Commerce ss1
Commerce ss1
TYPES OF GOODS
1. Capital Goods
2. Consumer Goods
Capital goods are goods purchased from the government and organizations for the
production of other goods. They are not meant for consumption. Example;
Machineries, raw materials, tools and equipment.
Consumer goods are goods purchased by the government and other organizations
primarily for consumption and personal use. They are not to be used to assist in
the production of other goods. Example: cloths, foodstuffs, bicycles, books etc.
SCHEME OF WORK
1. Home Trade
2. Retail Trade
3. Small Scale Retail Trade
4. Large Scale Retail Trade
5. Modern Trends in Retailing
6. Wholesale Trade
7. E-SHOP
HOME TRADE
Home trade is a division of commerce concerned with the buying and selling of
goods within a geographical area or country. It is also known as domestic trade,
local trade or internal trade”. It is easier because the same currency is used both in
buying and selling of goods. It is a branch of commerce which comprises
Wholesaling and Retailing
HOME TRADE
Wholesaling Retailing
RETAIL TRADE
This is the business activity of selling goods and services directly to the final
consumer’s / end users. Retailers are the final link in the distribution of goods
services.
Producer
Wholesaler
Retailer
Consumer
It is concerned with all the physical activities carried out to transport goods to the
end consumers at the right place and at the right time.
Retail trade is the most common form of home trade because it does not need a
large amount of capital and it out numbers both production and wholesaling.
WHO IS A RETAILERS
8. They supply door to door services; they bring goods closer to our homes.
RETAIL TRADE
2. The pricing policy: retailers need to consider the amount or price to be put
on the product depending on the target audience i.e. low or high income
earners.
3. Source of supply: retailers must consider the source that would ensure
constant supply because retailers cannot run out of stock, so they need to
decide whether to buy from the wholesalers or producers to suit his
customers.
5. Terms of sale / trade: The trader / retailer must decide whether to sell on
credit or cash basis only because the progress of the business depends on
this. He /she must know the rate / limit of discount to be given at any point
or time.
6. The experience of the retailer: the retailer must be loaded with business
acumen and managerial abilities to run his business properly.
7. Advertising: He/she must consider the best medium of adverting to suit his
products to create effective awareness.
8. Location of the Business: The site of the business must be decided because
the goods must be close to your consumers to increase patronage.
Retail trade can be classified into two (2) groups: they are
They include;
e. Market traders
a. Supermarket
b. Department stores
d. Variety stores
e. Mail-order
f. Hyper market
g. Franchise
ADVANTAGES OF HAWKERS
4. It is a form of advertising
6. Running cost of business is low; no need to pay rent, electricity, water etc.
DISADVANTAGES OF HAWKERS
Road side traders usually stay in one place along busy streets or roads or outside
gates of schools, hospital offices etc.
MOBILE SHOP
These are shops that move around and the goods are arranged in a motor van and
moved from one place to another to reach the final consumers. They take their
services to rural or urban areas to sell.
1. The goods are moved from one place to another through vans, trucks,
Lorries, bicycles etc.
This is another method of retail trade in Africa. Buyers and sellers are brought
together to transfer ownership of goods. Markets are built by the local
government and their stalls are arranged in rows.
1. Open stalls
2. Lock-up stalls
In open stalls owners bring the goods into the stalls, fresh, every day to avoid the
stealing of the goods. In lock-up stalls, owners lock up their stalls at the end of the
day with their goods in the store.
Oshodi Market
Balogun Market
Dosunmu Market
Alade Market
Oyingbo Market
STORES
These are retail outlets which operate in the rural or urban areas
FEATURES OF STORES
1. Delivery services: Small scale retail stores are very flexible in delivery
5. Flexibility of working hours: they are able to open early and close late
6. Personal relationship: owners are able to have good and cordial relationship
with customers
DIFFICULTIES ENCOUNTERED
4. Poor location: Most of the small-scale retail stores are located in the
neighborhood. This does not encourage patronage or more customers.
Large scale retailers achieve their growth by increasing the size of their unit.
Large scale retailing Could exist in
Chain / Multiple Store: This a group of retails stores basically of the same type,
centrally owned with a degree of centralized control of operation and selling the
same range of products. They have; identical store design, same layout, same
stock layout. They operate multiple outlets. They are usually owned by the same
person, a group of people or another organization.
1. They have identical layout, stock display and design e.g. Mr. Biggs, Sweet
Sensation, Chicken Republic etc.
