in retailing since 1950. Discount houses are large retail stores, freely open to the public, advertised widely, stocked with well-known brands of hard goods e.g., appliances, home furnishing, sports goods, jewellery, etc.
They deliberately and consistently sell their goods below the advertised list prices. They operate in heavily travelled but low rent areas. They spend the minimum amount on premises, furniture and fixtures; and offer very few customer services.
Retailer Type – 9. Tied Shops:
Retailers may agree to act as authorised dealers of a certain manufacturer to sell his products. Such a tied shop may get a higher commission, and it remains loyal to that manufacturer. It will not promote the sale of any rival product. Many textile mills have their tied shops to sell their textile products in big cities and towns.
Retailer Type – 10. Mail-Order Sale:
Standardisation, grading, branding and packaging brought about the growth of mail-order sale i.e., selling or shopping by post—described as arm-chair shopping. The seller approaches the prospects by mail, i.e., by sending circulars, price lists, catalogues, booklets, pamphlets, samples, etc., through the post.
All selling is done invariably by regular advertising and direct mail. Sometimes local agents are employed for order collection, execution as well as the collection of dues, when the sale is by instalments. However, orders are usually collected as well as executed through the mail by V.P.P. Hence, it is called the mail order business.
Goods Suitable for Mail-Order Business:
(i) Lighter valuable, durable, standardised and branded goods,
(ii) Goods having regular demand and which are well-known in the market,
(iii) Goods which can be precisely described and advertised with pictures and demonstration,
(iv) Goods which offer sufficient margin of profit to cover postage, advertisement, publicity and the cost of transport,
(v) Goods which can be easily sold by sample and description and which do not call for any personal inspection before purchase.
Examples of Goods Sold by Mail Order:
(v) Fountain pens;
(viii) Small appliances;
(ix) Common drugs and cosmetics;
(x) Ready made goods like garments and foods;
(xii) Household furnishings.
(i) The mail-order concern prepares an up-to-date mailing list of prospective customers- The mailing list is maintained in the form of a card index. It contains the names and addresses of prospects. Persuasive circulars, with the necessary sales literature in the form of samples, catalogues, price lists, pre-paid self-addressed envelopes, pamphlets, etc., are posted to the persons on the mailing list, and a regular follow up procedure is adopted by periodical reminders till an order is secured.
The mailing list can be prepared from government records, telephone directories, records of membership of association and clubs, trade directories etc. It must be revised periodically and it should be up-to-date.
(ii) The concern embarks upon a regular and intensive press publicity with the insertion of attractive advertisements in newspapers, weeklies and magazines. The advertisements may provide a coupon for a demand for fresh sales literature or further information or an order form for mailing an order.
(iii) Sometimes, the concern may employ trained travelling salesmen who are sent to different districts for house-to-house canvassing. They carry with them samples, patterns and all kinds of sales literature. They book orders personally and forward them to the head office for execution. However, this method of house- to-house canvassing is rather costly.
How Orders Are Executed:
The mail-order concern has an office in a city. It may maintain its own warehouse and keep a stock of the goods to be sold ready for dispatch on receipt of orders. It purchases stocks from the wholesaler or the manufacturer. As soon as orders are received, they are passed on to the warehouse and the dispatch department. Goods are dispatched to customers by VPP or by railway parcel.
The system of payment is C.O.D. (cash on delivery). When the parcels are sent by VPP, the price is recovered through the post office. If the parcel is sent by the railways, the railway receipt is sent by VPP. Sometimes cash is demanded with the order (CWO). When it is received, the order is executed.
The mail-order concern may simply act as an order collecting agency. It may enter into an agreement for the purpose with the wholesaler or manufacturer. It receives a commission on the volume and number of orders it collects. As soon as the order is received, the mail-order concern will forward it to the wholesaler or manufacturer, who dispatches the goods to the customers.
The advantages of a mail-order business are:
(i) No need for a big shop or office:
An independent mail order business can be conducted at any place. It need not have a big shop or an office on one of the main streets of a city, and it can save on the cost of making sales.
(ii) Order Collecting Agency:
If it acts as a middleman and an order-collecting agency on behalf of a wholesaler or manufacturer, it is not required to purchase stocks and maintain a warehouse. Its capital requirements are meagre.
(iii) Low Operating Costs:
The running and establishment charges are low. There is a saving on shop rent, servant charges, freight for bringing goods to the shop and then to the buyer.
In this way, it can offer a very good competition to department stores and other retail shops. It can also quote lower prices than those that are offered by local retailers.
(iv) Side Business:
It can be adopted as a side activity by a department store to eliminate the disadvantage of lack of local convenience. An enterprising manufacturer can establish direct relations with consumers by opening a mail-order section in his sales organisation.
