Do you ever wonder why businesses came on full bloom once and suddenly go under? Do you know why one shop opens and the other closes?
The reasons are several, ranging from various forms of competition, quality and quantity of goods and services, to the shortcomings of the retailer themselves, writes Ayodele Asaolu.
HERE, we shall discuss some of those factors that might contribute to the likely elimination of the small retailers. Some of the factors are:
Competition From the Large Retailers
Such competition could take different forms:
(a) Price competition: Although the large retailers might have large over-head costs they are still able to offer lower prices because of large stocks and large sales turn In addition, some small retailers buy in small bulk from the large retailers; since the former must sell at a profit, their retail prices are usually higher.
(b) Provision of Facilities: The lists of facilities offered by large retailers are impressive and constitute an eliminating factor to the small retailers. For instance, there are customers’ parking spaces in the departmental stores and super markets, with security guards watching over safety of customers’ vehicles. They deliver some bulky packs to customers’ houses. They also help with the pre-packaging of foods etc.
There are other non-shopping facilities like repair of shoes, televisions and radios; buying postage stamps, purchase of air or railway tickets or tickets for the local football match or cinema.
2) Lack of Varieties: A working housewife who has much to buy within a limited lunch period would prefer the facilities offered by the supermarkets or departmental stores for the purpose of shopping under one roof, and in the comforts of a neat and comfortable environment to the likelihood of having to visit many small retailers under the intensive heat of the sun.
3) Quality of Goods: The large retailers (the departmental stores and the supermarkets) are usually more reliable for the quality of their goods. Some of the goods sold by large retailers are “branded’s and have trade marks; they therefore appeal to customers.
Where purchased goods are found to he unsuitable or defective in one way or the other, large retailers would usually replace them if they are un-soiled. The small retailers are not able to perform this feat.
4) Limited Capital Resources: The capital finance of the small retailers is thin and narrow based. The slightest “financial ill-wind’ could blow a small-retailer out of business.
5) Lack of Proper Accounts Keeping: Some small retailers are illiterate and can not keep accounts of their business. Some have no records of accounts of their trades and merely rely on memory which fades with time and quantity of information to be remembered.
6) Lack of Established Premises: Many small retailers operate from illegal stalls which are constantly demolished by local government authorities.
7) Lack of Insurance Security Measures: the small retailers take no insurance covers as such on their trading assets. This renders them helpless when accidents happen to their trading fortunes.
8) Creation of Self-Retail Outlets by Producers and Wholesalers:
Some manufacturers market their own products and sell directly to the final consumers. This militates against the business of some small retailers. For instance, the Bata Shops and Boots Chemist Shops belong respectively to shoe and drugs manufacturing companies.
In conclusion all we discussed in both volumes of this text book point to one direction: i.e. while on the one hand, there are some positive factors helping the small retailers to remain in business at all costs and in the face of all odds there are some other factors which might contribute to the elimination of the small retailers.
Some Modern Trends in Retailing (I)
I. For instance the use of self service, branding and pre-packing department stores, and supermarkets were mentioned. Here we shall re-examine in greater detail the advantages and disadvantages of branding and pre-packing. In addition a list of other modern trends in retailing would be mentioned for discussion; i.e. after- sales service, use of trading stamps, auto-vending or slotting machines, discount stores, party selling and cash and carry practice.
Reasons for Modern Trends in Retailing
I) Higher Income Level and Standard of Living: in modern times income earned by an individual worker or employee has risen considerably and this has led to considerable rise in standard of living.
2) Varieties of Consumption Goods: A high standard of living has widened the scope of consumption goods; therefore there is pressing need for shops that could stock a variety of consumer goods. This accounts for the emergence of department store and chain stores.
3) Working Wives: The change in social and economic status of modern married women who now work and earn income suggests speedier shopping facilities. If a working married woman has to shop to meet the high standard of living of her family she will have to collect as many goods as possible within the short shopping period at her disposal. The type of retailer that could meet her need is the shop where different stores display many goods under the same roof with self facilities.