4. It can spread risk or losses over different stores in many different locations.
7. The problem of bad debt cannot be experienced because of cash and carry;
which is usually applied
3. Extra cost is expended for transportation of goods from the head office
4. Managers in the branches have no control over goods being sold as a result
of centralized control
DEPARTMENT STORES
These are a collection of shops under one roof with ownership of each shop or
department specializing in selling a special range of goods. The shops are divided
into departments and sections. Each section has a manager who oversees the store
and its affairs e.g. marks and spencer, ASDA, Sainsbury. These stores specialize
in different items, e.g. clothes, foodstuffs, home appliances etc. They are not into
centralized buying, so each department buys their own stock; stock control.
Department stores are large retail units that handle a wide variety of goods. Each
department has its own members of staff and they handle their own promotional
activities.
3. They are not easily accessible to customers outside the major urban centers
SUPERMARKETS
Supermarkets are large retailing stores / outlets that sell mainly food and household
items. They sell wide variety assortment under one roof. There is emphasis on
merchant appeal; there are adequate check-out counters and parking lots.
Supermarkets must have a minimum of 2000 feet and minimum of three checkout
points. They sell grocery, dairy products, fresh food etc.
FEATURE OF SUPERMARKETS
1. The products are arranged and well displayed with price tags
ADVANTAGE OF SUPERMARKET
2. It ensures convenience because customers can buy all their needs from one
place
DISADVANTAGE OF SUPERMARKETS
3. Extra running cost is incurred from the provision of trolleys and baskets.
MAIL-ORDER
This is a form of large scale retailing in which buying and selling is carried out by
post.
They can only thrive where there is an efficient postal system. They contact
prospective customers by mail by sending small catalogues as a form of
advertisement. They make their deliveries by mail but they do not use courier
services. Mail-order usually involves the use of specially prepared catalogues that
present the retailers products either visually or in writing. Each product in the
catalogue has a reference number and the price. Payments are either by cash with
order (CWO) cash on delivery or by installments. This form of trading is very
common in developing countries with well-developed postal service system e.g.
USA, Europe etc.
FEATURES OF MAIL-ORDER
ADVANTAGE OF MAIL-ORDER
2. The issues of bad debts are reduced as goods are sold by cash on delivery
basis
3. Goods are sold in urban and rural areas where there is post office
4. It makes it easier for people who are not able to visit the various store
because of distance or nature of jobs
DISCOUNT HOUSES
This is another form of large scale retailing but is not common in Nigeria. It
features a large variety of products which they sell on a low price basis because
they are bought in bulk. They operate on a low markup therefore; profit margin is
low. They offer minimal customer service; self-service. It is very popular in the
US. They reduce their overhead cost and buying in bulk in order to reduce cost.
They sell a wide variety of goods at less than traditional retail prices.
FRANCHISING
ADVANTAGES OF FRANCHISING
HYPER-MARKETS
These are large supermarket usually with a minimum of 25 checkout points with at
least 50,000 square feet of selling space all on the same floor /level. They offer a
wide range of products with self-service and free car parking lots and are common
in the USA. They are general merchandise warehouse retailer; they sell a wide
variety of products. The goods are usually displayed in a wired basket, metal
racks, wooden bins. They are located outside the town.
Checkout points is a place where customers go to pay for goods they want to buy.
VARIETY STORES
These are stores which handle a wide assortment of goods. The goods are not
necessarily related to each other. They sell toys, cosmetics, hardware etc. A group
of variety stores may constitute a chain
RETAIL COOPERATIVE
This is a form of cooperative in which many small independent retailers pool their
resources together to enable bulk purchase and then sell the goods at lower prices
at profit. They share the profit in the proportion of the purchase made by the
members.
MODERN TRENDS IN RETAILING
These are new trends that have been introduced in retail as a result of the dynamic
systems of trade. In order to enhance and facilitate business, new ideas have been
introduced. Such as:
- E-Commerce
- Vending Machines
- Branding
- Customer services
- Self Services
SELF – SERVICES
FEATURES OF SELF-SERVICES
4. Goods are paid for at checkout points before leaving the store
ADVANTAGE OF SELF-SERVICES
DISADVANTAGE OF SELF-SERVICE
AFTER-SALE SERVICES
These are extra services which retailers render to customers after purchasing their
goods. This is in order to ensure constant patronage. These after-sale services are
made available after goods are purchased. Some of these after-sale services
include:
- Delivery
- Installation
- Repair
- Maintenance
VENDING MACHINES -
Goods are displayed in machines. These machines were developed in the late
1940s. It became an important retailing method for making products available
when and where store retailing is not present the products are typically small and
branded such as potato ships, drinks, chocolates, cigarettes, tea/coffee machines.