(v) Maximum Local Convenience:
It gives maximum local convenience, like street vendors and peddlers. The buyer gets home delivery of goods and is not required to waste time and money on going to the city for the purchase of his requirements. He can place his order on the basis of the catalogue, sales literature, samples, etc., he receives. He gets free sales literature and samples.
(vi) Extensive Market:
The mail-order advertisement reaches all persons. So all of them become prospective customers. The advertisement can be accurately measured by keying it, and the successful media of advertising can be ascertained. The seller can thus concentrate on those media only.
(vii) Introduction of Credit Sales:
Recently, in many countries, mail-order firms have started credit sales of non-durable goods. Interest-free credit is offered up to six months. Many families of average means find it convenient to pay by instalments for clothing, footwear, household furnishings, linoleum, etc., over a period of six months.
(viii) Introduction of Sale on Approval:
Recently, in many countries, mail-order firms have started selling goods on sale-or- return basis, and also offer a guarantee about the quality of the goods. Now we can get national-brand goods at our residence at normal shop prices from mail-order firms.
A mail-order business is capable of providing a unique combination of services, which include home delivery, low prices and ample information for sound purchase decisions, while one is sitting in one’s arm-chair at home.
The disadvantages of a mail-order business are listed below:
(i) No Inter-Personal Contact:
There is no direct personal contact between the seller and the buyer. So there are no permanent customers.
(ii) Limited Choice of Articles for Sale:
This type of business has a narrow and limited scope. All articles cannot be sold, i.e., bulky goods, costly goods, where personal inspection is necessary before purchase, cannot be sold by mail-order, concerns.
(iii) Unsuitable for Small Compact Countries:
In small and densely-populated countries, where most of the population is urban and local dealers can satisfy almost all the consumers’ wants, this type of business has a very limited scope; for instance, in the UK, it has only a limited scope.
(iv) Costly Publicity:
The advertisement expenses of a mail order house are higher than those of other forms of retail trade. Because intensive and regular advertising is the sole factor which influences prospects and* secures their orders, direct mail publicity is costly.
(v) Danger of Bogus Advertisements:
Advertisements often give a false and exaggerated idea of the quality of the goods offered for sale. The mail-order business offers ample scope to dishonest sellers to cheat customers. This danger of cheating the buyer is constant and many innocent buyers are fooled by mail-order concerns.
In India, we often find advertisements of medicines, which claim to cure all diseases, and of Vashikaran Mantras which can make you pass examinations, get employment, win the girl you are in love with and do practically every other possible thing you like. Simple people are easily trapped and they learn only from bitter experience.
(vi) No Chance for Personal Inspection:
There is no opportunity for examining goods before the purchase is made. Buyers are always pleased when they are given a chance to look and pick, as in the case of ordinary retail shop.
(vii) Risk of Bad Debts:
At present, if they sell on credit, there is the risk of bad debts.
(iii) Delay in Getting Goods:
There is some delay between the order and the receipt of goods.
(ix) Limited Scope in Poor Countries:
Because of the illiteracy and general poverty of the people the mail order sale has a limited scope in undeveloped and developing countries.
Types of Mail-Order Concerns:
There are three types of mail-order selling activities:
(i) The Departmental Type:
In a department store, we may have a separate section dealing with mail-order selling. Ordinary department stores cannot offer local convenience to distant consumers. However, through a mail order section, they can approach distant consumers and regular customers, and give them the facility of making their purchases in their own areas. The mail-order business done by a department store is, of course, a side activity.
(ii) The Manufacturing Type:
A manufacturer may run this kind of mail-order business and try to sell his goods directly to consumers. His sales organisation deals in mail-order selling either as a main business or as a side activity.
(iii) The ‘Middleman’ Type:
The mail-order business can be undertaken by an independent organisation. Such a retail organisation may exclusively specialise in mail-order business. It may have its own warehouse, or it may function as an order collecting agency of the wholesaler or manufacturer.
Scope of Mail Order Business in India:
This sort of business was started in America, where there are long distances between residential areas and towns. Persons staying in the suburbs and rural areas find it very inconvenient to go to city markets for their purchases. Such persons prefer purchasing by post. In India, there are thousands of villages far away from cities. More than 70 per cent of our population lives in the villages.
If the mail-order business is started in a town, it is likely to flourish in the course of time. Hence, mail order selling in India has ample scope- But the standard of life in India is very low. Most of the needs of the rural folk are simple and easily satisfied by local markets As long as we do not have a substantial rise in per capita income, mail-order selling concerns cannot achieve any appreciable success.
Then, again, the standard of integrity in India is low, both among traders and the public. Mail-order business entirely depends upon advertisement and correspondence. It demands literate prospects. The bulk of the population is illiterate and ignorant. Hence, mail-order business does not have a favourable climate in India.
