Lecturer: Makarani,

Khamis Ali
Lecturer ZIFA
Lecture 2
khamiskhamis80@gmail.com

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Zanzibar Institute and Financial Administration ZIFA

AGENDA:
Definition of Home Trade
Retail trade
Functions of a Retailer
Types of Retailers
wholesale trade
Functions of a

wholesaler
Types of wholesalers
chain of distribution
Zanzibar Institute and Financial Administration ZIFA
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Definition of Home
refers to the buying and selling of goods for
Trade
delivery
within the boundaries of a particular
country.
Home trade may be further classified as given
below:

retail trade: is concerned with the

distribution of goods
in small quantities to
the consumers.
wholesale trade: deals with the buying of
goods from the manufacturers or producers in
bulk and selling
them in small quantities to
the retailers.
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Retail trade

A retailer is a person who buys goods from

wholesalers in greater quantities and sells to the

consumer in smaller quantities.
Characteristics of retailer;
He is the last link in the chain of distribution of

goods btw the producer and the consumer.

He is always in direct touch with the consumer.
He does not need a large capital.
He often gets credit from the wholesaler.
He sells his goods mostly on cash basis.
He gives credit facilities to some specific
consumers only.
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Functions of a Retailer
Retailer performs functions for two groups
of people;
the first group are the manufactures or
wholesalers who
provide him with
goods.

The second group are the consumers

who buy the goods from him .

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Functions of Retailer to the consumers

1. Holding stocks: he hold stocks of goods ready for

immediate use and sells them in small quantities to the

consumer.
2. Anticipation of consumer demand: through his close
contact with the final consumers, he is in a position to
anticipate their wants and stocks goods accordingly.
3. Providing variety of choice: he keeps a variety of
goods and satisfies the needs of his customers who
may differ considerably in their preferences.
4. Personal attention to consumers: he is direct
contact with consumers. He caters their tastes and
fashion and he pays personal attention to them. He
also help consumers by giving advice on the price and
choice of goods.
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Cont
5. Provide credit facilities: He grants credit to

his approved customers and in some cases

agrees to receive the amount installments.
6. Supplying information to the public: he
displays new goods at his shop and. also he
even educates the consumers in the matter of
satisfying their wants in an effective manner at
the minimum of expenses.
7. Miscellaneous services: free delivery of
goods at the door of the customers, repair and
after-sales service, etc are some of the
services rendered by the retailer to the
consumers.
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Functions of a Retailer to the

Manufacturers and
Wholesalers

1. Provides outlet for producers: he provides the

producer with outlet for his products. The end of

production is consumption.
2. Helps markets research: he has personal contact
with the customers. He passes on this information to
the producer through the wholesaler or otherwise. This
has the effect of influencing the producer to produce
those goods which suit the preference of the
consumers.
3. Publicity of their goods: he publicizes the goods on
the behalf of the manufacturers and wholesalers as
well as puts on display posters, stickers and hangings
of various products which supplied by the
manufacturers to attract the consumers.
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Types of Retailers

There are different types of retailers. These

can classify them as under:1. Small scale Retailers

2. Large scale retailers
These are explained as under: small scale retailers; consist of street
shops, hawkers, road side traders,
mobile traders, automatic vending
machines, market stall holders, open
market trader, kiosks, canteens, unit
shops etc.
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conti..

Street traders: are those who set up their

business by the side of the streets in large cities.

They are also known as road side traders.
Advantages;
1. Their

overheads are too low.

2. At
time they can buy goods directly to
manufacturers, so they sell at low prices.
3. They need small amount of capital.
Disadvantages
1. They have no fixed premises.
2. They cannot get regular customers so they sales
fluctuate.
3. They sell normally defective or inferior quality
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conti..
Mobile traders: are those traders who

carry goods in boxes and call upon their

customers at their houses. Sometimes,
they use specially designed vehicles to
carry a wide range of goods to villages,
sub-urban areas and housing colonies.
Example are peddlers, hawkers, market
stall holders and mobile shops.

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Cont.

Advantages;

They need small amount of capital to start business.

2. They have some permanent customers so they can
easily sell.
3. The customer get required goods at their places
conveniently
4. Their overheads are too low.
1.

Disadvantages;

It quite inconvenient to move from one place to

another.
2. Their sales are affected adversely when there is
rainy season.
3. They normally sell defective or inferior goods.
1.

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conti..

