DISADVANTAGES
OF LARGE SCALE RETAILING TO THE RETAILER
·
Large
capital is needed as large retailers need to buy a large variety of goods
direct from the manufacturers in bulk quantities.
·
As the shop expands and the branches and
departments increase, control becomes more difficult and expensive.
·
There are high operating expenses and these can be
covered only by a high turnover in sales.
·
There is a greater risk of loss through pilfering
and shoplifting as self-service is provided.
DISADVANTAGES
OF LARGE SCALE RETAILING TO THE CUSTOMERS
·
Customers do not enjoy personal services from these
large retailers.
·
Large retailers normally do not provide credit
facilities.
·
As large retailers provide many amenities, consumers
may get the goods at higher prices.
HOW
WHOLESALERS ARE AFFECTED BY THE GROWTH OF LARGE SCALE RETAILERS?
The establishment and
popularity of large retail outlets like the multiple and the variety chain
stores which have the financial and technical resources to buy in bulk direct
from the manufacturer have contributed to the decline of the wholesaler.
Nowadays most of the manufacturers prefer to sell goods direct to the large
scale retailers. By selling direct to the large scale retailers, the manufacturers
are able to sell goods on bulk consignment where the payment is made for the
consignment by the large scale retailers immediately. The manufacturers get the
benefits of more profit percentage as the wholesalers are eliminated in this
way. Manufacturers also get in touch with the final consumers through large
scale retailers as they perform the function of customers personal service
through pre-sale and after-sale service. Most importantly a large scale
retailer can deal with many manufacturers’ goods at wide range. As these
functions cannot at all be performed by wholesalers, the wholesale trade has
become of less importance.
SURVIVAL
OF THE SMALL RETAILER
In spite of the
intense competition from the large retailers and the proliferation of large shopping
centres or shopping malls, a number of small independent retailers have still
managed to survive even though their numbers have fallen greatly in recent
years. This is due to certain advantages that the small retailer still enjoys
over the larger and less personal retailers. However, the small retailer still
predominates in certain trades such as jewellery and bespoke tailoring in which
a large outlet is not exactly suitable.
The reasons for the survival of the small retailer are as
follows:
(a) Since the small retailer knows his customers well, he
is able to give better personal advice and service. This is extremely important
in some branches of retailing, e.g. jewellery and made-to-measure clothing. As
a result, consumers prefer going to one shopkeeper to others because of the
'personal touch' which puts them at ease.
(b) Since most small retailers cater for regular
customers, they are in a position to assess the credit-worthiness of each
customer and may be willing to give credit.
(c) They might
undertake delivery of goods - e.g. daily newspaper, fresh bread, daily
provisions.
(d) The small
retailer's shop is normally close to the homes of his customers, making it very
convenient for them to call whenever they run out of supplies.
(e) The small amount
of capital needed makes it easy for people to enter the retail trade. Not much
skill and expenses are needed to start a business.
(f) The small
shop does not have as many overheads as a large retailer, and hence can sell
most items at a slightly lower price.
(g) The small shop
is easier to manage. The small retailer is helped by members of his family. The
owner and other members of his family have every incentive to work very hard
since they reap all the profits.
(h) By becoming a
member of a voluntary chain (see Glossary) the small retailer may be
able to get his supplies on more favourable terms from the wholesalers in his
chain as well as enjoy other benefits like advertising, credit and insurance.
Advantages
of the small retailer
(Note that the above
points from (a) - (h) may be used in the discussion on the advantages of the
small retailer.)
Disadvantages
of the small retailer
1. Jack of all trades and master of none
The small retailer does not employ any specialist buyer.
He himself undertakes the tasks of buying as well as selling, store-keeping and
display, not to mention book-keeping and administration. Since he cannot be an
expert in every field, it is very likely that he is less efficient and hence,
his costs in relation to turnover are higher than those of the larger
retailers.
2. Lower trade discount
Since the small retailer gets his goods from the
wholesaler, it is natural that he will have to pay a higher price for his goods
since he gets a lower trade discount.
REASONS
WHY A SMALL RETAILER BUYS FROM THE WHOLESALER
1. Small
capital
The small retailer has only a small capital and cannot
afford to buy in bulk from the manufacturer. He can only make small orders at a
particular time.
2.
Limited market
The
small retailer has mainly a regular clientele. The market for his goods is only
limited to the people living in the vicinity of his shop. This does not warrant
bulk buying, even though he can get better prices if he were to buy in bulk
from the manufacturer.
3. Small
turnover
The
total volume of his sales per month is small. Bulk buying would mean that he
will have his limited capital tied up in stocks for too long a time. This not
only involves a loss of interest but also the payment for rental on storage
space. Goods lying around for too long would go bad in the case of foodstuff or
may go out of fashion in the case of goods like clothing and furniture. He only
needs to pay in small amounts for a great variety of goods produced by many
manufacturers. And this is exactly what the wholesale does for him.
4. Need
for credit
Trade
credit is one of the greatest sources of funds for a small retailer.
Manufacturers are often unwilling to give credit. However, the wholesaler is
often willing to give credit to the small retailer in order to secure business.
5.
Variety of goods
A
manufacturer only sells one or a few major related items of goods, e.g. soap,
shampoo, washing detergent and other cleansing agents. The number of brands
manufactured by a particular manufacturer is also limited. However, a
wholesaler stocks a great variety of brands of a particular good, e.g. Lux,
Palmolive and Imperial Leather soaps. He also stocks a wide range of
related goods, e.g. all kinds of foodstuff and household items.
6. Regular visits from the wholesalers
The small retailer gets to know the latest products in
the market through salesmen from wholesaling companies who visit him
periodically. The small retailer may also get advice as well as prospective
prices of certain product lines from these people who can help him choose the
types of goods to stock.
HOW
A SMALL RETAILER CAN MAKE HIS BUSINESS MORE SUCCESSFUL
- Location: The small retailer can change the location of his shop if his business is not good in terms of competition and demand.
- Service: The small retailer can improve his services in order to earn more goodwill and secure a regular market.
- Prices: The small retailer may be buying goods at very high prices. So he can change the wholesaler from whom he is buying goods.
- Quality: The quality of his goods may not be very good and hence he may be loosing his customers. So the retailer must buy better quality goods.
- Variety: The retailer must try and provide better variety of goods in order to increase his number of customers.
- Shop Layout: The retailer must keep his shop clean and display his goods very neatly. This will attract more customers.
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