Retailer Type – 11. One-Price Shop:
The fixed or one price shop is a typical kind of retail organisation in which one price is fixed for a very large variety of articles of everyday use. The articles are low-priced and appeal to bargain hunters, to the something-for-nothing instinct of man. As a result, these shops have an enormous sales turnover. The margin of profit per article is very low; but the profit on the total sales turnover is quite substantial.
As the common price for all articles is purposely kept at a low level, these one-price shops serve as good instruments for mass distribution. Such one-price shops can be chained together and run in the form of chained one-price shops. All units will then be under one ownership, management and control.
The purchases are usually made by a central office or a depot. The central organisation makes a wise and careful selection of a wide variety of goods of about the same price or within a narrow price range. The selected articles are procured from manufacturers or manufactured by the concern on a large scale. The central organisation of one-price shops tries to eliminate all slow-selling lines and concentrate fully on those goods which have a large and constant demand.
As the sale price of every article is the same, the buyer is at ease and he is given full opportunity to choose whatever articles he likes. In India, we come across many mobile retailers of this variety crying- ‘Har ek mal 5 Rupaye, 10 Rupaye.’
Retailer Type – 12. Consumers Co-Operative Stores:
Just as the multiple shop system is an instrument in the hands of a manufacturer to eliminate all middlemen in the distribution channel, so a co-operative store is an organisation owned, managed and controlled by consumers themselves to reduce the number of middlemen and their commission.
Features of Consumers Co-Operative Store:
(i) It is a voluntary association of consumers duly registered under the prevalent Co-operative Societies Act. At least ten members are required to register a society or store. The registration gives them certain privileges and exemptions which are available to non-co-operative bodies.
(ii) Members of the store make joint purchases and sale among themselves at current market price. The sale at market prices is preferred to avoid unhealthy competition with other retailers.
(iii) Membership is open to all. Wealth is not a criterion; rich and poor are treated alike. However, stress is laid on moral character at the time of admitting a person as a member.
(iv) The store has a small share capital and the amount is recoverable in installments. Every person has to pay an entrance fee.
(v) The management of the store is democratic and generally honorary. One man, one vote is the rule. Day-to-day management is in the hands of permanent paid officers. The general meeting of members every year elects an executive committee to look after the management of the store.
(vi) A definite percentage of profits is utilised for social and educational purposes. Profits after payment of limited interest on capital are utilised for distribution as dividend. The amount of dividend is based not on the shares held but is linked with the amount of purchases made by the members.
This linking of dividend with purchases is a unique feature of co-operative stores. It secures two advantages. First, every member in his own interest will try to make the maximum purchases from his store; and this ensures the automatic loyalty of members to their store. Secondly, if every member makes the maximum necessary purchase? The store will have maximum sales and maximum profit without any resort to advertising.
(vii) As the consumers co-operative is essentially meant for the working class and lower middle class population, capital naturally plays a secondary role. In co-operation, honesty and loyalty are capitalised, and greater emphasis is laid on the moral character of the members. Personal security is the best security in a co-operative organisation.
(viii) The liability of members is generally limited up to the value of the shares held by them.
(ix) The annual accounts of the store are audited by the Registrar of Co-operative Societies or a person authorised by him.
(x) Before the declaration of a dividend, at least 25 per cent -of the net profits must be credited to the General Reserve and 10 per cent to the General Welfare Fund or a similar fund” for social benefit of the members.
Advantages of Consumers’ Co-Operatives:
(i) Self-help is the best help for consumers to prevent their own exploitation, safeguard themselves against profiteering, adulteration, hoarding and black-marketing and similar other evils indulged in by merchants and traders.
(ii) We can eliminate many middlemen in commerce.
(iii) As dividends are based on purchases, we can have maximum business without advertisement and salesmanship and ensure the maximum loyalty of members to the store.
(iv) Members can have better quality goods at fair and reasonable prices.
(v) Members can acquire good knowledge and experience of business management.
(vi) Consumers’ co-operatives can fulfill all the demands of consumerism and protect consumer rights and privileges in the market.
(vii) There is no danger of underweight and lower quality of goods purchased from the store.
(viii) Consumers’ co-operatives guarantee consumer rights, such as the right to protect health and safety on the basis of the quality of goods they buy from the store, the right to get ample information, the right to choose from a wide variety of goods, the right to ventilate grievances and get them redressed. In conditions of scarcity of common goods and rising prices, i.e., inflation, a cooperative store is a boon to lower and middle class people in India.
Disadvantages of Consumers’ Co-Operatives:
(i) The spirit of co-operation, i.e., “each working for all and all working for each other”, may be missing in the co-operative store. If members are selfish and there is no common interest, there is a danger of failure.
