CHAPTER 1

INTRODUCTION TO COMMERCE
WHAT IS COMMERCE?
Commerce is defined as trade and aids to trade. By means of trade and aids to trade, commerce is concerned with
the distribution of goods and services from producers to areas of want. The two main branches of commerce
therefore are trade and aids to trade.

1. TRADE
Trade is the buying and selling of goods in a view to make profit. There are two main branches of trade namely
home trade and foreign trade.
(a) Home trade is done within the country, e.g. the buying and selling of goods and services within Zambia.
Home trade is further subdivided into retail trade and wholesale trade.
(i) Retail trade is concerned with the provision of goods in smaller quantities to consumers. The
business people involved in the retailing are called retailers.
(ii) Wholesale trade is concerned with the buying of goods in bulk from the producer and breaking
the bulk in smaller quantities to suit the requirements of the retailers. Traders involved in
wholesale trade are called wholesalers.
(b) Foreign trade is concerned with the buying and selling of goods and services between countries, e.g.
trade between Zambia and Botswana. Foreign trade is also known as Overseas or International trade.
The subdivisions of foreign trade are import trade and export trade.
(i) Import trade is the buying of goods and services from other countries and bringing them into
this country. Traders who buy goods from other countries are called importers.
(ii) Export trade is the sale of goods or services produced in this country to other countries.
Traders who sell goods and services to other countries are called exporters.

2. AIDS TO TRADE
Aids to trade are services that make trade to function. The aids to trade are Banking, Insurance, Communication,
Advertising, Transport and Warehousing. The following are some of the ways in which the aids to trade help
trade to function;
(a) Banking
Banking assists trade by;
(i) Financing traders by means of loans and overdrafts.
(ii) Safe-keeping the money in current, savings and deposit accounts. Traders handle a lot of
money, which if kept in homes can be misused, stolen or destroyed in fire.
(iii) Giving advice to traders on business investment.
(iv) Offering traders several methods of payment such as cheques, standing order, credit transfer,
bank drafts, documentary credits, etc.
(v) Giving trading information to traders on local and international markets.
(vi) Receiving payments on behalf of customers.
(v) Dealing with payments for exports and imports.
(b) Insurance
Insurance helps trade by;
(i) Compensating traders for the loss of goods in transit or goods held in warehouses etc.
(ii) Protecting traders against financial losses. Protection against financial losses is given when
insured people are compensated.
(iii) Spreading the risks around insured persons so that all insured ones pay for losses suffered by
one person.
(iv) Encouraging traders to enter into large scale business contracts which they may have avoided
for fear of incurring great losses.
 (v) Covering claims from third parties e.g. compensation paid to employees under Employer’s
Liability Insurance, and compensation paid to members of the public for injury or death caused
to them due to business owner’s negligence under Public Liability Insurance.
(vi) Providing compensation for loss of business activities due to fire burning down business
premises, covered by Consequential Loss Insurance.
(c) Transport
Transport assists trade by;
(i) Delivering raw materials, equipment etc to industries.
(ii) Delivering finished goods to local and international markets by means of sea, rail, road and air
transport systems.
(iii) Moving employees to and from places of work.
(iv) Moving traders, company executives, agents etc to home and overseas markets to meet their
customers.
(d) Advertising
Advertising helps trade by;
(i) Informing people of various types of goods and services available on markets.
(ii) Persuading potential customers to buy goods and services by using various methods of appeal.
(iii) Recruiting the required staff.
(iv) Obtaining information on where to get goods for sale or raw materials to use in industries etc.
(e) Communication
Communication assists trade by;
(i) Informing the public of various goods and services available on markets.
(ii) Allowing customers and suppliers of finished goods and raw materials in home and international
trade to be contacted easily speedily by means of telephone, electronic mail, fax, air, letters etc
thereby allowing quick settlement of queries and payments.
(iii) Ensuring that instructions to process raw materials in factories and instructions to distribute
finished goods to markets are given to right people at the right time.
(iv) Organising surveys to promote business activities.
(f) Warehousing
Warehousing facilitates trade by;
(i) Storing goods in warehouses awaiting transport or awaiting processing, or awaiting sale to
customers in either home or international trade.
(ii) Protecting goods from elements i.e. against weather, fire and theft.
(iii) Guarding against price fluctuations by storing in warehouses when they are plenty and releasing
them when they are scarce. When there is steady flow of goods on markets, prices are stabilized
and sharp price fluctuations are avoided.
(iv) Guaranteeing future supplies by storing goods in warehouses when they are plenty and
releasing them when they are scarce. Where warehousing facilities are fully utilized, shortages
of goods are avoided.
(v) Storing goods in bonded warehouses awaiting payment of customs duty.

