THE NATURE AND THE SCOPE OF COMMERCE

COMMERCE AS A SUBJECT
The subject of commerce teaches us about businesses, and how they produce goods and offer services.
Business simply refers to activities that are concerned with making goods and services available to human
being with the aim of making some profit.

Commerce enlightens the students in the following ways;

- It makes the students aware of contemporary issues in the world of business.
- It teaches social responsibilities and corporate values as well as making ethical decisions.
- It teaches customer relations and business community in general.
- It makes students aware of female and male labour force participation, gender difference and
equity.
- It makes students aware of the relationship between statistics and problems in business as well as
forecasting the progress or business basing on statistics.
- Commerce equips the student with financial management skills which they can use in their future
business.

THE SCOPE OF COMMERCE

Apart of commerce being viewed as a subject of study, commerce can be defined as exchange of goods
and service. Its main aim is to supply people that they should have in order to live and cope with changes
of the world.

Commerce includes trade and part of production that deals with the distribution of goods and
services.
* Trade is the buying and selling of goods and services.
* Aids to trade are activities that support the buying and selling of goods and services.

- Trade can take place at a local level, meaning that it is done within our country where
wholesalers and retailers are involved. This is known as domestic trade/home trade.
- Trade can also take place at international level. This trade between countries is known as foreign
trade/ international trade. This trade involves imports and exports are involved.

There are several activities that are required to support trade. These activities are known as Aids to trade.
Examples of such activities includes, warehousing, advertising, banking, transport, insurance and
communication.
The following chart illustrates the branches of commerce

Commerce

Trade Aids to trade

Home/ Foreign/ Warehousing

Domestic trade international trade
Advertising
Retailers Wholesalers Export Import
Banking

Communication

Insurance

Transport
IMPORTANCE OF COMMERCE

1. Commerce brings revenue as people sell goods and services. The government also earns income
through the collection of tax that is income tax and custom duty.
2. Job creation: commerce creates employment as people are employed in commercial industries
and some are self employed traders.
3. Promotion of trade within the local area- through networking such as, Botswana Confederation of
Commerce and Industry and Manpower (BOCCIM) and Exports Association of Botswana
Business. These connections may help business to get more affordable services and also expand
their market.
4. The development of the community and nation when businesses are set up. The businesses will
result in the development of infrastructure.
5. People’s standard of living will be raised because they learn new skills
6. Commerce supplies imports from foreign markets, which enables people to enjoy imported
goods.
7. Influencing trade policies- commerce makes people aware of their needs and wants. In that way
they become aware of what should be available for them to cope with new friends.
JOB OPPORTUNITIES

Some of the job opportunities in commerce are;

- Entrepreneur - Retailer
- Wholesalers - Importer
- Exporter - Bank clerk/officer

HUMAN NEEDS AND WANTS

HUMAN NEEDS

- Are basic products that are necessary in order for a human being to survive. If we cannot satisfy
or have these needs we will either die or suffer hardship.

Example

- Clothing - Shelter - Food

WANTS

 Are products that make our lives more comfortable or we would like to have.

Examples

 Television , Cell phones, Cameras e.t.c

DIFFERENCE BETWEEN NEEDS AND WANTS

NEEDS WANTS
Are few Are many and unlimited
May easily be satisfied Are difficult to satisfy because they are many and unlimited
Tend to be the same Are always changing
You cannot live without them You can live without them

GOODS AND SERVICES

GOODS: Are those products that people produce in order to satisfy their human needs and wants. These
products are all things that we can see, touch, feel and hold. We call them TANGIBLE PRODUCTS.

Examples
- Radio - Desk - Chair - Computer - Shoes - Hats - A pen etc

Producer goods are items used to make other goods. They are either used up in the process of
production, for example, flour: or they are more permanent and are used to keep on producing in future,
for example sewing machine.
Consumer goods are those commodities that satisfy needs and wants directly. They can be either durable
or non durable.
- Durable goods- are those that lasts for a long period of time e.g. furniture
- Non- durable – they do not last a long time e.g. food.

Goods

Consumer goods Producer goods

Non durable e.g Durable goods Capital goods e.g Single use e.g
food e.g furniture Sewing machine flour

SERVICES
- They cannot be seen or touched. They are intangible because we cannot see or touch but we
benefit from them.