(ii) There is no credit sale as a rule.
(iii) As the store is managed by members, we may not have competent and capable management. This leads to inefficiency. Business demands paid and professional management.
(iv) A consumers’ co-operative may not have enough capital to run the business smoothly and profitably.
Consumer Co-Operatives in India:
Consumer Co-operatives made their first appearance in 1903 in Madras. However, these co-operatives did not succeed much in India. In 1948-49, there were around 8,600 consumer co-operatives in India with membership of about 16 lakhs, handling trade worth Rs. 50 crores. In 1983, there were over 18,500 primary societies at the base level, about 600 central and wholesale societies and 15 State consumer co-operative federations at the State level, 7 State co-operative’-cum-consumers’ federations and the National Cooperative Consumers’ Federation at the national level.
In addition, there are over 5,000 co-operative societies functioning among industrial workers, railway employees, post and telegraph employees and so on. These consumer co-operatives are engaged in distribution of various essential articles—controlled/uncontrolled.
Out of 94,000 primary agricultural credit societies, about 43,300 societies have so far been covered under rural consumer co-operative programme.
By 1990, it is proposed to cover all the reorganised primary agricultural credit societies under the programme of consumer cooperation. By 1990, all the state capitals and bigger cities would have co-operative department stores.
Co-operative organisations have a bright future in capitalist countries, where shopkeepers and merchants exploit consumers by charging high prices and giving adulterated goods. In a capitalistic society, the prices of goods are unduly loaded with the middleman’s profits.
There is a widespread complaint that the prices paid by consumers for marketing functions are out of proportion to the services rendered by the agents who discharge those functions.
Cooperative organisations are of the people, by the people and for the people. They are considered to be capable of solving many economic problems of the poorer classes of the population.
In India, where the bulk of the population lives in acute poverty, co-operative efforts in production, finance, marketing and consumption will slowly lift the masses above the poverty line. It has been said that if co-operation fails, the best hope of India will also fail.
The Central Government as well as State Governments during the last forty years have given special attention and encouragement in the development and growth of consumers’ co-operative stores to enable the general members of the public to buy their daily requirements at reasonable and fair prices.
In many big cities, we have now Supermarkets, Sahakari Bhandars, or Apna Bazars, organised as co-operative establishments. The government have provided financial and managerial assistance to co-operative stores.
Retailer Type – 13. Itinerant Traders:
Those traders who do not have a fixed place of business and who move about from place to place are called itinerant traders. These traders have limited capital, limited stock of goods, limited variety of goods. The most important character of these traders is they may not stick to a particular line of business i.e., they may change the product.
Itinerant retailers may be classified as follows:
(a) Hawkers and Pedlars:
Hawker means a person who has a hand cart or animal for transporting and displaying his goods. A pedlar carries the goods on his head. The goods they sell are generally of average quality. The advantage is that the housewife can conveniently buy her household requirements right at her own door without taking the trouble of going to the bazaar, e.g., vegetables, fish, etc.
(b) Pavement Shops or Street Traders:
Pavement traders generally arrange their goods at busy street-corners or pavements. Generally speaking, such traders deal only in one particular line of goods. It is common sight to see stationery shops, fountain pen dealers, etc., in busy streets of a town.
(c) Market Traders:
These traders arrange their goods before the main shop in a market when they are closed for their weekly holiday.
(d) Cheap Jacks:
Such traders generally hire small shops centrally located in residential localities and display their goods there. They deal in household articles or such other cheap articles as imitation jewellery or clothing etc. as long as they get good customers.
Retailer Type – 14. Small-Scale Retail Shops:
The term itself indicates that the size of the business is small. Limited turnover, limited capital, intimate and personal contact with all customers, are some of the characteristics of small-scale retail shops. It is mostly a one-man show. It is mainly looked after by its proprietor and the members of his family. Therefore, the overhead costs are very low and the selling price is also low. The limitation of this type of organisation is that it cannot offer a variety of goods and services.
(a) Street Stalls:
These stalls are generally located in street corners with limited space available. Fountain pens, cosmetics and similar other inexpensive articles are sold here.
(b) Second-Hand Goods Dealers:
They usually sell books, spare parts, etc. They cater to the needs of the economically weaker sections of the society.
(c) General Stores:
These stores are generally setup in most of the residential localities, they supply wide variety of products. General stores play a very important part in supplying necessary articles to consumers.
(d) Speciality Shops:
These shops deal in a particular line of goods e.g., children’s wear, fancy goods, ladies corner, etc. They are also called single-line stores.
The traditional retail shopkeeper has a few selling points- (1) Offer of greater local convenience to customers, (2) personal attention and services, (3) temporary credit, (4) longer shop hours, (5) free home-delivery service, (6) guidance to the customer in making wise selection of goods.