Small fixed shops: the most important retail

outlets are the small fixed shop. These shops

are owned mostly by the sole proprietors. The
examples of small fixed shops are unit shops,
kiosks and canteens.
Advantages;
1.Overheads are low.
2.Credit facilities can be provided to the
customers.
3.These shop can be operated permanently.
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Cont.

Disadvantages;
1. In

one area, different shops sell

similar goods so there is greater
competition.
2. More capital required to attract more
customers by stocking different type
of goods.
3. Some credit customers can disappear
without paying the amounts due from
them.
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conti..

Tied shops: these are retail sales agencies

selling the products of a particular manufacturer

who, in turn, finances them. The manufacturer
insists on a standard design for such shops.
Sometimes allowed to sell non-competing
products of other manufacturers. The main
example is petrol stations.
Advantages;
1. These outlets sell the products of a specific
company so the customers can buy those
goods without any hesitation.
2. Through these outlets, the manufacturer can
supply goods direct to the customers.
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Cont

1.

2.

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Disadvantages;
These outlets sell the products of
one manufacturer only so the
consumers have no choice.
Insufficient supply of the goods
from the manufacturers can result
in the closure of such outlets.

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large scale retailers

Large scale retailers operate their business

at a large scale. They carry a lot of stock

and their volume of sales is bigger. large
scale
retailers
include
multiple
supermarkets, chain stores, and department
stores. These can be explained as under:Multiple shops or chain stores: are a
number of shops owned and managed by
one concern, found in different places,
stocking the same class of merchandise and
often similar in appearance.
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main features of multiple

1. There is uniformity of the premises, external
shops
are
:
shop front, internal layout and furniture and
fixtures of the branches.
2. Control is vested in the central organization
and the individual branch manager are given
only restricted powers.
3. Buying is centralized and selling is
decentralized through a large number
branches scattered over a wide area.
4. Generally they deal only in a particular set of
goods mainly in standardized type of goods.
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conti..

Sales are strictly for cash and credit

facilities are not allowed
6.
They are often part of an integrated
wholesale
retail group
7. Not infrequently, some are owned and
operated
by manufacturers with a view
to selling their own
products
8. Selling prices are fixed by the central
organization.
5.

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advantages
of
multiple
1. Efficient service; multiple shop system serves the
customers easily and efficiently by opening a large
shops
number of branches near the customers residence.
2. Economies of large scale buying and selling;

multiple shops enjoy all the advantages of a scale

enterprise, like economies of large scale buying and
selling, centralized and efficient control etc.
3. Geographical diversification of risks; since the
operation of multiple shop system is scattered over
a wide area. Any loss incurred by one braches due
to bad situated of trade, that lose can be
compensated from profit earned by branches
situated in areas where the trade is good.
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4.

conti..

Low advertisement expenses per branch;

standardization of shop fronts, internal layout etc
have effect of good advertisement. One shop in the
chain advertises for the other.
5. No loss from bad debt; since credit facilities are not
allowed there are no chances of bad debts.
6. Low operation expenses; as an extension to the
above point there is no need to maintain a large
clerical staff to maintain the account of customers.
7. Less selling effort; since multiple shops are mainly
dealing in standardized and branded goods selling
effort will be less.
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Disadvantage
of
multiple
1. Lack of personal contact; there is little personal
contact between the customer and seller. It need
shops

hardly be pointed out that personal attention is a

very important factor for the success of retail
trade.
2. Lack of credit facility; Customers do not get
credit facilities due to policy of multiple shop
which may affect the turnover adversely.
3. Limited power of the branch managers; this
may affect adversely the initiative in them.
Besides, centralized buying may result in overlooking the tastes of the customers of a particular
locality.

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Department
stores
This is a number of single shops each restricted to
selling only one class of goods under one roof (i.e
same building) and one management. Each shop has
a department manager who decide on the size and
type of stock to be held. It offer a wide variety of
goods so that customers need not go to different
shops for purchasing different articles.
Department store often maintain their own
restaurants, reading rooms, cinema houses, hair
dressing and beauty saloons, information bureau etc.
Department store are always situated in the central
shopping areas of big towns. The premises are
generally very extensive to accommodate various
departments.
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Advantages of department
1. Lower prices for goods; department
stores

store
purchase goods direct from manufacturer, this has
effect of saving on the middlemans commission.
These enable the department store to sell goods
at comparatively low prices.
2. Saving on overhead expenses; owing to the
large volume of sales of a department store the
overhead expenses of the store will be distributed
over a large turnover. Thus the average rate of
overhead expenses will be comparatively low.
3. Right personnel for the right job; the large size
of a department store enables it to employ the right
person for the right job.