1. It is vulnerable to pilferage
2. No provision of change
4. Profit is low
BRANDING
This is the general term covering brand names, designs and symbols. They have
symbols for each brand which may be used by a producer to distinguish from that
of other organizations. It is a modern trend in retailing and also a prerequisite for
product differentiation in manufacturing. It is necessary to enhance originality; it
prevents product adulteration.
ADVANTAGE OF BRANDING
DISADVANTAGE OF BRANDING
E-RETAILING
ADVANTAGE OF E-RETAILING
CUSTOMERS SERVICES
Customer service is the provision of services to customers before, during and after
a purchase. Customer service is the act of taking care of the customer’s needs by
providing and delivering professional helpful high quality service and assistance
to customers after their requirements are met. It is the process of ensuring
customer satisfaction with a product or service. Often, customer service takes
place while performing a transaction for customer, such as making a sale or
returning an item. Customer service can take the form of an in person interaction,
a phone call, self-service system and other means.
2. Customer service gets a seller more customers and advertises the goods if
customer service is satisfactory
3. Increase in profit
1. Lack of innovation
WHOLESALE TRADE
Producer
Wholesaler
Retailer Middlemen
Consumer
1. The wholesalers buy in large quantities from the producer and sell in small
quantities to the retailer: this is known as bulk breaking.
2. They provide warehousing facilities for goods bought from the producer;
they keep the goods in good condition so the producers can continue with
production processes
3. They use their own means of transportation in order to move and distribute
the goods to the retailers.
5. The storage of the goods brings about price stability in the goods, they
prevent price fluctuation until they are demanded for by the retailers.
6. They bear the risks of the goods; they take and accept responsibility of
losses of the goods.
7. The wholesaler takes charge of the market research on behalf of the
producer. The wholesaler gives feedback from consumers about their
satisfaction back to the producer. They also give information about the
market of the goods.
9. The wholesalers have the role of financing the manufacturer. They pay
promptly to the producers, which facilitates further production process.
They also provide credit facilities by paying up front before the goods are
supplied.
10. The wholesaler also gives advice to the manufacturers on the brand of goods
needed by the consumers; market situation of the goods.
2. They transport the goods to the retailer’s place of business at the expense of
the retailers
3. They provide credit facilities to the retailers; the retailers can then buy and
pay for the goods later.
5. They advise the retailers on the goods and about new development in the
market.
6. The wholesaler links the retailer and the producer. Information moves from
the retailer to the wholesaler and then to the manufacturers.
8. The wholesalers store goods in warehouse and this reduces price fluctuation
and the price of the goods are stable.
CHANNELS OF DISTRIBUTION
Channels of distribution are paths through which the goods flow from the
producers to the final consumers. It can also be defined as the path through which
the ownership of goods is transferred as it moves from the producers to the end
consumers.
Producer Consumer
In this channels, the goods have to pass through the hands of certain people known
as MIDDLEMEN.
MIDDLEMEN
1. Producer Consumer
1. Producer - Consumer
Here, the producers appoint agents to distribute and advertise their products.
The agents get the goods from the producer and sell in bits and units to the
final consumers.
Here, the agents buy in bulk from producers and sell in small quantities to
the retailers, and then the consumers buy from the retailers in bits / units.
The agents are known as authorized distributors.
The agents purchase in large quantities and sell to small scale wholesalers,
who then sell in small quantities to the retailers before the goods finally
reach the consumers in bits / unit. Examples of this type of goods are
Colgate. Most goods that pass through this channel are imported from other
countries.
The wholesalers buy directly from producers in bulks and sell to consumers
in bit/units. Most of these types of goods are industrial goods and are not
too expensive
3. Nature of the Goods: The nature of the goods has to be considered before
choosing a channel. For expensive goods, they will need to go through a
shorter channel of distribution.
4. Size of Order: When the size of the order is large, the producer can bypass
the middlemen and get the goods straight to the consumers.
Some people believe that middlemen are essential and carryout important
functions. They believe that middlemen should not be eliminated because
their job cannot be performed by others. Others believe that middlemen have
contributed to the increase in price and hoarding of goods. They believe that
producers should deal with the consumers without the aid of middlemen.
TYPES OF WHOLESALERS
They are classified into two broad categories:
1. Merchant Wholesalers
2. Agent Middlemen
4. They provide delivery services using large trucks / vehicles that can
adequately move the goods
5. They provide advisory services; they advise their customers on goods that
are moving in the market.
3. Cash and carry wholesalers: These wholesalers are mainly concerned with
grocery products. Customers have to pay first. They do not offer credit
facilities or delivery services. Once you pay, you carry your goods. They
operate on lower margins. The retailers have to order, pay cash and carry
away the goods.