Examples

- Medical care - Education - Banking - Insurance - Entertainment - Tourism

PRODUCERS AND CONSUMERS

- A producer is someone who provides goods and services that will help to satisfy human needs
wants.
- Consumers are the end users of products. They use their money to buy their basic items they
need to survive, as well as the goods and services they desire to have

IMPORTANCE OF PRODUCERS
- Producers are important in the satisfaction of human needs and wants as they keep on making
goods and services to reach consumers
- People satisfy their needs and wants by providing services which earn them income, which they
later use it to buy what they need and want.

HOW FAMILIES AND COMMUNITY SATISFY THEIR NEEDS AND WANTS

- Family can contribute towards fulfilling their needs and wants by sharing work.
- In community setting there are various people who are engaged in different duties or jobs may be,
growing their own vegetables or selling the surplus.
- A shop can run by members of a family who will be responsible for buying, selling and
promoting.
RIGHT OF PRODUCERS

- Has the right of ownership of the product.

RIGHT OF CONSUMERS

- Has the right to be informed about the product. This can include the producer stating the
ingredients of the products. This will allow the consumer to make decision when he/she purchase.
- Has the right to be provided with safe products. A safe product is the one that cannot harm the
user.
- Has the right to buy products in a safe environment.

POSSIBLE EFFECTS OF SATISFYING NEEDS WANTS ON THE ENVIRONMENT

As communities satisfy their needs and wants the environment gets affected in one way or the other.
These are the ways in which the environment is affected;

POSITIVE EFFECTS
 Grounds can be well landscaped using recycled water
 Farm waste such as cattle manure can be used to fertilize the farm land

NEGATIVE EFFECTS
 Air pollution caused by emission from traffic, factory chimneys and power stations may affect the
environment
 Water pollution caused by businesses, such as breweries, that use chemicals and dispose of their
waste into the rivers and dams
 The noise and smell that comes from road and rail traffic, as well as noise from factories or
construction sites, may also affect people.

THE NATURE OF PRODUCTION

PRODUCTION
 Is the act of making goods and providing services to satisfy our needs and wants.
 It is also the process of making goods and services available in order to satisfy needs and wants.
 It is the transformation of resources into goods/ services to satisfy human needs and wants.

Production involves creation of:

i. Utility of form; any activity that changes the form of product so that it becomes more useful to
the user.

ii. Utility of place; any activity that transfers the product or service to a location which is within
easier access to the consumer increases usefulness to the product.

iii. Utility of time; any activity that adds to the availability of a product or a service over a period of
time makes it more useful to the consumer.
EXTRACTIVE INDUSTRIES

 They provide us with raw materials, which are used for further production.
 Mining, Fishing, Farming or Lumbering (cutting timber) are some examples of productive
activities under extractive industries.

Some of the things are ready for use such as fruits and vegetables. Others such as diamonds, timber and
iron cannot be immediately used and they have to be processed further in order to produce goods before
they can finally be used.

MANUFACTURING INDUSTRIES

 It is the process of changing raw materials into finished goods. For example;

1. Skins of animals are used to manufacture leather products such as shoes and bags.
2. Diamonds are used in the manufacturing of jewellery such as earring and necklaces.
3. Sunflower is used to make cooking oil and margarine

CONSTRUCTION INDUSTRIES

 Sometimes manufactured goods are further used in production. Activities such as building
houses, bridges, roads and railway lines are all the activities, which use manufactured goods.

DIRECT SERVICES

 Production also includes direct services such as those provided by the doctor, teacher, policeman
etc.

BARTER SYSTEM
 When you produce more goods than you need, and exchange the excess for goods others have
produced in excess.

The problem with the barter system is finding someone who has the items you need and who also need
the items you have. This is often very difficult to do. To overcome this problem, money was introduced
and it made exchange easier.

TYPES OF PRODUCTION

1) DIRECT PRODUCTION

 This means that people produce for their own use. A farmer will produce crops for his/her own
family use. In this case the producer is the consumer since what is produced is not sold but
consumed directly by the producer. This production is also known as subsistence production.