DIAGRAM OF COMMERCE
Commerce

Trade Aids to trade

Home Foreign Warehousing

Advertising
Retail Wholesale Import Export Banking
Transport
Insurance
Communication
Important things to note
1. Always define trade as the buying and selling of goods and services for profit.
2. Remember that the aids to trade exist to help trade to function. It there was no trade, aids to trade would be
unnecessary. However commerce would still exist if there were no trade because it also assists primary and
secondary industries to function. Thus commerce is more than trade.
3. Commercial activities are activities that relate to the four branches of trade and the aids to trade. Thus
the four branches of trade are retail, wholesale, import and export trade. The aids to trade are Banking,
Insurance, Communication, Advertising, Transport and Warehousing.
4. The ways in which aids to trade help trade already outlined this chapter are key facts, which should be applied
to most questions in introduction to Commerce.
5. Do not repeat the same word to give an answer.
Example: Explain with suitable examples why transport is essential to those engaged in primary industry
e.g. mining.
Do not write as follows:
Transport;
(a) Transports
(b) Transports workers to and from work etc.
Write as follows:
Transport;
(a) Carries raw materials to manufacturing industries.
(b) Moves workers to and from work etc.
The following words may be helpful when writing on aids to trade;
(a) Transport; carries/moves/delivers.
(b) Insurance; compensates/restores/protects
(c) Advertising; informs/persuades.
(d) Banking; safe guards/keeps.
(e) Communication; contacts.
(f) Warehousing; stores/keeps/protects.
 CHAPTER 2
INTRODUCTION TO COMMERCE
PRODUCTION
WHAT IS PRODUCTION?
Production is the provision of goods and services, which satisfy the needs and wants of mankind.
Production covers all activities that contribute to the satisfaction of the customer’s demands for goods and services.
From the moment people are born, they want things. The basic wants of people are referred to as Human needs.
Human needs are goods and services which man cannot do without such as food, shelter, water, air and clothes.
Goods and services that man can do without such as a car, television set, lip stick, music etc are referred to as
Human wants.
People’s desires for more goods and services increase as they satisfy other wants. Furthermore, tastes for food, cars,
cloths, music, healthcare etc differ from one individual to another. Therefore all kind of gods and services must be
produced to satisfy the needs and wants of people.
Producers of goods and services that satisfy the needs and wants of people are divided into three main categories of
Industry, Commerce and Direct Services.
1. Industry
Industry is concerned with the actual making of goods by extracting raw materials from natural resources and
then processing them into finished goods which people are able to use to their satisfaction. Industry is
subdivided into Primary and Secondary industries.
(a) Primary Industry (or Extractive Industry)
Primary industry is concerned with the extraction of raw materials from natural resources. It is the first
stage in the chain of production of goods. Examples of Extractive industries are mining, fishing, oil
drilling, lumbering etc. Some raw materials are use by consumers in their raw forms e.g. fruits,
vegetables etc but most raw materials are processed before use.
(b) Secondary Industry (or Manufacturing Industry)
Secondary industry is concerned with the processing of raw materials into finished goods which people
are able to use to satisfy their wants. It is the second stage in the chain of production of goods.
Examples of secondary industries are;
(i) Converting raw maize into mealie meal by milling companies.
(ii) Transforming raw cotton into clothing materials by textiles industries.
(iii) Turning timber into furniture by carpenters.
(iv) Processing a variety of materials to create sophisticated products such as cars, computers, air
crafts etc.
(v) Using semi-processed goods to assemble or construct other complete products e.g. assembling
cars, television and radio sets, construction of bridges and houses etc.
2. Commerce
Commerce is trade and aids to trade. The role of trade is that of distributing goods and services from producers
to consumers. Retailers, wholesalers, importers and exporters with the help of transport, banking, insurance,
advertising, warehousing and communication do the function of distribution of goods and services.
Why is commerce a branch of production?
Commerce is a branch of production because;
(a) It contributes to the satisfaction of human wants by distributing goods and services as in the following
examples;
(i) Retail trade offers consumers with great varieties of goods at convenient places and in
affordable quantities.
(ii) Import trade brings goods in the country such as food, cloths, books, computers, cars etc some
of which may not be found locally so that people’s wants are satisfied with whatever goods they
may wish to have.
 (iii) Transport moves goods from producers to consumers so that consumers are satisfied with
goods they want. It also moves people from one place to another, thus making them happy.
(iv) Advertising informs consumers on the availability of goods and services, thus contributing to the
people’s higher standards of living.
(b) Commerce completes the process of production by delivering goods to consumers at the right time,
right place ,in right conditions and at the right price.
(c) Where the products of industry cannot be distributed to consumers by means of commercial activities,
then production will be incomplete. Consumers would not be satisfied.
3. Direct Services
Direct services are services produced for the direct benefit of the consumer. They are personal and direct
services provided to the individual citizen. Examples of direct services are education, health care, legal advice,
entertainment, security service etc.
Why are direct services a branch of production?
Direct services are a branch of production because;
(a) They contribute to the satisfaction of human wants by providing a variety of public and personal
services.
(b) They increase the efficiency and improve productivity of workers engaged in industry and commerce as
shown in the following examples;
(i) Teachers, lecturers etc equip workers in industry and commerce with educational and
professional skills required in performing tasks.
(ii) Nurses, doctors etc attend to sick workers to ensure that there is a healthier workforce in
industry and commerce.
(iii) Police officers, soldiers etc provide security required by workers in industry and commerce and
the general public to carry out their duties in peace without fear to lose life and property.