4. Truck wholesalers: they combine selling, delivery and collection in one
operation. They carry only a limited range of stock; the selection may be
rather completed. Most truck wholesalers handle perishable goods e.g.
Tomatoes, fish, vegetables. They have an assortment of a certain type of
goods / line of goods, the ability to make fast and frequent delivery is their
major appeal to customers.
5. The drop shipment: these wholesalers handle goods physically but leave the
performance and storage to the producers as well as transportation. The
producers send directly to the retailers. The wholesalers pick the orders and
send to the producers. The goods move from the production line to the
retailer through transportation. The producers bill the drop shippers at
factory prices. The wholesalers put their own margin on the goods so they
make profit and share with the producers.
They take orders from the retailers and ensure that producers deliver goods
to the retailers that have placed the order. They deal mostly with bulky goods egg.
Coal. Drop shippers take title of the goods but do not physically handle them.
2. AGENT MIDDLE-MEN
They are mostly engaged in wholesaling rather than retailing. They assist in
negotiating sales and purchases or both on behalf of their principals. They do not
take title to the goods. They do not sell in their own name; they represent the
principal, producers and gain commission. They are:
1. Broker
2. Manufacturer Agents
3. Auctioneer
4. Commission Agent
5. The Factor
Broker: they are agents that link or connect seller with the buyers, they do not
take title over the goods. They receive a commission called BROKERAGE: they
specialize in a narrow range of products. They represent buyers and sellers in
negotiating. They do not have any physical control over goods.
Manufacturer Agent: they are usually appointed by the producers to market the
products in a specific area. Then manufacturers pay them commission. They are
engaged in industrial and durable goods.
4. The agent possesses limited authority in regards to the term of sale and price
5. They are rarely involved in credit collection and risk. He is not expected to
sell on credit
Auctioneers: They are agents approved by the government. they are agent who
offer goods to prospective buyers through public auction. They sell goods to the
highest bidder. They deal in unique goods such as artwork, houses etc.
Commission Agent: they buy and sell goods on commission basis; he usually
exercises physical control of goods and terms of sales of the goods handled by
them. This is one of the exceptions to agents.
The Factor: They are the opposite of the brokers; they do not buy goods but they
take possession. They provide both warehousing and handling facilities and for
this, they receive commission.
3. They undertake to restore the principal back to his original position against
any loss
WAREHOUSING
A warehouse is a place where goods are stored until they are demanded for by the
consumers.
IMPORTANCE OF WAREHOUSING
7. Seasonal problems are eliminated; seasonal goods are stored until they are
needed
TYPES OF WAREHOUSES
1. Bonded warehouse
2. State Warehouse
3. Wholesale Warehouse
4. Public Warehouse
5. Manufacturers Warehouse
7. retail warehouses
8. giant barns
9. cold-storage warehouses
1. MANUFACTURERS WAREHOUSE
These are owned by the manufacturer or producer of goods to store their own
products until they are demanded for. they are located within their factories to
store goods produced by them. Some manufacturers have regional distribution
centers such as Coca-Cola.
2. WHOLESALE WAREHOUSE
These are owned by the wholesalers used to keep all the goods bought from the
manufacturers. They are usually located near distribution and sale centers so the
retailer can have good access to them
3. PUBLIC WAREHOUSE
There are warehouses usually owned and operated by private individuals. These
individuals let it out to anyone for safe keeping of goods. They are usually located
near seaports, airports, markets and so on. Anyone who hires a public warehouse
will pay rent to the owners for services rendered.
4. STATE WAREHOUSE
They are usually owned controlled by the government of a country. They are
places where contrabands or smuggled goods seized by customs authority are kept
until they are auctioned.
The first bonded warehouse was introduced by Walpole a 1724 for tea. Warrants
are issued when goods are stored in a warehouse. A warrant is a document issued
out at the bonded warehouses which entitles a named person to the goods stated on
the warrant.
2. It provides security for goods imported from other countries whose duties
have not been paid
3. Custom authorities will have the opportunity to calculate the actual value of
import duties
4. It will afford the importer adequate time to pay the charged custom duties
6. Production processes; branding, packaging, can be done while they are still
in the warehouse
7. The prospective buyers would have the chance and opportunity to see goods
before purchase.
CHARACTERISTICS OF AN E-SHOP
1. It is easy to setup
2. There are no geographical boundaries
3. Much cheaper than traditional business
4. There are flexible business hours
5. Marketing strategies cost less
6. There are few security and integrity issues
7. Buyers and sellers don’t meet
8. Delivery of products takes time
9. There is a transaction risk which is higher than the traditional business
Anyone can buy anything from anywhere at any time