Advantages Disadvantages
- Less expensive - Limited output
- Easy to manage - No exchange of products
- Less manpower is needed
- Self sufficient
2) INDIRECT PRODUCTION

 It takes place when you produce in excess (large quantities) so that others can use them to satisfy
their needs and wants. Goods are produced in excess so that they can be sold to other people who
need them. This kind of production facilitates trade and needs formation of business
establishments like;
o Commercial farms: Notwane poultry and Pandamatenga farm.
o Factories: clove, Bolux industry
o Supermarkets: Choppies, shoppers.

Advantages Disadvantages
- Profitable - Expensive
- Promote foreign exchange
- Involves pooling of expertise

FACTORS OF PRODUCTION

Before we engage in production, a number of things must be available. These are known as FACTORS
OF PRODUCTION or AGENTS OF PRODUCTION. Factors of production are the resources that are
needed to make goods and services. Without these resources, then it would be very difficult to satisfy
people’s needs and wants. These resources are classified into;

 Land
 Labour
 Capital and
 Entrepreneurship

The first three (3) are known as the BASIC FACTORS OF PRODUCTION
FACTORS OF REWARDS
PRODUCTION

Land does not only mean the soil, which we farm, or the
LAND plot of land, which we build our factory or a home. It RENT
also means all resources that we naturally find not only
on the surface of the earth but also above and below it. It
includes the sea, fish, rivers, minerals, forest etc. Land
can be sub divided into RENEWABLE AND NON
RENEWABLE resources.

Capital is ready-made goods that assist in further

CAPITAL production of other goods and services. Which are INTEREST
FINANCIAL CAPITAL such as money, AND
PHYSICAL CAPITAL such as Tools, machinery,
trucks, hammers,. When we spend money to acquire
capital is called INVESTMENT.

 Refers to the unique ability/skill to combine

land, labour and capital to produce goods and
services.

An Entrepreneur is someone who decides to set/build

up a business. He/she takes all the decisions about the
ENTREPRENEURSHIP business and put together all the factors of production. PROFIT
They are the owners of the business who by making
decisions, enable production to be carried out in an
anticipation of demand. An entrepreneur makes decision
as to:

 What to produce
 How to produce it
 Where to produce
  Labour refers to human resources, that is all
human effort used to make production possible.
This may be physical labour such as the working
of labourers and factory hands. This includes
Professional, skilled, semi skilled or unskilled,
manual or non manual labour. It may also be
LABOUR WAGES AND
mental labour such as contributions made by SALARIES
accountants, teachers, lawyers or doctors.

All production requires some labour even the automated

Factories requires workers to supervise machines, to
program computers, to operate equipment and process
paper work.

WAYS OF USING THE FACTORS OF PRODUCTION SUSTAINABLY

The factors of production are limited in supply, even though there may be many people who live in the
country, often there is lack of skilled manpower to carry out certain job. Capital to be used in the
production of goods is not allways available. Therefore, it is important to use the resources on land in a
sustainable manner so that they will last for a long period.

 One way of using factors of production sustainably is RECYCLING

1. Waste water from factories can be cleaned and re used for irrigation
2. Waste could be recycled

 Individuals and firms should conserve energy e.g. by switching off electrical appliances that are
not in use.

 Laws that curb deforestation should be enforced. Business involved in using wood should be
encouraged to replant trees

THE EFFECTS OF HIV/ AIDS ON LABOUR FORCE OR PRODUCTIVITY

HIV stands for Human Immune Deficiency Virus. It makes the body of a human being weak and unable
to resist diseases. A person will immediately suffer from AIDS and other diseases like TB. The pandemic
have serious effect on labour productivity. The condition of HIV/ AIDS has the following problems;

 Loss of money: business loss money by supporting their workers through the provision of
medical aids, by paying for the funerals costs and paying them when they are on sick leave.
 Low moral and motivation: HIV/AIDS can reduce interest and motivation in the work place this
can happen if one is sick or look down upon by colleagues.
 Absence from work: people who are affected or infected end up as regular visitors to the health
facilities making them loss time that could be used for production.
  No delivery at work: those affected get weak and fail to deliver their services to the full. They
become unproductive and the whole business will slow down in production.
 Loss of workers: active workers die or become inactive, reducing labour supply in the country.
The production system is affected and the whole economy is slowed down.
 Import of labour: The country is eventually to import labour. The payments for imported labour
will be higher as they have to be paid more to attract them.

STAGES OF PRODUCTION

There are basically three (3) stages of Production.