Production

Industry Direct Services

Primary Industry Secondary Industry Health Care

(Extractive Industry) (Manufacturing Industry education
Music
Legal Advice
Security
Commerce

Trade Aids to trade

Home Foreign Warehousing

Advertising
Retail Wholesale Import Export Banking
Transport
Insurance
Communication

The Diagram of production above is important to the study of commerce because;

(a) It clearly shows that there are three main branches of production namely, Industry, Commerce and Direct
Services.
(b) It shows that producers are not only engaged in industry but also involved in commerce and direct services. Any
person who contributes to the satisfaction of human wants is a producer. A thief is not a producer because he
steals from people goods meant to make them happy.
 CHAPTER 3
INTRODUCTION TO COMMERCE
METHODS OF PRODUCTION
The satisfaction of human wants can be achieved either by Direct Production or Indirect Production.
1. Direct Production
Direct production is the method of production whereby one person works to satisfy his/her wants entirely by
his/her own efforts. For example, one person can grow own food, make own clothes, build own house, rear own
cattle etc. Since one person does many things by himself/herself, he/she is not able to produce goods in large
quantities. He/she may manage just to produce a little of each item for his/her own consumption.
Communities that practice direct production are usually poor and enjoys the lowest standards of living. This
method of production is therefore not recommended for producing goods and services. Modern communities
practice Indirect Production.
2. Indirect Production
Indirect production is a method of production whereby goods and services are produced by Specialisation or
Division of Labour.
Specialisation is the concentration by an individual on a specific occupation or narrow range of work with a
particular occupation.
Example:
In a furniture shop, the work of making chairs by six workers may be divided as follows;
− The first worker may specialize in obtaining wood from the supplies.
− The second worker may specialise in cutting woods into required sizes.
− The third worker may concentrate on smoothening wood surface.
− The forth worker may be responsible for joining the places of wood together to make the required
chairs.
− The fifth worker may specialise in applying varnish to chairs.
− The sixth worker may be in charge of selling the completed chairs.
As work flows through the carpentry in an endless stream, each specialised worker contributing to the chair
making process what his/her talents and skills can offer, hundreds of high quality chairs would be made each
day.
The most important feature of specialisation, therefore, is the co-operation of individuals in producing goods
and services. Where individuals co-operate to work together, goods and services are produced in large
quantities to satisfy everyone in the community and still remain with plenty of surplus goods or services for sale
to other people.
The principle of specialisation is very much widely used in producing goods and services. It is applied at
Individual, Regional and National levels.
(a) Specialisation by Individual
This occurs when individuals concentrate in supplying a certain type of goods and services. Individuals
specialise in producing goods and services according to their skills and talents. Thus we may have
individuals specialising as hair dressers, carpenters, traders, farmers, lawyers etc.
(b) Specialisation by Regions
This occurs when important industries are located in one region possibly due to availability of raw
materials etc. In Zambia for example major copper mining industries are located on the Copperbelt area.
Therefore Copperbelt province specialises in producing copper.
(c) Specialisation by Nations
Nations specialise in producing goods and services according to the type of raw materials , skills of
population, climate etc available in each country.
Example:
 (i) Zambia is blessed with abundant natural resources of copper. Zambia therefore specialises in
producing copper and sells the surplus to other countries that do not have copper.
(ii) Japan specialises in producing electronic goods due to high skills of its population. The surplus
goods are sold to other countries that include Zambia.
Why Does Specialisation by individuals, Regions or Nations lead to the need for commerce?
Reasons include the following;
(a) When individuals, regions or nations specialise, they can not provide all their needs. They depend on
other people to supply them with other goods and services they do not themselves produce. Thus
buying and selling of goods will certainly take place.
Example:
Doctors spend most of their time attending to patients in hospitals. They use their salaries to buy goods
and services, which they do not themselves produce. Buying and selling are trading activities, which are
part of commerce.
Therefore, without trade specialisation could not take place and individuals, regions or nations would
have to be self-sufficient.
(b) When individuals, regions or nations specialise, large quantities of goods are produced, and therefore
commerce is required to distribute the surplus goods to markets by means of transport, banking,
insurance, advertising, communication and warehousing.
Advantages of Specialisation
(a) People are able to choose the work they can do best because they have a liking for it.
(b) The fact that people choose the work they like make them do the job to the best of their abilities.
(c) Workers become more skilled because they repeatedly do the same job over and over again. Practice
make perfect.
(d) As workers become more skilled, they are able to invent new better tools to simplify their work.
(e) There is great saving on tools when workers specialise in performing tasks. For example one set of
carpentry tools may be shared amongst a number of workers instead of one worker having a complete
set of tools to himself/herself.
(f) There is saving on time when workers specialise because movements are very much reduced.
(g) Specialisation leads to mass production of goods and services.
(h) Training is cheaper as jobs are easy to learn.
(i) Every worker’s ability is made use of.
(j) Workers become efficient.
Disadvantages of Specialisation
(a) Workers become bored when they do the same job repeatedly.
(b) A specialised worker who loses employment may not easily find another job because his specialised
skills may not be required elsewhere.
(c) They new better tools invented by workers may replace them, thus causing unemployment.
(d) Each section of specialised industry or factory depends on performance of other sections. A serious
problem in one area/section may affect the work in other sections.
(e) When individuals, regions or nations specialise in producing goods or services, they may suffer hardships
when demand for their products falls.
(f) Individuals skills and crafts are lost due to use of machinery.
(g) Inability of slow workers to keep pace with others may affect the production.
(h) There is risk of contracting diseases.
(i) Discontent amongst workers may lead to low productivity.