4) Higher Cost of Labour: in an age of higher salaries it costs more wages to keep shop assistants. Modern trends in retailing therefore focus attention on how to cut down to the barest mini mum the labour costs. Examples of this are the self-service facilities, the use of auto-vending machines, etc.
5) Force of Competition: Competition among large retailers Point to the direction of devices that would lead to increased sales and net margins. Such force of competition accounts for the adoption of the modern retailing trends as demonstrated in discount stores, Party selling, trading stamps, auto-vending machines; in addition to self- service facilities.
Branding: A branded good is a good that is differentiated from I other goods of its type by giving it a special name. For instance, a customer who wants to buy tea might prefer (among the classes of branded tea) Typhon Tea; PG. Tips tea; or Lipton tea. The idea is to generate the impression in the minds of consumers that a certain type of branded good is different from and superior to the others; this will be reflected in the prices associated with the different brands. The Gillette shaving razor blade Is different from the Naccet shaving blade, and one is promoted as being superior to the other.
There are advantages and disadvantages of branded goods to different commercial units.
Advantages to the Retailer
(a) Easy for placing order: Branded goods can be ordered easily from the manufacturer or wholesaler by mere reference to the “branded” name.
(b) Adequacy of casual knowledge: Since “brand” names usually stand out and are associated with long-established states of quality, retailers need no specialist or expert knowledge before ordering such goods,
(c) Relief in weighing and re-packing: Branded goods are usually pre-packed; therefore there is no need for repacking by retailers for whom they are easy to handle.
(d) Relief of advertising function: The manufacturers invariably handle the advertisements of their branded goods and therefore relieve retailers the expenses of advertisement.
(e) Maintenance of fixed retail price: The manufacturer advertises fixed prices for his branded goods thereby maintaining ruling prices all over a given sales area. This guarentees a selling price for all retailers. Group competition is therefore in other fields other than in pricing.
(f) Window display materials: — The manufacturers of branded goods usually provide materials to retailers for window displays.
The Disadvantages to the Retailer
(a) Lack of competitive prices; Prices of branded goods are usually the same in all retailers’ shops. The very efficient therefore could not increase his turnover by selling at cut-down prices.
(b) Large stock of different branded goods: Since customers prefer to compare different brands of the same goods, the retailers who hope to meet the immediate demand of their numerous customers must keep large stocks of a variety of branded goods. This involves large capital.
(c) Difficult persuasion function: Even when one branded good A is a near substitute for another branded good B, a retailer might have problem in persuading a customer that this is so, especially when good B is out of stock and good A is available in great quantity as a substitute.
Advantages to the Customer
(a) Guaranteed quality: Qualities of branded goods are guaranteed and are the same in all shops and markets. Branded goods therefore are standard all over the world.
(b) One ruling price: – Consumers are assured that at any given period of time in the market, the same price obtains for a specific branded good
(c) Ruling price and retailers’ interference: Once the selling price is advertised by the manufacturer, retailers cannot arbitrarily increase the price.
‘Disadvantages to the Consumer
(a) Lack of competitive prices: Because the prices of branded goods are fixed, consumers cannot enjoy the advantages of large scale turnover in form of lower prices resulting from the performance of large markets.
(b) Likely higher prices: It is likely that the cost of the manufacturer’s advertisements would have been passed on to consumers in form of marked-up prices resulting in higher selling prices. For instance about 75% of the selling prices of patent medicines and cosmetics is traceable to costs of advertisement.
As a modern trend in retailing, pre-packing is predominant in the self-service shops.
By pre-packing all goods that are to be sold in a shop are graded, weighed, packed and well wrapped by the manufacturers before such goods show up on the selling counters. Pre-packing has tremendous advantages for manufacturers, retailers and the consumers.