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A Definition Of Retail And Types Of Retail Operations

What is Retailing?

Retailing can be defined as the sale of goods and merchandise for personal or household consumption which is done from a fixed or temporary location, generally a store. Retailers buy large quantities of goods or services from manufacturers, wholesalers or importers and then sell these in smaller quantities to the consumer.

The Primary Objective of Retail

Retailers trade to make a profit and to grow their wealth.

More importantly, retailers are passionate about serving their shoppers’ needs: bringing them the products they need at prices they can afford. Successful retailers are those who always keep the customer in mind, whatever they are doing in their business.

Retailers make a living by keeping their customers happy by providing:

  • The right product
  • At the right price
  • In the right place
  • At the right time

The Key Retail Functions

  • Provide a variety of products and services to the shopper
  • Buy goods in large volumes and sell those goods in smaller quantities to many different shoppers
  • Hold extra stock of goods which will be available when the shopper wants them
  • Display products in such a way that the shoppers can choose between them more easily
  • Offer shoppers credit, in some instances, so that they can pay for goods when they are able to afford them

By doing these things, a retailer adds value to products, making the consumer’s life easier. These activities take time and money so the retailer adds a rand value to the cost of the product that he has bought. 

Cost of product from the wholesaler R10,00
Cost of collecting from the wholesaler R1,00
Cost of displaying on the shelf R0,50
Total Cost R11,50

 

Types of Retailers: Who’s Who in the Trade

The Informal Trade refers to anyone who trades in temporary structures, outdoors, or from buildings which are usually used for other purposes, like houses. Generally, informal traders do not operate formal business structures, and while some are very successful, most informal businesses operate “from hand to mouth”, without accumulating many assets. It is estimated that there may be as many as 750 000 informal businesses in South Africa, which include pavement hawkers, market stalls, spaza shops, tuckshops and shebeens. The informal trade is a very important part of the South African economy, creating employment for hundreds of thousands of people.

A spaza shop, also called a tuck shop, refers to a small, informal retail outlet often operating from a shipping container, selling mainly soft drinks, cigarettes, paraffin, candles, maize meal, bread and alcohol to the local community.

Some local spaza shops, such as the house shops, operate out of a residential unit on a part-time basis in order to supplement other household income. Most South Africans operate their businesses themselves or draw on family labour.

A spaza shop must not be confused with retail /business facilities on properties located in business streets or nodes that serve a wider community on a larger scale.

The Independent Trade refers to independently-owned retailers with formal systems and permanent structures. These businesses include everything from small counter-service traders and small self-service stores to small and even large local supermarkets. In most cases, the owner is also the manager of the store, and this often means that the businesses are efficiently run and profitable. Some of these businesses group together to form “buying groups”. This means that they are able to:

  • Buy stock in greater bulk and so get it at a better price
  • Negotiate better payment terms from their suppliers.

The Modern Trade is a term which covers all stores owned by large businesses like Pick ‘n Pay, Shoprite or Truworths. These stores always trade under a major retailer brand, but come in a wide range of formats, which include: garage stores, convenience stores, superettes, supermarkets and hypermarkets. Modern trade stores are often found in shopping centres or malls. Recently, more and more of the major retailers are moving into areas where they did not trade previously, for example, townships and rural centres. This means that there is increasing competition between the Modern Trade and the Independent Trade which has traditionally served these areas.

The General Trade consists of wholesalers and cash and carry stores. Their function is to sell goods in bulk to the Independent and Informal trade. Because they sell in bulk, they are able to offer attractive prices to their customers. Some wholesalers and cash and carry businesses are owned independently by individuals, while others are owned by large corporate companies like Massmart (who own Makro and Jumbo).