FACTORS OF PRODUCTION
Factors of production are essential resources or inputs that must be available before any production of goods or
services can take place.
The four factors of production are Land, Labour, Capital and Enterprise.
1. Land
 The term land does not only mean the site for construction of buildings or site for farming but also includes all
kind of natural resources found on earth and underground such as mineral wealth like copper, gold and coal;
fish in water; wild animals etc.
The provision of site where production takes place is the main contribution of land as a factor of production.
Without land therefore nothing can be produced. For example, a farmer needs a piece of land on which to grow
crops, a fisherman needs water from which to catch fish, a manufacturer needs a piece of land on which to
construct a building for factories.
The people who provide land are called landlords. Landlords receive rates/ rents as their reward for providing
land.
2. Labour
Labour is human effort made in producing goods and services. Labour is divided into manual (physical) labour or
skilled (mental) labour.
Manual labour is provided by workers who use their hands most of their times in producing goods or services
such as labourers on farms and in factories.
Skilled labour is provided by workers who use their brains in producing goods or services such as accountants
and managers in offices.
The people who provide labour are called workers. Workers receive wages or salaries as their reward for
providing labour.
3. Capital
Capital includes money, buildings, machinery, raw materials, partly finished goods and other items required in
producing further goods.
The people who provide capital are called capitalists. Capitalists receive interests as their reward for providing
capital.
4. Enterprise
Enterprise is the ability to organize other factors of production of land, labour and capital so that each factor is
well utilized in the production of goods and services.
Enterprise involves making important decisions such as;
(i) When to start business.
(ii) Where to locate the business.
(iii) What type of goods or services to offer for sale.
(iv) How much goods to offer for sale.
(v) Which workers to employ and for what job.
Making decisions is risk bearing. Correct decisions can make the business prosper. Wrong decision can ruin the
business.
People who take the decisions to start the business, and decide what to produce or provide for sale etc are
called Entrepreneurs (Organisers). Entrepreneurs receive profit as their rewards for organizing the businesses
well. Where business is poorly organized, the entrepreneur receives a loss as his/her reward for making wrong
decisions.
 CHAPTER 4
RETAILING
INTRODUCTION
Retailing is the selling of goods in smaller quantities to consumers. The business people involved in retailing are called
retailers and are found in every community as street venders, market traders or as giant supermarkets in towns or
cities.
Functions of a retailer
(a) To break the bulk. The retailer buys goods in large quantities from manufacturers or wholesalers then sell
them in smaller quantities that suit the requirements of the consumers.
The word retail means out again and therefore breaking the bulk is the main function of the retailer.
(b) To provide a variety of goods to the customers.
(c) To display goods for sale in retail shops.
(d) To offer credits to trusted customers.
(e) To give advice to consumers especially on new goods.
(f) To provide a local supply to consumers. This means that the small retailer conveniently locates the shop close to
consumers’ homes, thereby providing the goods at any time of the day e.g. a box of matches in the evening.
(g) To price goods before sale to consumers.
(h) To package goods before sale to consumers.
(i) To advertise his/her business to the public.
(j) To offer delivery service on some goods like furniture etc.
(k) To pass on information to wholesalers or direct to manufacturers on consumers’ complaints, suggestions or
praises on products.
(l) A small retailer opens his/her retail shop at any time to serve consumers. For example a small retailer can open
`his/her shop early in the morning at six hours to enable customers buy food for breakfast.
(m) To provide pre-sales and after sale services.
Pre-sales service is the checking of goods such as television sets etc before sale to customers to ensure that
goods are in workable conditions.
After-sales service is the maintenance or repair of goods such as electrical equipments, cars etc after sale or
within a guaranteed period. It also includes help given in installation of equipment bought by a customer e.g.
fixing a car radio in a customer’s car.
Factors to consider when establishing a retail shop.
The main factors to consider when opening a retail shop include;
1. Capital