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conti..

4. One department advertises for another; the

department store is made up of a number of

departments housed under one roof. When a
customer enters one department he is often
attracted by the articles displayed in the
neighboring departments. Thus one department
can effectively advertise for another.
5. Diversification of risks; since a department
store is dealing in a variety of products, it will be
possible to diversify the risks. Even if it
undergoes loss in one or two lines of goods
which it traded, the profit which it earns in the
other lines will more than make up the loss.
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disadvantages of department
1. Lack of personal contact with customers; It is not
stores.
able to give personal attention to the customers. The
customers of such a store are far too many and they are
drawn from different places with different tastes.
2. Not easily accessible to many; they are situated in
central shopping areas of large towns and cities unlike
to ordinary retail stores so they are not able to cater the
needs of the rural population.
3. Chance of mismanagement; since the organizational
set up of a department is very large, inefficiency in
management is a possibility.
4. Chances of pilfering; some customer may exploit the
situation by pilfering the goods displayed due to it may
not be possible to exercise a close watch on all the
customers.

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Differences between department stores

and multiple shops

1. A department store is a collection of shops all under the

same roof, each department dealing in a particular branch

of retail trade but under the multiple shop system we can
find a large number of individual shops operating in
different parts of the country.
2. Department store the whole business is concentrated in
one unit and the customers are drawn to it but multiple
shop system opening a large number of shops in various
places.
3. A department store deals in a wide variety of articles while
a multiple shop specializes in a particular set of goods.
4. A multiple shop is often part of a integrated wholesale
retail group. This is not so in the case of department store

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conti..

5. Department store procures goods from different

sources and sells them at a central place while

multiple shop purchases from a single source
and sells them from different centers.
6. Geographical diversification of risk is possible in
the case of a multiple shop since it is operating
from different centers while in the case of
department store is not possible.
7. Department store has to be centrally located
and requires extensive premises while multiple
can operate from any fairly populous place and
does not require large premises.
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super-markets
These are large stores that stock

many of
household items and operate on self service
system. They offer food stuffs, utensils, drinks,
electrical
appliances,
cleaning
materials,
stationary, mattresses, hardware etc.
Self service means that a customer pick up any
item he needs by himself. Items carry price tags
which is its cost and customers move through
the shop from shelf to shelf, picking whatever
they need.
Example of supermarket are nakumatt, kwality
supermarket etc.

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super-markets

These are large stores that stock many of

household items and operate on self service
system. They offer food stuffs, utensils, drinks,
electrical
appliances,
cleaning
materials,
stationary, mattresses, hardware etc.
Self service means that a customer pick up any
item he needs by himself. Items carry price tags
which is its cost and customers move through
the shop from shelf to shelf, picking whatever
they need.
Example of supermarket are nakumatt, kwality
supermarket etc.
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THA
NK
YOU
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HOME TRADE

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mail order business

Is a type of retail trade where the business

is done by post. In this type of retail trade,

the customers place their order for goods
through post and the goods are also
supplied through post. There is absolutely
no personal contact between the seller and
the buyer. The mail order businessmen
advertise about the goods and the
customers
relying
upon
these
advertisements place orders for them.
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Cont.
Advantages

of mail order business

to the retailer;
1. It
is not necessary to maintain
expensive showrooms.
2. It is not necessary to maintain huge
transport fleet.
3. Selling and buying are done though
post so no need to employ salesmen.
4. Losses from bad debt do not arise
since sold for cash.
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Advantages of mail order business to

the customers;
The customer can save the trouble of going to the

retailers shop. He sends the order for goods through

post and gets them at his residence.
Disadvantages of mail order business;
1. There is no personal contact btw mail order business
and the customer.
2. Customer may be misled by false and exaggerated
advertisements.
3. No credit facility to the customer since buyer will have
to pay before delivery the goods.
4. Heavy advertisement expenses
5. Limited range of goods which suitable for mail order
business.
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hire purchase and installment

Under hire purchase system, the buyer agrees to pay
system
for the commodity in installments. On signing the
agreement the buyer can take possession of the
commodity and use it. But the ownership in the articles
rest with the seller until the buyer pays the final
installment. if the buyer fails to pay any installment the
seller is entitled to take back the article and the buyer
will have no claim over the installments he has already
paid. The amount paid will be treated as hire charges
for the article. Hence the sale becomes complete only
when the buyer pays the final installment. On payment
of the final installment the ownership of the article
passes from the seller to the buyer.
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conti..