1. Primary stage
2. Secondary stage
3. Tertiary stage.

PRODUCTION

PRIMARY STAGE/ SECONDARY TERTIARY STAGE

EXTRACTIVE STAGE

PRIMARY STAGE

 Is the first stage of production mainly concerned with the extraction of raw materials. Some of the
sectors found in this industry include farming, mining, fishing, hunting and forestry. These are
called extractive industries because raw materials are taken from nature.

For example;

1. Farming;
 rearing of animals
 Producing farm produce such as tomatoes, sorghum, millet, maize and rice
2. Fishing; catching fish in the seas, lakes, lakes, and rivers.
3. Lumbering; cutting trees from the forest
4. Mining; obtaining precious minerals such as diamonds, gold and iron ore.

SECONDARY STAGE

 In this stage of production raw materials are changed into semi-finished or finished goods. Some
goods needs further processing after going through this stage. That is why this stage is divided
into industries of;
1. Manufacturing
2. Construction
In Manufacturing consumer goods (sugar) and producer goods (planks) are made. Whereas in
construction, producer goods are used to make usable products such as planks manufactured from timber
that can be used to make chairs.
 EXAMPLES OF MANUFACTURING INDUSTRIES

a. Kgalagadi Soap Industries- Soap

b. Kgalagadi Breweries Limited- Soft drinks and beers
c. SefalanaMiling- Mealie- Meal and Cereal products
d. Botswana Meat Commission- Corned beef.

EXAMPLES CONSTRUCTION INDUSTRIES

 Planks are used to build houses, by Botswana Housing Corporation.

 Iron Steels are used by Murray Roberts Construction to build bridges, roads and railway
lines.

TERTIARY PRODUCTION

It deals with the selling, buying and distribution of goods to the consumer. It consists of commerce and
direct personal services.

Examples of commerce include Cash Bazaar, Pep, Spar, Score e.t.c are engaged in commerce.

Direct services

- Direct services are offered by other service providers who do not work directly on production.
They include the following;

 Police officers: who protect business against criminals who might rob the business and
employees.
 Military personnel: who guard against foreign enemies who might try to destabilize the country.
 Doctors: who provide medical care to the people who are involved in production.

Commerce
- The service are those that facilitates the movement of product from the manufactures to the
consumers. For example; transport, advertising, and warehousing.

CHAIN OF PRODUCTION

- The chain of production consists of the various stages of production involved in the product. It
involves changing of raw materials into finished usable products.

Example; a chain of production of poles.

Primary stage: Timbering
Secondary stage: treating timber, and making poles from timber
Tertiary stage: transporting treated poles
 COMMERCIAL activities

- It covers all those services that support the process of buying and selling. Examples are
Transport, Warehousing, Insurance, Banking Advertising and Communication.
(TWIBAC).

COMMERCE

TRADE AIDS TO TRADE

TRANSPORT
HOME FOREIGN
WAREHOUSING
RETAILER IMPORT
INSURANCE

WHOLESALER EXPORT BANKING

COMMUNICATION

ADVERTISING
1. Banking:
Banking is used to;
- Accept deposit from customers. Help to keep our money safe. We can deposit money in the bank
and it will earn interest.
- Provide banking services as cheque and saving account.
- Help traders to get foreign currencies so that they can buy from other countries.
- They also provide money in form of loan to those who need money to start, run or expand their
business.

2. Insurance

Insurance is important to individuals and firms because it provides protection against possible risks.
People enter into a contact with the insurance company and make regular payments called Premiums.
This ensures that they are compensated if their house or shop catches fire, care is damaged due to an
accident, or if any of these risks insured against occurs.
This payment insures the business against risk.
3. Transport

- Transport is very important to trade as it brings raw- materials to manufactures or the business
and finished goods from the business to the customers.
- Help to clear the production line for further manufacturing.
- Helps to move workers and other passengers from place to place.

4. Advertising

Advertising refers to the spread of information about a product or an event. This will be published to as
many customers as possible to persuade them to buy, in order to increase sales and profit of the business.
Advertising is used by business to;
- Inform customers about the availability of certain products, their use, price and quality.
- Persuade people to buy large quantities of product, which would help to increase sales.
- Ensures that their competition does not take away their customers.
- Build a reputation for new products.
- Announce new products
- Remind consumers that the product is still available and they should continue buying.