When establishing a retail shop ensure that enough capital is available. The amount of capital will determine the
size of the retail shop. The money must be enough for building a new shop or for renting an existing shop, and
still remain with sufficient funds for buying goods for resale, paying for electricity, paying salaries to workers etc.
2. Location of a retail shop
When choosing the location of a retail shop a prudent business person will ensure that;
(a) the sight of the retail shop has sufficient customers to support the shop,
(b) the shop will easily be accessible and
(c) enough profits will be realized in relation to the cost of the site.
3. Business experience of the owner
The person intending to open a retail shop should have some experience in running retail shops. He/she should
have sufficient knowledge of the goods being sold so that he/she can give expert advice to customers. Good
advice to customers encourages repeat purchases and helps in good will for the business.
4. Goods for sale
 In establishing a successful retail shop it is important to offer for sale those goods required by people in the
locality of the shop. For example in a place where there are many school children, a retailer is bound to succeed
if most of the goods required by school children are stocked in the shop.
5. Method of selling
Sales of goods can either be by personal service or by self service or by combining the two methods. Each
method has its own advantages and disadvantages. The retailer should therefore consider carefully in identifying
the most appropriate method of selling goods.
6. Name of the shop
The name of the shop should be eye-catching and easy to remember.
Well chosen business names contribute to popularity and success of the business
7. Right quantities of goods should be stocked in order to avoid over-stocking.
8. For retail shop to be successful, extensive adverting campaigns must be carried out before and after the shop
opens.
9. in establishing a successful retail shop, credit facilities may be introduced to trusted customers.
10. A great variety of goods should be provided in the shop in order to meet the needs of all customers.
Factors to consider when choosing the location of retail shop.
Factors influencing the choice of site of a retail shop include;
1. Cost of site
Sites in main streets of town and city centres are very expensive. Sites on outskirts of towns and cities and in
suburbs are cheaper. The cost of site chosen must be in relation to anticipated turnover and profit.
2. Competition
The retail shop should not be located in an area where there are already shops selling the same type of goods or
services as those intended for the new shop. If the location has already similar business, then the new shop
should offer goods at reduced prices, offer better quality goods, provide a wider range of goods and provide
better quality customer service.
3. Sufficient customer
The retail shop should be located in an area where there are sufficient customers to support the shop. For
example a retail shop selling educational books should be located near educational institutions like schools,
colleges or universities where there are sufficient customers for educational books.
4. Trade growth
The retail shop should be located in a place where there is possibility of trade growth due to increase in
population or employment.
5. Security of the shop
The shop should be located in a secure place free from acts of vandalism and robbery. The shop should in fact
be insured with an insurance company.
6. Transport and communication facilities
Transport should always be available to bring goods from suppliers to the shop, and also deliver goods to
customers’ homes.
Communications facilities such as telephones, fax, internets, postal services etc should be available for easy
running of the business.
7. Sources of supply
The shop should be located in a place where sources of supply for goods are reliable so that goods wanted by
customers are always stocked in the shop.
It is difficult to maintain customer loyalty by a business that has irregular supply of goods.
8. Capital
Capital for the new retail shop should be sufficient to meet the demand of the site of the business envisaged
and also to avoid daily cash flow problems.
9. Prices of goods
Careful consideration should be taken in arriving at suitable price range of goods for the area in which the shop
is located in order to avoid slow moving goods. It is not advisable for a trader to sell expensive goods in an area
where people do not have the means to raise money to buy expensive goods.
10. Accessibility to shop
 The shop should be located in a convenient place where customers are able to reach it without difficulties.
11. Parking space
The site identified for the new retail shop should have enough parking space for workers’ and customers’
vehicles in order to encourage good business.