A small retail shop or unit store requires limited amount of capital and organising power as well as limited marginal skill. It has low establishment charges. It hardly requires such publicity as the manufacturer or wholesaler advertises the product, which is easily known to the customers.
The proprietor has a flexible selling policy. He makes concessions and allowances to please a good customer. This is not possible for a branch manager of a multiple shop. That is why the unit shop still survives even against big retailers.
There are two unique demands of consumers, viz. – (1) local convenience in purchases, and (2) personalised services to satisfy ever-changing psychology of the consumers. Large- scale retailers find it difficult to satisfy fully these two basic demands of consumers. But the small unit shops can offer 100 per cent satisfaction in these respects.
Under normal trading conditions, there is no doubt that the large retailers may be able to under-sell their unit shops’ rivals. Even so, for the reasons mentioned above, the unit shops still survive and will survive for a long time in retail trade.
Measures to Overcome Competition from Big Retailers:
A small retailer suffers from certain handicaps- (1) unfair price competition from big retailers, (2) lack of modern sales promotion devices, e.g., attractive window display, (3) inadequate advertising, (4) unfavourable terms of purchases due to small orders, (5) lack of capital, and (6) lower capacity of risk-bearing.
The small retailers try to overcome some of these disadvantages in the following manner:
1. Co-Operative Buying:
Bulk purchase is the key to cheaper prices. Croup buying can secure more favourable terms and prices because it enables small units to meet chain-store competition. The small retailers may form a co-operative association for conducting joint- purchases on a large-scale basis, and reap the benefits of bulk purchases. This trend is noted in the grocery trade.
2. Modern Business Principles:
The small retailers may undertake modernisation of their business practices and operations to secure maximum economy and efficiency in their trade.
3. Cash-and-Carry Warehouse:
Some wholesalers sell at lower prices instead of offering credit to retailers and free delivery services. Thus, the small retailers get the chance to buy at cut prices and to sell as low as their rivals in the multiple shops.
4. Wholesalers’ Specialist Services:
The small shopkeepers can take full advantages of the specialised services of the wholesaler. On goods whose prices are fixed by the manufacturer, the small trader has the same gross profit as big stores, whereas the big retailers have to perform themselves all wholesaling functions, when they by-pass the wholesaler.
5. Co-Operative Groups or Chains:
In fact, on account of development of large-scale retailing, wholesalers as well as small retailers have been adversely affected. Therefore, recently both the wholesalers and retailers have united to fight against their common enemy, the large retailers. They form a voluntary or co-operative chain which enables the small traders to get the benefits of large-scale purchases.
A voluntary chain is an association of independent retailers, sponsored by a wholesaler. The wholesaler will furnish various services to the member retailers, who in tun will buy all their merchandise from this wholesaler. Due to very big buying power of the association, the wholesaler is able to buy at prices competitive with large chain stores.
A co-operative chain of retailers is instituted and sponsored by a group of independent retailers who jointly buy and operate a wholesale warehouse. It has the same basic purpose as the voluntary chain, i.e., to face effectively competition from corporate chain stores.
In a voluntary chain (sponsored by wholesalers) a wholesaler provides merchandise to a group of independent retailers and also offers services of buying, advertising, accounting, store layout and inventory control to retailers. In a co-operative chain the retailers have common buying, warehousing and transporting services for all members.
Retailer Type – 15. Large-Scale Retail Shops:
They are large-format stores (Supermarkets, Hypermarkets) and provide a variety of goods in many locations.
France is believed to be the original home of departmental stores. But cooperative stores of England were the stepping stone for departmental stores. Some of the leading merchants of Paris set up the three well known stores, “Bon Marche-1852”, ‘Louvre-1855’ and ‘Printemps- 1865’.
A departmental store is a large retail establishment having in the same building a number of departments each of which confines its activities to sell same type of a particular product. In other words a departmental store is a large-scale retail unit having different departments under one roof. It is a combination of single-line stores under one roof. Each department deals in one line of goods. The management is also under one hand.
It offers goods of various types and it is generally remarked that it sells from pin to plane. They are located in central and busy localities of towns and cities. The customer who wants to buy his various requirements need not move from one shop to another. All that he has to do is to go to a departmental store, where he can buy all his requirements without much waste of time and energy.
The Reasons which led to the growth of Departmental Stores:
1. After the industrial revolution, there was mass production. Mass production leads to mass selling. It is through departmental stores that mass selling is made easy.
2. The growth of large cities and towns, spread over extensive areas, has necessitated centralised large selling shops.
3. The rise of well-to-do class of people has also facilitated the development of departmental stores. These people require articles of high quality and look for service and comfort while buying their requirements.
