Home Trade Overview

Home Trade

Home trade encompasses trade conducted entirely within a country, divided into retail and wholesale branches. Retail trade involves buying goods in bulk and then breaking down the bulk into smaller quantities to meet individual consumer needs. Retailers buy from wholesalers and sell directly to consumers. Wholesale trade, on the other hand, deals in purchasing goods in bulk and selling them in substantial quantities to retailers rather than directly to consumers.

Retail Trade and Retailer Functions

The term “retail” stems from "to cut again," emphasizing that retailers break down large quantities to better suit consumer needs. Retailers perform multiple functions, including breaking bulk, providing a variety of goods, extending credit to trusted customers, and offering delivery for some items. They also provide local supply, presales, and after-sales services, display goods attractively, and share market information with wholesalers. Retailers play an advisory role to consumers and ensure the packaging of goods before sale.

Establishing a Retail Shop

When opening a retail shop, key considerations include securing adequate capital, selecting a suitable location, and leveraging the owner's business experience. Other factors include determining which goods to stock, deciding on selling methods, choosing an appealing shop name, stocking appropriate quantities, and planning how to reach and inform potential customers.

Location Considerations for Retail Shops

In selecting a retail shop location, factors to consider are site costs, competition levels, customer density, trade growth, shop security, transport and communication links, proximity to supply sources, capital, pricing strategies, and accessibility. Parking space availability also plays a role in determining the location’s suitability.

Self-Service Stores

Self-service stores cater to customer convenience, offering trolleys, a variety of packaged and branded goods, extensive trading spaces, and additional customer facilities like car parks. They generally operate with multiple checkout points where cashiers collect payments, sell at competitive prices, and often belong to larger retail chains that buy directly from producers at factory prices.

E-commerce

E-commerce, or online shopping, enables selling goods and services over the internet. This format allows customers to shop from home without traveling, providing them access to a worldwide market. E-commerce operates 24/7, giving customers the flexibility to browse and purchase goods at any time and offering a wide range of products and services.

Characteristics of Small-Scale Retailers

Small-scale retailers are typically sole proprietorships with limited capital, unable to advertise nationally, and unable to hire highly skilled employees. They generally operate in townships, offering personal services and working long hours, with early openings and late closings. Due to the ownership structure, small-scale retailers usually have unlimited liability.

Characteristics of Large-Scale Retailers

Large-scale retailers buy goods in bulk directly from manufacturers at factory prices, manage their own transport and warehousing, and can afford national advertising campaigns. They often provide self-service options, additional amenities like restaurants, car parks, and specialized sections such as hair salons, and operate in city centers or across major urban areas. Offering an extensive variety of goods, large retailers belong to chains of stores, provide after-sales services, and use attractive displays to encourage impulse buying. They also use “loss leaders” (low-priced items) to attract customers.

Invoices and Monthly Statements

Invoices are bills issued by sellers to buyers, particularly for credit sales, detailing quantities, descriptions, prices, any discounts, and payment terms. The invoice serves as the starting point of the accounting process and forms the foundation for transactions recorded in purchase and sales day books. Monthly statements summarize all transactions (invoices, debit notes, credit notes, payments) between the seller and buyer over a month. These statements show the outstanding amount owed, allow buyers to reconcile accounts, and serve as polite reminders for payment.

Functions of a Wholesaler

A wholesaler buys goods in bulk from producers and sells them in smaller quantities to retailers, offering services like warehousing, bearing risks, stabilizing prices, and breaking bulk. Wholesalers provide market information to manufacturers, finance retailers by offering credit, and facilitate the transport of goods. Additionally, they prepare goods for sale and handle marketing activities to boost product visibility.

Characteristics of Cash-and-Carry Wholesalers

Cash-and-carry wholesalers strictly operate on a cash basis, primarily dealing in groceries, and are structured to allow self-service. They stock a variety of goods displayed on shelves in large buildings, catering to both retailers and consumers.

Hire Purchase Agreements

A hire purchase agreement allows a buyer to make a down payment (deposit) and pay the balance through regular fixed installments over a specified period. The buyer gains possession of the item but does not own it until the final installment is paid. The item remains the seller's legal property until full payment is completed, allowing the seller to repossess it if payments default. Typically used for durable items like furniture, hire purchase agreements enable buyers to use goods while paying for them over time.

Advantages and Disadvantages of Hire Purchase

Advantages include enabling buyers to afford expensive items, potential price reductions, inflation benefits, and spreading payments over time, freeing up funds for other expenses. Items can be used immediately, benefiting buyers' daily lives. However, disadvantages include higher costs due to interest, risks of excessive debt, long-term installment commitments, potential repossession for payment defaults, and restrictions on selling the item until payments are complete.