TYPES OF RETAILERS
There are Small Scale Retailers and Large Scale Retailers.
A. Small Scale Retailers
Small scale retailers include the following;
1. Peddlers (Itinerants)
These are retailers who carry goods in their hands and move on foot from house to house or from street
to street selling goods.
2. Hawkers
These are traders who use some form of transport to carry goods e.g. a cart, bicycle etc and sell goods
wherever they can find customers.
3. Street Traders
They are traders found on streets selling assorted goods such as newspapers, magazines, sweets,
wristwatches etc.
4. Market Traders
These are traders found on markets selling vegetables, groceries etc. They hire stales from council
authorities and use them to sell the merchandise.
Advantages of Market Traders include;
(i) carters for customers’ needs as they offer a wide range of goods.
(ii) sell goods at lower prices.
(iii) require little capital to start and run the business.
(iv) business are self advertising.
Disadvantages of Market Traders include;
(i) There is stiff competition amongst market traders.
(ii) Makes little profit due to limited sales.
(iii) Opening and closing hours are controlled.
5. Mobile Shops
A mobile shop is a van or bus that has been converted into a shop and goes round people’s homes, work
places or in streets selling goods.
Advantages of Mobile Shops include;
(i) The business advertises itself as the vehicle moves from street to street in search for customers.
(ii) Customers are known personally, ad thus the right type of goods can be offered to customers.
(iii) Save customers’ time because the van goes round people’s homes selling goods.
Disadvantages of a Mobile Shop include;
(i) Extra expenses are incurred on fuel, repairs to the vehicle etc.
(ii) The quantity of goods that can be carried for sale is limited by space in the vehicle.
(iii) There can be total loss of business if the vehicle is involved in an accident.
6. Automatic Vending Machine
A vending machine is a retailing machine that releases item(s) required upon pressing a coin in the slot.
Examples of vending machines include mini-soccer, juke box, postage stamps vending machines etc.
An automatic Vending machine is placed mostly in busy central sites such as bus stations, rail stations,
hotels etc. This kind of retailing offers a 24 hour service and is therefore a target to criminal activities.
7. Sole Trader
A sole trader is a business person who owns or runs a small retail shop. Sole trading shops are common
in villages and townships from where members by goods mostly groceries.
Sole trading shops are also known by names of independent shops, corner shops or unit shops.
Main Features of Sole Traders
(a) They are owned and run by one person.
 (b) They have limited capital, and they are therefore small-scale businesses.
(c) They may offer a variety of goods or may specialise in one kind of goods e.g. may sell sports
wear only.
(d) A sole trader has unlimited liability. Unlimited liability means that if the business is in financial
difficulties or is bankrupt, the owner can be forced to sell his/her personal property at home in
order to pay the business debts.
(e) Sole trader shops are usually located out of town or city centres e.g. in townships and outskirts
of towns because;
(i) The cost of rent and rates is very high in town centres.
(ii) A sole trader is able to provide a local supply to customers who cannot travel to town
centres.
Factors Working Against Small Scale Retailers
Factors contributing to the decline in number of small scale retailers include;
(a) Lack of enough capital to expand the business.
(b) Small scale retailers cannot afford to site their shops on main streets of town centres where business is good.
They do not have enough money.
(c) The growth of large scale retailers e.g. supermarkets, department shops, hypermarkets etc has weakened the
position of small retailers in trade. Most consumers prefer to shop at large scale retailers.
(d) Large scale retailers are able to buy goods in bulk direct from manufacturers because they have large capital, but
small scale retailers cannot afford.
(e) Since large scale retailers buy goods direct from the manufacturers, they able to sell them at cheaper prices,
thus attracting more customers to large scale retailers than small retailers.
(f) Customers are attracted to large scale retailers by the additional customer facilities offered e.g. car parks,
restaurants, hair saloons, filling stations, library etc but small retailers cannot afford additional facilities for
customers.
(g) When the owner of the small retail shop is sick or on leave, the shop is likely to be closed, thus creating
difficulties in running the business.
(h) Smaller retailers cannot offer a wide range of goods as the large scale retailers can.
(i) The fact that small scale retailers have limited liability.
Factors Working for the Survival of Small Scale Retailers
Despite the factors working against small scale retailers mentioned above small scale retailers are able to trade
successfully. The factors contributing to the success of small scale retailers include;
(a) Small retailers are conveniently located near customers’ homes and therefore can serve customers better than
large retailers.
(b) Some small retailers supply specialised type of service or goods e.g. sports equipment, hair dressing etc.
(c) They open for longer hours, thus enabling workers to purchase the requirements on their way home when most
large retail shops are closed.
(d) They offer credit facilities to trust worthy customers.
(e) They offer delivery service on certain products such as fridges, stoves, furniture etc.
(f) They offer personal service and advice needed by customers for example advice given to customers on how to
use a washing machine etc.
(g) Some retailers form voluntary retail chains in order to obtain the benefits of buying in bulk from manufacturers
and thus compete favourably with large retailers.
(h) Where a small retailer has owned a shop on main streets for many years, he/she may not be affected by rising
costs of central sites in town centres and therefore can survive in business.
Main Characteristics of Small Scale Retailers
The characteristics of small retailers can be summarized as follows;
(a) They are owned by one person.
(b) They have limited capital, and therefore they are small businesses which cannot afford to;
(i) Advertise on a national scale.
(ii) Employ high skillful workers to run the business.
(iii) Provide customer facilities such as car parks, filling stations, etc.
(c) They are located in townships (suburbs) and villages where rent and rates are cheaper.
(d) They open businesses for longer hours i.e. they open early in the mornings before large retail shops open and
close late in the evenings.
(e) They offer personal service to customers, for example advice given to customers by chemists on how to use
medicines.
(f) They have limited liability since most small retail businesses are owned by sole traders.
(g) They offer delivery services on certain goods bought by customers, for example a bag of mealie-meal bought by
customer can be delivered home without extra cost.