Features of Departmental Stores:
1. Usually, departmental stores are located in the centre of the city and ail the departments are controlled by one.
2. It is a complete shopping centre. They sell a wide variety of many goods at cheap prices.
3. They do great service to the customers. Provision of recreational facilities, canteen, reading room, etc., within the premises, and free home delivery, etc., are some of the services.
4. They make extensive use of advertisement.
5. Usually, the cost of operation of a departmental store is high due to relatively high expenses of rent, advertising and delivery over a wide area.
6. The principle of division of labour and specialisation is more intensively used.
1. Convenience in shopping- ‘All in one’ — a person can purchase all his requirements from one departmental store. Thus, shopping is made easy and convenient.
2. Wide choice of product- Consumers can select goods of their liking from large stock of goods of different varieties.
3. Service to customers- Most of the departmental stores offer facilities of rest rooms, children play rooms, canteen, etc.
4. Economies of large-scale buying- The departmental stores purchase goods directly from the manufacturers. Therefore, they can obtain them at low prices.
5. Extensive use of advertisements- As they are big organisations, large-scale advertisement is possible.
6. Self-advertisement – One department advertises another department. Customers pass through more than one department. Therefore, customers are likely to be attracted by the display of goods in other departments. They may make further purchases.
7. Ability to Employ Specialists- As a departmental store is organised as a joint stock company with a large amount of capital, they can employ specialists with expert knowledge of buying, advertising, selling and pricing.
8. Large Turnover- Departmental stores are located at popular shopping centres of big cities. This attracts large number of buyers. Various services also go to attract customers. Thus, departmental stores are known for transacting large sales.
1. High Cost of Operation and High Price- The cost of running the business is very high. Extensive services and facilities are offered to the consumers, extensive advertisement, high rate of rent for buildings, salaries to experts — all go to increase the overhead cost of departmental stores. Because of the high cost of operation, prices also will be slightly costlier.
2. Difficulty of supervision- Since large number of departments are there, there is difficulty in supervision.
3. Lack of personal touch- Personal attention to the customers is not possible.
4. Distance from residential localities- Departmental stores are away from the residential areas. They may not suit the needs of the vast majority of people who live at long distances from the central part of the city. Customers who are at a long distances will satisfy their immediate needs from the local stores.
5. Misuse of liberal services- Some service departments may be run at a loss to attract customers. Many customers make unjust use of the liberal services extended.
Multiple shops are also known as chain stores in the U.S.A. A multiple shop is an extension of the simple retail store. When a retail shop is successful, a few more branches will be opened. Chain stores consist of many shops under one management. Companies which manufacture consumer goods usually use the multiple-shop system to market their products through branches spread throughout the length and breadth of the country.
Each shop is managed by a branch manager e.g., Bata Shoe Co., Singer Sewing Machines Ltd., Delhi Cloth Mills, etc. The goods are received from the head office and the sale price is determined by it.
1. The head office makes bulk purchase of goods for all its branches and this enables it to purchase goods at low prices.
2. One advertisement will be enough for all the branches.
3. Goods are sold on cash basis. Therefore, there are no bad debts.
4. Since all the branches are under the same management, shortage of goods in one branch can be easily adjusted with the goods from neighbouring branches. It need not await receipt of stocks from the head office.
5. All the branches of the multiple stores are decorated in a uniform style. The interior layout, window-dressing and outward appearance are the same in the stores. This attracts more customers.
6. Multiple shops are mainly established to eliminate retailers. Thus, middlemen cost is reduced.
7. Multiple stores are generally selling necessary articles. Therefore, there is quick turnover of goods and, therefore, money is not locked up in stocks.
1. The multiple shop has to be located in crowded and busy areas and, therefore, high rents have to be paid for accommodating the shop. Therefore, overhead expenditures are more.
2. There is no personal touch between the management and the customers.
3. The shops sells only one particular type of goods, individual tastes of the customers cannot be satisfied.
4. Multiple shops sell on cash basis. Therefore, to some extent the volume of sales might suffer.
5. The managers of the shop are not the proprietors. So they may not be interested in the improvement of the branch.
6. Personalised service cannot be expected in multiple stores. For example no home- delivery will be undertaken.
The latest addition to the various types of retailers is the so-called discount houses, which brought about a revolution in retailing since 1950. The discount houses are large retail stores, freely open to the public, advertised widely, stocked with well-known brands of hard goods e.g., appliances, home furnishing, sports goods, readymade garments, etc.
They deliberately and consistently sell their goods below the advertised list prices. They operate in heavily travelled but low rent areas. They spend minimum amount on premises, furniture and fixtures and offer very few customer services.
A new class of consumers consisting of large middle-income group of people emerged after the Second World War and these people were price-minded. These people preferred low prices and few services. With so many wants and limited purchasing power, the supermarkets and discount houses were most suitable.
