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Business Studies > Internal Trade > Retail Trade
Internal Trade

Retail Trade

All goods go through a distribution channel to make the journey from the manufacturer to the final consumer. One important cog in this machinery is the retail trade, the final step of the distribution channel. Let us see the role retailers and retail trade play in our economy.

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Retail Trade

Retail trade is the business activity associated with the sale of goods to the final consumer, the ultimate customer. It is the link between wholesalers or manufacturers and the customers of the product. Typically retailers sell goods in small quantities to consumers for personal use, not for resale or business use.

Retail is the final step of the distribution channel. the retailer will buy the goods from the wholesaler, or sometimes directly from the producer, in bulk (large quantities) at a discounted price. And then it sells the goods to the final consumers of the goods, in small units or quantities, at retail price enjoying the benefits in the process.

Retail trade can take a lot of forms. It is not necessary that the goods are sold from a store, retail trade can even happen over the phone, via post or mail service, door to door selling etc. So the place of sale can also differ greatly, for example, a store, a supermarket, the customer’s house itself or even a vending machine. But one thing which remains common in all of the above cases is that the buyer of the goods is its final consumer. As far as this is true, it will be a retail trade.

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Services of Retailers

Retailers are the important link between manufacturers and customers. They are the final point of sales and are invaluable to the entire distribution channel. They, in fact, provide services to both the wholesalers and the consumers. Let us have a look.

Services to Wholesalers or Manufacturers

  • Final link in the distribution of goods: This is a function of place utility. Wholesalers or manufacturers cannot cover a wide geographical area and markets to sell the goods to the final consumer. It falls upon the retailer to create place utility and ensure that the goods are distributed throughout a wide market and reaches all consumers. Retailers are the link between the wholesalers and the final consumers
  • Personalised Selling Efforts: There are certain goods that require personal selling. These are non-standardised goods that cannot just be picked off the shelves. But the manufacturer is not there to sell the product, that responsibility falls on the retailers. They use personal selling techniques to realize the sale. Take for example selling shoes, which always requires a personal touch from the retailer.
  • Permit Economies of Scale: A manufacturer can produce goods in bulk, and a wholesaler can buy goods in bulk because retailers perform the function of breaking up the bulk. Although they buy in bulk themselves, they sell in smaller (sometimes individual) units. This allows the producers and even the wholesalers to enjoy the economies of scale.
  • Source of Market Information: Retailers are the only ones in direct contact with the final consumers on a daily basis. They are in a unique position to provide the manufacturers with an valuable feedback they have collected from the consumers. If a consumer has complaints or problems, the retailer is the first person he contacts. Such information is invaluable to the manufacturers in their quest to improve their products.
  • Advertising and Promotions: Retailers will even help manufacturers and wholesalers with their promotions and advertisements. Retailers will frequently take part in promotional activities, put up advertisements of the product inside their shops, run offers, discounts etc.

Services to Customers

  • Convenience: Retailers overcome the barrier of place, and allow the consumers to buy all their products from the local market near their house. Consumers also do not have to worry about sourcing the products they require because the retailers perform this function for them. So if a consumer in Chennai, wants to buy a good manufactured in Mumbai, he/she only need to visit their local retail store.
  • Assured Availability: A consumer also does not have to bother with buying the goods in bulk. The can buy them in individual nits as and when required. The retail store will make certain that the product is available when the need for it arises. There is no worry about storage or warehousing as such for the consumer.
  • Variety: Another important service retailers provide to consumers is that they provide them with a lot of options. The variety offered enables the consumer to make the best decision for themselves, after having reviewed all the options.
  • After Sales Service: Certain products at times require some installation, demonstration or any such after sale service. It usually falls upon the retailers to provide such services to the consumer.
  • Credit Facility: A retailer at times will offer the consumer a financing option or a credit facility to make the payment in monthly instalments, or to simply defer the payment to another date. This allows the consumer to buy the products they need even if they do not currently have the entire finance for it.

Solved Question for You

Q: Retailers overcome the barrier of space. True or False?

Ans: The given statement is true. A manufacturer or wholesaler cannot cover the entire market of a good. It spreads over a large geographical area, like the whole country. Retailers help overcome this barrier of space because they are spread out in all local markets and reach all the consumers with the goods.

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