CHAPTER 5
LARGE SCALE RETAILERS
Large scale retailers include Supermarkets, Multiple Stores, Variety Chain Stores, Department Stores, Mail Order
Businesses, Co-operative Retail Societies and Hypermarkets.
1. Supermarkets
A supermarket is a self service retail shop with a large selling space and deals in mostly groceries and general
household goods.
Main Features of Supermarkets
The main features of supermarkets include the following;
(a) Supermarkets offer self service with shopping baskets and trolleys available to customers.
(b) They sell a variety of goods mostly groceries, vegetables, meat, toiletries and general household goods.
(c) They sell packaged, priced and branded goods.
(d) They have large trading space designed to make shopping simple, speedy and luxurious by the provision
of walk-through.
(e) Supermarkets may sell their brands.
(f) They provide customers with additional customer services such as car parks, restaurants, filling stations,
etc.
(g) They have check-out points where cashiers collect payments from customers.
(h) Goods are attractively displayed in appropriate sections to encourage impulse buying.
(i) They buy goods direct from producers at factory prices.
(j) They sell goods at cheaper prices.
(k) Supermarkets may belong to large retail chains.
(l) They use loss leaders in attracting customers into the shops.
What are loss leaders?
Loss leaders are goods sold below cost price i.e. at reduced prices in order to attract customers into the
shop. The reasons for using loss leaders in business include the following;
(i) To attract customers into the shop so that customers are in turn made to buy other goods on
which prices are not reduced, thus leading to high sales turnover of the business.
(ii) Loss leaders may be used to increase working capital in a retail shop.
(iii) Loss leaders may be used to dispose of old stock or remaining goods when closing down the
shop.
(iv) Loss leaders may be used by a retailer to wade off competition from other retailers.
(m) The suitable location for supermarkets is in town/city centres or in other prominent shopping areas. The
reasons for locating supermarkets in town/city centres include;
(i) Many potential customers are found in town centres.
(ii) A supermarket needs to nearer to other large retail shops so that it is bale to attract to the store
some of the customers who go shopping in town centres.
(iii) A supermarket is able to make high sales in town centres because that is where many people
congregate.
Advantages of Supermarkets to;
(a) Retailer (Owner of the shop)
(i) Supermarkets can buy goods in bulk direct from the producers at factory prices, thus receive
large discounts from suppliers.
 (ii) Supermarkets are located in town centres where customers congregate.
(iii) They employ few workers since customers serve themselves, thus saving business expenses in
salaries.
(iv) Supermarkets are bale to compete with other large retail shops.
(v) They are able to employ specialist workers e.g. they can employ fish buyers, meat buyers,
vegetable buyers, etc.
(vi) Attract display of goods encourages impulse buying, which leads to increased sales and greater
profits.
(vii) Supermarkets chains i.e. supermarkets belonging to chain stores are able to undertake the
functions of a wholesaler.
(b) The Consumer
(i) Consumers are offered a wide variety of goods and may get all their requirements from one
shop.
(ii) Consumers benefit from additional customer services offered such as car parks, music,
restaurants, etc.
(iii) The principle of low profit margins but higher turnover of supermarkets enables consumers to
obtain goods at low prices.
(iv) Consumers have quicker service since they serve themselves.
(v) Consumers are free to walk around the shop without being asked to buy anything.
(vi) Consumers have more time to browse and check goods in supermarkets.
Disadvantages of Supermarkets to;
(a) Retailer (Owner of the Supermarket)
(i) Due to customer traffic in the supermarket, pilferage (theft) of goods by customers is a common
problem.
(ii) Supermarket chains become difficult when branches increase in number.
(iii) Shop sites in town centres are very expensive.
(iv) Goods are damaged or made dirty as customers browse them.