5. Communication

Communication refers to the spreading of information from one person or organisation to another, in
either spoken or written forms. There are various media that can be used to spread information, such as;
telephone, send fax (facsimile), letters, E-mail or Internet.

- Communication enables traders to keep in contact with their customers and suppliers.
- Communication helps to enlarge the market locally and abroad.
- Communication informs workers about issues relating to the firm.

6. Warehousing

Warehousing is the storage of goods. When goods are produced the consumer may not need them
immediately. A place must be found to store them until they are needed. The aim is to keep the goods in
excellent condition until they are needed.

- Warehousing helps to keep the price stable because the goods are released whenever they are
needed. Therefore prices do not go up because of oversupply
- Warehousing ensures a steady supply of goods especially those that are produced seasonally.
- Warehousing can provide refrigeration so the goods that rot easily can be kept fresh for some
time.

TRADE AND AIDS TO TRADE

Trade involves both the buying and selling of goods and services between people and countries

The aids to trade are all those activities and services that made it possible for trade to take place.

HOME TRADE AND FOREIGN TRADE

Home trade and foreign trade differ in the following ways;

Home trade Foreign trade

Composition Consist of retail and wholesale trade
Measurement The same units of measurements are
used e.g. in Botswana we use the
metric system with grams for mass
and meters for distance.
Coverage Take place within a boarder of a
Consist of export and import trade
Different units of measurements may be
used, pounds, ounces and feet for
measurement.
Takes place between a country and the
 country. rest of the world
Communication Local language is used. E.g. in Different languages are used.
Botswana Setswana is used.
Currency The same currency is used within the Different currencies are used in different
country. E.g. (Pula). countries
Distance Usually short Usually long
Trade Free from trade barriers Imports are often taxed to bring money
restrictions into a country

DIVISION OF LABOUr and SPECIALISATION

DIVISION OF LABOUR

- It occurs when the work to be done is divided into many activities.

Example; in a book printing business/ firm;

1. One person will be given the task of composing the information.

2. Other person will be doing the proof correction (editing).
3. Other person will be printing.
4. Binding

SPECIALISATION

- Occurs when people channel their effort into producing something, which requires skills.

E.g. If a farmer decides to grow water- melons only, that is specialization.

Today specialisation occurs in all aspects of production. It enables people to train for particular profession
or areas such as accountant, teacher, nurse, carpenter, gardener, secretary, e.t.c.

Specialisation takes place at school, community, and world level. Example

SPECIALISATION AT SCHOOL OR COLLEGE

To do this, we have:

- Night watchmen specialize in providing security in the school.

- Cooks to prepares/cook our meals
- Bursar to deal with financial matters
- Teachers specialize in providing Education.

Teachers specialize in certain subjects, which are usually grouped together in departments for each
subject.
For example:

Setswana- all teachers concerned divide teaching load among themselves so that there is further division
of labour. Each teacher may teach different levels such as Form 1B, 2A, 3F etc.

SPECIALISATION IN THE COMMUNITY AND WORLD

There is different specialization in community

E.g.
- Schools specialize in providing Education.
- Hospitals specialize in providing medical care.
- Farmer specializes in producing food.
- The Army specializes in protecting the country.
- The Post Office specializes in providing Postal Services.

The different activities of the world also practice specialization. Some specialize in food and mineral
production. Some specialize in manufactured goods and others in provision of services.

The list below is some countries and the areas of specialization.

COUNTRY SPECIALISATION
Japan Electronic goods/cars
Australia Beef and Wool
South Africa Gold and Diamond

ADVANTAGES OF SPECIALISATION

1. Tools and equipment are used efficiently

2. Workers can do the job that they enjoy
3. By repeating the same process, a worker become skilled at it and can perform the task quickly.
4. Specialization saves time. Without specialization you would have to do every part of a job
yourself.
5. Workers do not have to move from one job to another and as a result they do not lose
concentration and waste time.
6. The training period is short because of the small piece of task each worker has to learn.
7. As the work become simplified and mechanized, there is bound to be reduction in fatigue.

