Small-scale Retail businesses/small scale Retailers

Business studies study module

These are retailers whose capital requirement is low and their sales volume also low. They form the majority of retail traders and all found in all parts of the country.

Small scale businesses are easy to start and in most cases they are operated as one-man’s business.

A small scale trader serves the needs of people in the immediate neighbourhood and deal mainly in fast moving goods such as foodstuffs, detergents, kerosene e.t.c

Categories and Types of small scale

These are two main categories of small-scale traders as shown below;

  1. Small scale Traders without shops

Itinerant Traders (Hawkers and peddlers)

Roadside sellers

Open air market Traders

  1. Small scale retailers with shops

Single shops               Tied shops                  Kiosks      Mobile shops

Market stalls               Canteens            Mail order stores

  1. Small scale Retailers without shops
  2. Itinerant Traders

These are retailers who move from place to place selling their goods either on foot, bicycles or motor cycles

-They move from town to town, door to door and from village to village selling their goods. Their goods may include clothes, utensils and foodstuffs. Customers can buy goods without having to travel to look for them

-Examples of itinerant traders are hawkers and peddlers (Hawkers move around on bicycles, handcarts or motorcycles while peddlers walk around)

-The itinerant traders require a licence from the local authorities in order to sell their goods.

Characteristics of itinerant Traders

  • Are found mainly in densely populated areas
  • Move from place to place in search of customers
  • They are very persuasive
  • Their prices are not controlled.

Advantages of itinerant Traders

  1. They require little capital to start
  2. They are convenient because they bring goods closer to the people
  3. The business is flexible in that they can move from place to place. They can also change from line of business to another
  4. Few legal formalities are required
  5. They usually do not suffer bad debts because they sell in cash.

Disadvantages of itinerant Traders

  1. The traders get tired because of moving from one place to another while carrying goods.
  2. The business is affected bad weather conditions
  3. The traders sale a limited range of goods
  4. It is difficult to transport goods from one place to another.
  5. Do not offer guarantee, in case items are to be found defective
  6. They are constantly in conflict with the local government.

Roadside sellers

These are traders who sell their goods at places where other people pass and at busy places such as along busy roads, bus stages, road junctions and entrances to public buildings.

They place their goods on trays, cardboards, empty sacks and mails

They sell items such as fruits, utensils, sweets, clothing and some hardware.

  • Open-air market Traders

Open air markets are places set aside the government through the local authorities where people meet to buy and sell goods. Traders selling similar commodities are allocated a special area. Such markets are open on particular days of the week.

The variety of goods sold here is wide and include agricultural produce, clothing, household items, animals, foodstuffs and even furniture.

The traders move from one market to another depending on the various market days.

Advantages of small-scale retailers without shops

  1. They require a small amount of capital to start and operate their businesses.
  2. They are convenient since they take goods to the customers within their reach.
  3. They incur low costs of doing business
  4. Most of their goods are low-priced and hence more affordable to customers.
  5. The business is flexible. It is easy to change from one business to another
  6. They require few legal requirements
  7. The financial risks involved in these businesses are minimal
  8. They do not suffer bad debts since they sell on cash bases
  9. They interact at personal level with the customers and can convince them to buy their goods.

Disadvantages of small-scale retailers without shops

  1. It is tiring for traders to move from place to place especially if the goods are heavy and the distance covered are long
  2. The traders face stiff competition from other traders with more resources
  3. They offer a limited variety of goods
  4. They are affected unfavorable weather condition
  5. Lack of permanent operating premises denies them a chance to develop permanent customers
  6. They face a lot of certainty, especially in terms of a steady flow of income
  7. They sometimes sell defective or low quality goods because customers expect to pay little money for them.

Small scale Retailers with shops

These are small scale retailers with permanent locations to operate from. They include;

  1. Kiosks

These are small shops or structures found mostly in residential areas, busy streets, highly populated areas or inside building where people pass or work

They deal in fast-moving items and groceries such as; sodas, cakes, sweets, cigarettes, and newspapers e.t.c. some kiosks also sell food

  1. Market stalls

These are permanent stands found in market places, especially those operated the various local authorities

They are of different designs depending on the goods they sell or services they offer.

They are rented or leased individuals from local authorities

They deal in fast moving household goods though some may specialize in other products such as clothing and shoes.

Examples are stalls at Muthurwa markets, Kariokor, and most municipal markets.

Advantages of kiosks and market stalls

  • They are small, hence easy to start and operate
  • They are conveniently located close to their customers
  • They require little capital to start
  • They tend to have a loyal group of customers since they have permanent premises
  • They incur relatively low running costs
  • They give personal attention to their customers
  • They are flexible since the owner can change from one business to another easily.