Under the installment selling system, the articles

becomes the property of the buyer with the

payment of the first installment. In case of failure
to keep up with installments, the seller cannot
repossess the product but may sue him in court
for unpaid amounts.
Advantages to the customer;
1.The customer is allowed to pay in installment.
At the same time enjoy the article as soon as
the first installment is paid.
2.The system encourage thrift among the
people. The buyer is compelled to save.
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conti..
Advantage to the trader;
The trader can increase his sales by creating

new demand for his products.

Disadvantages;
1.Only goods suitable for re-possession can be
sold under these methods.
2.The seller has to be very cautious otherwise he
may incur losses owing to bad debts and
accumulation of second hand goods.
3.Buyer have to pay higher price under these
systems.
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wholesale trade

Functions of wholesalers to manufacturers;

1.he has close contact with retailer to judge changes

in demand that may occur, so he orders the goods

in advance of demand.
2.He relieves manufacturer by stocking the goods in
his own warehouse until demanded by the retailers.
3.A good deal of publicity work is undertaken by the
wholesaler on behalf of the manufacturer.
4.He uses own transport to move goods from
manufacturer to his warehouse. Thus the
manufacturer saved of transport expenses.
5.He renders valuable financial help to the
manufacturer by purchase goods for ready cash or
by bills of exchange.
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conti..

Functions of wholesalers to retailer;

1.The wholesaler is an ever ready foundation of

supply of goods. The travelling salesmen as

agents of the wholesaler visit the retailer often to
know his requirement and see they are supplied
with goods in time.
2.With his knowledge of the market the wholesaler
is of often in a position to render advice to the
retailer with regard to the disposal of goods.
3.As an expert buyer and seller the wholesaler is on
the look out for new products and new market, so
he is the source of supply of new product to the
retailer.
4.The wholesaler allow credit facilities to the
retailer.
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conti..
Functions

of

wholesalers

to

consumers;
1.The wholesaler helps to maintain
prices steady. When the price is
falling on account of over production
and consequent over supply, the
wholesaler purchase goods in large
quantities and stocks them, thus
absorbing the excess supply and
vice-versa.
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advantages
and
disadvantages
the

The wholesale
trader
perform someof
functions
in
the interest
of the manufacturer, retailers and
wholesale
trade

consumers.
These
function
indicate
the
advantage of the wholesale trade.
The disadvantages of the wholesale trade are:1.The wholesalers are link btw the manufacturer
and the retailers so they are in a position to
exploit them if they do not buy goods from the
manufacturers in time.
2.Sometimes , they provide incorrect information
to the manufacturers regarding the market
situation.
3.They can create shortage of some goods in view
of some selfish motives.

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Various types
of wholesalers are classified as under;
Types
of wholesalers
1.General wholesalers: they deal in a variety of goods

like foodstuffs, hardware, cloth etc.

2.Specialized wholesalers: they sell a particular type
of goods e.g hardware, books, cloth etc but offer great
variety within their particular field.
3.Regional wholesalers: they sell goods within a
particular area or region e,g district or province.
4.Nation-wide wholesalers: they supply their goods to
the retailers all over the country. They normally they
have their ware-houses in main towns of the country.
5.Truck wholesalers: these carry only a limited range
of stock and combine selling, delivery and collection
function in one operation. They also known as wagon
jobbers
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Should the wholesaler be eliminated?

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It depend of the kind of goods which can be

sold directly to retailer or consumer and the
growth of large scale retailers has reduce the
need of wholesaler.
In spite of all the above it is not always possible
to eliminate the wholesaler altogether because;
There are many grocery items which would be
uneconomical for the manufacturer distributed.
Wholesaler is often in position to help
manufacturer on experience sale organization
and accumulated knowledge about market
Wholesaler is a particularly important link in the
chain
of
distribution
as
far
as
small
manufacturers and small retailers are concerned.

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chain of distribution
A chain of distribution is a path in which

products follow from

the producer or
manufacturer to the final consumer or user.
The path consists of a set of business entities like
retailers, wholesalers, industries etc.
Normally, the chain of distribution follows as
under:1.
wholesalers
buy
goods
from
manufacturers
2. Retailers buy goods from wholesalers
3. Consumers buy goods from retailers
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Chain of distribution
This diagram is concerned with home trade only.
diagram
Manufacturers
Wholesale
rs
Small
Retail shops
Retailers
of
Consumer
manufacture
s
rs
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Large
Retailer
s

47

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THANK YOU FOR

LISTENING

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