DISADVANTAGES OF SPECIALISATION

1. Workers who do specialization work all the day can become bored, as the task becomes more
repetitive.
2. Machines can be invented to do simple job activities and workers may lose their jobs, as the
machines will be more efficient.
3. Workers become so specialized that they have a problem moving from one job to another.
4. Each part of the factory or each stage in the process of making a product relies on the other. This
is called interdependence. For example if people working in one stage of production are absent or
are working slowly, then the next stages will as well slow down.
 5. The worker may find it difficult to identify him/her as having contributed to the production of the
product and therefore loses the pride of craftsmanship.

CHAIN/ CHANNELS OF DISTRIBUTION

The different routes in which a product can pass from the Producer until it reaches the final consumer is
called:- Channels of distribution.

The type of channel of distribution of a particular product depends on the type of product and who the
consumer is.

CHANNELS OF DISTRIBUTION

PRODUCER ------------ WHOLESALER ------------ RETAILER ------------- CONSUMER

A manufacturer or a producer makes the product. This could be groceries or household items. These
goods are sold in very large quantities to the wholesaler such as Metro and Sefalana. The wholesaler then
sells the goods in small quantities to the retailer, who sells to his/her customers in small units.

CHANNEL OF DISTRIBUTION

PRODUCER ------------- RETAILER ------------- CONSUMER

This is an indirect channel and it involves the use of only one link in the channel of distribution. The
producer supplies goods to the retailer who sells them to the consumer. The wholesaler is cut completely.

Furniture- Large-scale furniture makers usually send their products directly to the retailer who displays
them in their shops.

CHANNEL OF DISTRIBUTION

PRODUCER ------------- CONSUMER

Certain goods are produced or manufactured in small quantities or produce to suit a particular customer.
Goods like these are usually sold directly to the consumer. Some food items are also perishable and must
reach the consumer as quickly as possible. Customers usually purchase the item directly from the
manufacturer or producer.

CHANNEL OF DISTRIBUTION

PRODUCER ------------ WHOLESALER ------------ CONSUMER

Some wholesalers buy from the manufacturer or producers and sell directly to the consumer. For
example; - Trade World, Metro and Sefalana Cash and Carry allow consumers to buy directly in large
quantities.
Examples of customers who buy in large quantities directly from the wholesaler are hotels, and
Government organizations (Schools). They buy in large in large quantities of goods and services at a time.

NOTE: - Wholesaler and Retailer are called middlemen or intermediaries.

THE RETAIL TRADE.

- The retail trade is the part of trade that makes goods available to consumers. This means that everyone
who makes goods available to us is engaged in retail trade.

Retailer specialise in selling goods in small units to the consumer. Any member of the general public can
go into Siza-Bantu, V5 or Score and buy items on sale.

THE FUNCTIONS OF RETAILERS.

1.Retailer breaks the bulk.

- The retailer buys goods in fairly large quantities and sells them in smaller units (sometimes one at
a time) to consumer, so the retailer buys in bulk and sells very small number of goods to the
consumer.

2.Offer after sale service. This is a service provided to a consumer after selling a product by the seller.

- (Retailers offer delivery and installation services)- When buying bulky or heavy goods such as
furniture, a set of television, a satellite dish or Hi-Fi system, it is very helpful if the shop delivers
the item to your home. Some retailers delivers and set up equipment in the buyers home and make
sure that it is in good working condition.

3.Retailers offer a wide range of goods.

- The retailers store the goods from several producers or manufacturers. This allows the consumer
to choose from a wide range of goods. This saves customer’s time as they do not need to visit
may different producers or manufacturers.

For example, when you go to buy groceries you would not want to go to different producers or
manufacturers for each item.

4.Retailer gives advice.

- We need advice about goods before we buy them. The specialist retailer is able to give advice to
the consumers about the goods he/she sells.

5.Bringing goods close to the consumer.

- The retailer lies between the wholesaler and the consumer in the channel of distribution and is the
one that makes goods available to the consumer.
 The retailer therefore, set up a shop in places where the consumer can easily have access to the goods.

6.Retailer offer credit facilities.

- Many retailers offer their customers credit facilities. Consumer buys on credit because they do
not always have the required amount of money to pay for their purchases. Expensive items such
as furniture and appliances are often bought on credit. If the seller agrees, the buyer is allowed to
take away the item and pay for it over a certain period of time.