Disadvantages of kiosks and market stalls

  • They provide a limited range of products
  • They usually do not have adequate higher capital for expansion
  • They charge relatively higher prices than the retailers without shops
  • They face stiff competition from more established retail businesses
  • They sometimes suffer from bad debts
  • Due to their size, they do not enjoy economies of scale
  • For market stalls the hours for operation are controlled the local authority concerned

Single shops (unit shops)

Single shops are mostly located in the trading or market centres in rural areas or in the residential areas of high towns

-They are operated from fixed premises

-They are usually run one person who may get assistance from him/her family or employ attendance

-Some deal in one line of commodity such as houses, clothing, groceries or electronics

Advantages of single shops

  • Minimal capital is required
  • Running costs are usually low as the owner may use the services of family members
  • They may offer credit facilities to some customers
  • They are easy to start because only a licence is required
  • They usually have a loyal group of customers
  • The owner can change his or her line of business at will
  • They are easy to start since the owner does not have to meet any manufactures requirements
  • Products prices are fixed the shop owners
  • The owner has the freedom of creativity and independence
  • They are convenient since they ensure goods are within easy reach of their customers.

Disadvantages of single shops

  • Expansion is difficult due to limited funds
  • They face stiff competition from large businesses
  • The absence of the owner may result in closure and loss of business
  • May suffer bad debts
  • Provide limited variety of goods
  • The operations of the business are affected the owner’s commitment.
  1. Tied shops

These are shops that mainly sell the products of one particular manufacture or are owned a specific supplier of certain goods. The shops are owned or controlled the manufacturer, and are thus tied to the manufacture.

The manufacture/supplier designs the organization of the shop and its appearance e.g. painting hence they look alike. The supply closely supervises the shops.

Examples of tide shops include; Bata shops which sell shoes made Bata Company, petrol station like National, Kobil, and total e.t.c

Advantages of Tied shops

  • Availability of goods is assured at all times
  • The supplier carries out promotion for the goods
  • The manufacturer/supplier can easily give credit to the shops
  • Customers can return or change faulty goods at any of the shops
  • The shops are easily identifiable due to their similarity
  • Traders are financed the manufacture
  • They get loyal customers who keep buying their branded products
  • Advertisement expenses are met the manufacture
  • They get technical advice from the manufacture
  • Some operate from permanent premises owned the manufacture.

Disadvantages of Tied shops

  • Decision making is slow because the manufacturer must be consulted
  • The variety of goods is limited
  • The shops cannot sell goods from any other manufactures even if customers require them
  • Prices are fixed the manufacture and sometimes profit margins may be low
  • They inhibit the retailers creativity and innovations
  • There is a likelihood of disagreements between the manufacture and the tied shop owners.

Differences/Distinction between a tied shop and single shop                                                                                                                      

  1. Canteens:These are retail shops found in institutions such as schools, colleges, hospitals and army barracks.

-They stock a variety of consumable goods such as sodas, bread, tea, groceries and other things used the people in that institution.

-They are run the institutions management or individuals on retail business

-Most of them operate without a license as they are considered to be part of the institution. Their hours of operation are sometimes regulated the institution

Advantages of canteens

-Some do not pay any rent, thus they incur low overhead costs

-They often require low capital to start

-Some offer credit facilities to their customers

-They are situated at ideal location which is convenient for their customers

-They are assured of a market as they cater for people in particular institution.

Disadvantages of canteens

-The market is limited to people in a particular institution

-They do not open throughout/they open for limited hours e.g. after classes in schools

-They close down when the targeted customers are not available e.g. during school holidays.

-They may suffer from bad debts

-They are difficult to expand due to insufficient funds

  1. Automatic vending machines; These are coin or card operated machines used to sell commodities like drinks, stamps, and snacks e.t.c. Examples are coffee shops, ATM’s e.t.c

Features

-They dispense goods or services once a coin or a card is inserted and instructions keyed in.

-They operate without an attendant

-They are usually placed at strategic places such as busy streets, office buildings, shopping centres and hospitals.

Advantages of vending machines

  • Commodities can be bought anytime because no attendant is required
  • They save the owner the cost of employing a shop attendant
  • They can be put strategically to boost sales e.g at institutions
  • They are fast and accurate
  • They are not affected weather changes
  • They provide goods and services on cash basis protecting the owner from the burden of bad debts.

Disadvantages of vending machines

  • They provide a limited range of products
  • Break-downs or stock-outs may discourage customers
  • Maintenance costs are high due to regular servicing, repairs and sometimes vandalism
  • The owner may incur losses through fraud and use of inappropriate coins and cards consumers.
  • Customers are forced to carry coins and cards in order to obtain goods or services
  • Their use is limited to customers who are familiar with how the machine works
  • They are mainly found in urban areas, therelocking out the people in rural areas.

Mobile shops

Mobile shops, like itinerant traders move from town to town or village to village selling their goods.

-They have vehicles that they have converted into a shop from which customers can buy their goods

-They visit different towns at regular intervals.

Advantages of small scale Retailers

  1. Easy to raise capital to start
  2. Retailers are in close contact with the consumers and may give credit to credit worthy customers.
  3. Are able to use free or cheap labour from family members
  4. The risks involved in their businesses are small
  5. The business is simple to start and manage
  6. Few legal formalities required to start and run the business
  7. The trader can easily change from one form of business to another i.e. the business is flexible

Disadvantages of small-scale retailers

  1. Traders have limited access to loan facilities
  2. They may not afford to hire specialists or technical staff
  3. May suffer bad debts if they give credit to customers without proper assessment
  4. Do not enjoy economies of scale
  5. Have a low turnover because of the little capital invested

     



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