Branding, packaging and advertising required little sales efforts and local sales promotion. Thus, the situation after 1950 in many countries was ripe for major changes in retailing. Discount houses saw great prospects in a low-margin, high-turnover type operation, with very few services but big price cuts.
They could reduce their operating expenses to about 15 per cent of sales while departmental stores and limited- line stores had operating expenses of up to 35 per cent of sales.
Specialty Stores have narrow product-line but deep assortment. Examples- The Planet M, Zodiac/Park Avenue Store.
A supermarket is a novel form of retail organisation specialising in necessaries and convenience goods. Usually it concentrates on all food articles — groceries, meat, fruits, vegetables and tinned products. Example- Food World. Non-food items sold by these stores should satisfy a few conditions.
Firstly, it must be widely used and must appeal to general consumers. Secondly, a non-food article must be a branded product, i.e., pre-sold to customers through intensive advertising. Thirdly, it should be a low-priced article.
The following are some distinctive features of supermarkets, which are very popular in the U.S.A. and Europe.
i. It is a large, cash-and-carry store. It saves in terms of credit facilities and delivery expenses.
ii. A big supermarket may have a very wide variety of articles sometimes covering thousands of items.
iii. There is no sales pressure. Buyer is at ease and gets sufficient time for selection. The supermarket represents the most developed form of self-service retailing. The distribution is cheaper. Self-service is a general rule and buyer may be provided with conveyance on wheels to carry his purchases from point to point. Thus, it provides individual selection without salesman.
iv. Packaging plays a very important part. Immediate identification regarding contents, quantity, price, etc., is provided by packages of products which are kept on self- services shelves. Transparent packing helps to meet these requirements.
v. It has a minimum selling area of 3,600 sq. metres (60 mt by 60 mt). It must have a central location and expert management to secure a very high turnover.
vi. Self-service combined with the large buying power and low percentage of profit margins means that supermarkets can sell at low prices. This low-price appeal is an important feature of supermarkets.
vii. Modern packaging, labelling and branding devices have encouraged the growth of self-service shopping and supermarkets, which provide a number of advantages, e.g., reduction in the sales staff, cut in establishment or running costs. Bulk purchases are always cheaper. Hence, sale prices can be kept down.
viii. Self-service shopping and supermarkets may be operated by co-operatives and departmental stores.
ix. More than 75 per cent of the sales in grocery in the U.S.A. as done by supermarkets in 1980. Supermarkets have rapidly taken over food retailing. They have also added non-food items.
x. All supermarkets are usually run by limited companies.
xi. At present, discount selling in food articles is also undertaken by the supermarkets.
xii. Supermarkets are cut-price and self-service chain stores. They give very keen competition to all types of retail shops. The policy of ‘loss’ leaders followed by the supermarkets leads to cutting the price of some popular article, e.g., sale of sugar much below the market price. The losses on sugar are fully compensated by profit on the extra sales secured for other goods bought by the housewives.
A superstore is a large super market (25,000 sq. ft.) and is the best example of scrambled merchandise or diversification in retail trade. In addition to usual food products, a superstore tries to fulfil many other consumer needs, e.g., tobacco products, apparels, housewares, hardware items, books, records, hobby items, garden products, sports goods, photographic materials, etc. Even some household services such as laundry, shoe repair, beauty parlours are also provided. Example- Nilgiris, Bangalore.
7. Shopping Centres (In Suburban Areas):
Modern trend in retailing is towards increasing decentralisation. A shopping centre is a group of commercial establishments planned, developed, owned, and managed as a unit related in location, size, and type of shop to the trade area it serves, and it also provides necessary amenities to the shoppers at one place. Planned shopping centre is an integrated retail unit. Shopping centre concept represents a natural evolution of urban expansion.
We have well-planned and organised shopping centres to offer maximum shopping convenience in the form of one-stop shopping. A shopping centre is designed, developed and operated, usually by a company, near about large residential complexes so that shoppers have easy access to it. It may consist of numerous retail stores (small and large).
These shopping centres or malls offer a very wide variety and assortments of consumer goods. Such concentration of retail trade makes shopping very convenient, particularly to the surrounding ever-growing suburban customers in a big city like Mumbai. Shopping centres are responsible for drawing away the retail trade from the central metropolitan cities to suburban regions.
The retail shops in the shopping centre evolve a joint promotion campaign to attract suburban customers. A consumer can save time, energy, and travel costs, and can make all purchases at one place. Shopping centres or malls resemble central city shopping districts.
They are changing consumer shopping habits as they reduce the need or urgency to go to the central city in order the make their purchases. These new retail units have reduced the importance of the central city’s downtown shopping district or older main street suburban business district.