CHARACTERISTICS OF SMALL SCALE RETAILERS

Small scale retailers are those with the following characteristics;

- They have small capital.
- They sell limited quantities and varieties of goods.
- They have small premises or buildings and sometimes have no fixed premises.
- They are mostly run by a sole trader that is they are owned by one person.

TYPES OF RETAILERS

Retailers can be classified according to their size.

SMALL SCALE RETAILERS LARGE SCALE RETAILERS

Hawkers
- These are traders who carry their goods from
one place to another, door to door. Hawkers
normally have a proper license. They sell items
like ice cream, clothes which are easy to carry
around.
Advantages
- Only small amount of money (capital) is needed
to start a business by a retailer.
- They are free to choose a market, they can move
where they have many customers.
- Customers can buy goods at their homes and
save them energy and money spent moving to
the retailers.
Disadvantages
- Customers have limited of goods choice since
hawkers does not provide variety of goods.
- Can get tired of moving up and down.
- Bad weather may prevent the business
continuing.
- The retailer is at risk to be attacked by thieves
as mostly they move around alone.
Supermarket
- A supermarket provides a self service. Self
service means that when a consumer enters a
shop he/she is free to move around the shop
with a trolley and select goods which are
displayed on the shelves and only pays at the
check points (tills) when leaving the shop.
Advantages
- They buy in bulk cheaply from producers.
- Customers are free to choose their goods.
- Provide a wide range of goods to allow
customers a choice.
Disadvantages
- No credit is given to customers
- The shop occupies a very large area which is
expensive to build.
- Some customer can steal the goods due to self
service.
- More people are employed which means the
retailer pays more money ( salaries)
Street trader
- The retailers sell their goods by the road side
usually on tables under a tree.
Advantages
- Only small amount of money (capital) is needed
to start a business by the retailer.
- The retailer is free to choose a market.
- Retailers save money that could have been spent
on rent and wages.
Disadvantages
- A retailer does not sell a variety of goods so
customers have limited choice.
- Bad weather may prevent the business
continuing.
- When the owner is sick or dies the business will
close down.
Market stallholders
- These traders operate from special places called
market or market stalls owned by the council.
Advantages
- They only pay rent and do not suffer the
expenses incurred in building a shop.
- Little capital is required to start a business.
Disadvantages
- Consumers have a limited choice to buy from.
- Sometimes rent paid is too high for the retailer. Disadvantages
Mobile shops Hypermarket
- A mobile shop is a vehicle or wagon turned into
a shop. It moves from one place to another
looking for customers.
Advantages
- Free to choose the market so they can move
where they have many customers.
- Customers do not have to transport goods as the Advantages
retailer go to their door-step.
Chain stores
- These are shops owned by the company with
branches all over the country. E.g. Pep stores,
Shoppers, Furn mart e.t.c. each baranch
manager and all the branches are controlled by
a head office. All the branches sell the same
type of goods normally at the same price.
These shops mostly have similar trading hours.
Advantages
- Customers buy cheaper goods.
- Shops are identical so they can be easily
identified.
- One advert can cover all the shops so retailers
saves money
Disadvantages
- A large capital is required to start the business.
- More people are employed which means the
retailer pays more money ( salaries)
- Distribution of goods to all branches is
expansive
Department stores
- These are large shops with different sections
under one roof, each section has a manager and
specilises on selling one product. However
there is a manager in charge of the whole shop.
Advantages
- Customers enjoy service like self and car parks
- Specialized sales workers are available to help
customers
- Customers have to travel long distance to the
shops.
- Stealing and damaging of goods.
- Is a very large supermarket. They usually sell
on cash basis only. They do not provide
delivery service. They provide facilities such
as a large car-park and children’ playing. They
are usually located outside town because they
need a large area
- Goods offered are cheaper.
 - Retailer saves money on salaries since only one
or two people are employed.
Disadvantages
- The retailer can be attacked by robbers
- Servicing and repairing of vehicle reduces
profits for the retailer as well as fuel costs.
Independent retailers
- These are small retailers who run a shop in a
permanent places and very common is
residential areas. E.g. tuck shop, Bottle stores,
General dealers e.t.c. they mostly belong to one
person or family.
Advantages
- All profits made are enjoyed by one person.
- Easy to start the business as little money is
needed.
- Consumers can get personal advice.
Disadvantages
- When the retailer is sick or dies the business Disadvantages
will close down
- Sometimes the retailer will make wrong
decisions she is alone as sole trader
WHOLE SALE TRADE
- Customers enjoy facilities like children’s
playing field.
- They usually open longer hours than
supermarkets.
Disadvantages
- The shop is expensive to set up
- The shop is located out of town so customers
need to pay transport to get there.
-
Cooperative societies retailers
- These are shops owned and controlled by its
members who are also its customers. The
minimum number of people allowed to form a
co-operative is 10 members. Members
contribute capital. An annual general meeting
is held which members elect a management
committee to run the business.
Advantages
- Members enjoy cheaper goods
- Easy to raise capital since members contribute
the money
- Members are free to withdrew capital at
anytime
- Management committee elected sometimes
fails to run the business.
Mail order
- Sell goods to customers through the post
office.
Advantages
- Goods are delivered to the customer door step
- Credit facilities are sometimes given to some
customers.
- Catalogues help to attract customers
Disadvantages
- Customers cannot make a good choice by
looking at the pictures
- Catalogues are expensive to print and
distribute, so the retailer spents lot of money
on advertising.

- Wholesale trade is the buying of goods in very large quantities from the producer then selling
them in small quantities to retailers and sometimes to customers.

Those traders who practice wholesale trade are known as wholesalers. A wholesaler is a middleman,
because of being located in between the manufacturers and retailers.

TYPES OF WHOLESALERS
There are many types of wholesalers as follows:
 a) General wholesalers
o They offer short term credit to regular customers
o They have many branches in different parts of the country
o They sell a wide range of goods like toiletry, clothing and food.
o They have large warehouse where they store variety of goods from different producers.

b) Specialist wholesalers
o These specialize in selling only a certain type of a product like future only
o An example of a specialist wholesaler is Jamal Trading Company selling building
materials and hardware only.
o Another example is Fruit & Vegetable wholesaler selling only fruits and vegetables.

c) Cash and carry wholesalers

o This is a wholesaler who sells goods on cash basis only and does not provide credit
facilities.
o A cash and carry does not provide transport to customers buying from them
o They have large premises
o They provide self-service
o Both retailers and consumers are allowed to buy.
o They sell mostly groceries and house hold appliances.
o They are mostly located near retailers. E.g. Metsef, Metro, Trade centre, Trade World
e.t.c.

d) Co-operative wholesale society

o Offer a variety of goods
o They controlled and owned by retailer co-operative societies
o Their main aim is to ensure that co-operative retailer societies get cheaper goods that they
would if they buy from other wholesalers

e) Mail Order wholesalers

o These provide goods to their customers through the post office
o They advertise their products in catalogues.
o They may employ sales persons known as agents to sell on their behalf.
o If the terms are Cash With Order (C.W.O) then the customer sends payments with the
order.
o If the term is Cash on Delivery (C.O.D) the payment is made when goods are received,
that is cash in exchange.

FUNCTIONS OF WHOLESALERS

1. Provide warehousing facilities

 They provide storage facilities for goods bought in bulk from manufacturers and keep
them safely until the goods are needed by the customer. This help by making goods
available throughout hence ensuring steady supply for the customers.

2. They break the bulk

  They buy in large quantities from different manufacturers and sell in smaller units to
afford to buy. This is because most of small retailers do not have enough capital to buy
goods in large quantities and they do not have warehousing for storage.

3. Offer transport
 Wholesalers normally have a number of vehicles, with these provides transport to retailer.
A wholesaler goes to the manufacturers to buy using her own transport.

4. They bear risks

 By storing goods in large quantities in a warehouse, wholesalers take the risk that goods
kept might not be wanted due to changes in fashion, even the prie may go down or goods
may be damaged. If any of these situations may occur the wholesalers will make a huge
loss.

5. Acts as financier
 They provide finance or money needed for distribution of goods. The wholesalers pays
the manufacturers cash in exchange for the goods, this makes it possible for, the
manufacturer to have sufficient working capital so that production is not interrupted.

6. Provide a variety of goods

 They buy goods from different manufacturers and give retailers a variety of goods to
choose from.

7. Preparing goods for sale

 Wholesalers can brand goods on behalf of the manufacturer i.e. giving a product a name.
They also pack, weight, price and advertise goods.