The fixed or one-price shop is a typical example of retail organisation in which one identical price is fixed for a very large variety of articles of everyday use. The articles are of low price and they appeal to bargain making instinct, and due to this, these shops get a huge amount of sales turnover.
The margin of profit per article is very low but the profit on the total sales turnover is quite substantial. As the common price for all articles is purposely kept at a low level, these one-price shops can serve as good instruments for mass distribution. All units will be under one ownership, management and control.
The purchases are usually made by a central office or a depot. The central organisation makes a wise and careful selection of a wide variety of goods of about the same price or within a narrow price range. The selected articles are procured from manufacturers or manufactured by the concern on a large scale. The central organisation of one-price shop tries to eliminate all slow selling line and concentrates fully on those goods which have a large and continuous demand.
As there is same price for any article, the buyer is at ease and he is given full opportunity to choose whatever articles he likes. In India, we come across many mobile retailers of this variety crying ‘Har ek mal bees Rupaya’ (Rs.20 only).
Dedicated brand outlets retail branded products of the company. Examples- Nike, Reebok, Zodiac etc. Multibrand outlets deal in branded products of more than one company. Examples- Vijay Sales, Vivek, etc.
Manufacturer’s own outlets and plush, exclusive showrooms, galleries, and arcades constitute an important part of the direct selling or non-store retailing since 1980. In textile industry, in India, this pattern of retailing is now used extensively. For instance, there are more than 1900 authorised Vimal Showrooms in all urban areas across the country. In big cities, we have jumbo showroom of “Vimal Fabrics.” The showroom idea also acts as a promotional tool and not merely distribution outlet.
11. Factory Outlets/Off-Price Retailers:
Factory outlets are owned and operated by manufacturers to sell surplus, irregular (seconds) or discontinued goods. These outlet stores offer prices as much as 50 per cent below retail on a broad range of items.
Off-price retailers buy from producers their excess output, or excess stock at the end of a fashion season or irregular goods of inferior, i.e., 2nd quality rejected under quality control at lower than normal wholesale or regular price. Hence, they can sell below the current prices for regular (1st quality) of in-season goods, sold in other retail stores. We have also retailer’s chain stores to sell such goods at attractive discount prices.
12. Consumer Co-Operative Stores:
Just as multiple-shop system is an instrument in the hands of a manufacturer to eliminate all middlemen in distribution, similarly, a co-operative store is an organisation owned, managed and controlled by consumers themselves to reduce the number of middlemen and their commission.
Features of Consumer Co-Operative Store:
1. It is a voluntary association of consumers duly registered under the prevalent Cooperative Societies Act. At least ten members are required to register a society or store. The registration gives certain privileges and exemptions which are not available to other non-co-operative bodies.
2. Members of the store make joint-purchases and sales among themselves at the current market prices. Sale at market price is preferred to avoid unhealthy competition with other retailers.
3. Membership is open to all. Wealth is not a criterion- rich and poor are treated alike. However, stress is given on the moral character at the time of admitting a person as a member.
4. The store has a share capital of a small face value and the amount is recoverable by instalments. Every person has to pay an entrance fee.
5. Management of the store is democratic and generally honorary. “One man, one vote” is the rule. Day-to-day management is in the hands of permanent paid officers. The general meeting of members every year appoints an executive committee to look after the management of the store.
6. A definite percentage of profits is utilised for social and educational purposes. Profits after payment of limited interest on capital are utilised for the distribution of dividends. The amount of dividend is based not on the shares held but is linked with the amount of purchases made by the members.
This linking of dividend with purchases is a unique principle in co-operative stores. It secures two advantages. Firstly, every member in his own interest will try to make maximum purchases from his store and this will ensure automatic loyalty of members to their store. Secondly, if every member makes maximum necessary purchases, the store will have maximum sales and maximum profits without any resort to advertising.
7. As consumers’ co-operation is essentially meant for working class and lower middle class population, capital will naturally have a secondary role. In co-operation, honesty and loyalty are capitalised and more emphasis is laid on the moral character of the members. Personal security is the best security honoured in a co-operative organisation.
8. The liability of members is generally limited by shares.
9. The accounts of store are audited by the Registrar of Co-operative Societies or a person authorised by him.
10. Before declaration of dividend, at least 25 per cent of the net profits must be credited to the General Reserve and 10 per cent to the General Welfare Fund or a similar fund for social benefits of members.
Concessionaire is a store format that rides piggyback on another outlet, say a fuel pump. A Kiosk is a free standing open pavilion, often open on one or more sides used for providing information, selling and promotion of products and services.
Franchising is the granting of sole selling right within a given geographical area. The franchising company (Franchiser) supplies equipments/raw materials to the licensee and the licensee pays fees or a percentage of turnovers. Examples- Apex Computer Centre, McDonald/ KFC outlets.