(v) Additional costs are incurred for equipment such as baskets, trolleys, etc.
(b) The Consumer
(i) Delays at checkout points are common especially at peak shopping hours.
(ii) As there is no personal service offered, customers may be delayed in finding goods, and they
may also have difficulties in buying goods that require help from sales assistants such as
medicines.
(iii) Self service and attractive display of goods leads to over spending by consumers through
impulse buying.
(iv) Credit facilities are not usually offered in supermarkets.
(v) Prepackaged goods sold in supermarkets are not inspected before buying buy customers.
2. Multiple Stores
A multiple store is a retail shop that sells one or several lines of goods with more than ten shops in a town or all
over the country under single ownership mostly by limited companies. An example of a multiple store is Bata
Shoe Company retail shops.
Main Features of Multiple Stores
The main features of multiple stores include the following;
(a) Multiple stores have more than ten branches (shops) in a town or in many parts of the country.
(b) Branches are controlled from the Head Office.
(c) Each branch is run by a Branch Manager.
(d) Branches sell similar standardized goods and charge uniform prices.
(e) Multiple stores have centralized policy making, centralized buying of goods and centralized accounting.
(f) All branches of multiple stores have standardized designs for example similar front layouts and fittings
through out the country.
(g) Multiple stores can sell one type of goods e.g. Bata Shoe Company retail shops.
(h) Multiple stores may manufacturer their own goods e.g. Bata Shoe Company retail shops.
(i) Goods and staff can be transferred between branches.
 (j) A loss made in one branch can be offset by profits made in other branches.
(k) Branch Managers are allowed to buy goods locally.
(l) Multiple stores can advertise on national scale, one advertisement covering all branches through out the
country.
(m) Multiple stores are located in town centres or near other busy shopping centres. The reasons for
locating them in town centres include;
(i) Many potential customers are found in town centres.
(ii) Since multiple stores specialise in selling one type of goods, they need to be located near other
shops that sell a variety of goods so that they are able to attract to their shops all potential
customers.
Advantages of Multiple Stores to;
(a) The Retailer (Owner of the shop)
(i) Multiple stores can buy goods direct from the manufacturers at factory prices.
(ii) They can advertise on national scale, one advertisement covering all branches through out the
country.
(iii) Goods and staff can be transferred from one branch to another e.g. when certain goods are not
selling in one area, they can be transferred to another shop.
(iv) Losses made in one branch can be offset by profits made in other branches.
(v) Multiple stores are able to sell one their own brands e.g. Bata Shoe Company sells its own shoes
that it makes.
(vi) Since multiple stores are owned by limited companies, they can afford to employ high qualified
experts to run the branches well.
(vii) They can compete favourably with any other large retail shop.
(viii) Multiple stores are located in town centres where many people congregate and business is
good.
(b) Consumer
(i) Consumers easily recognize branches in other towns by name and similar front layouts.
(ii) Consumers are offered goods at competitive prices.
(iii) Shop assistants assist customers when buying goods.
(iv) Money back guarantee is offered if customer is not satisfied with the goods bought.
Disadvantages of Multiple Stores to;
(a) The Retailer (Owner of the shop)
(i) Multiple stores become difficult to manage when branches increase in number.
(ii) The shop sites in town centres are very expensive.
(iii) Branches cannot put forward their own policies because multiple stores have centralized policy
making, centralized buying of goods and centralized accounting, etc.
(iv) Goods are made dirty or damaged when customers browse them.
(b) Consumer
(i) Consumers may not be offered credit facilities.
(ii) Customers travel long journeys to and fro town centres to exchange unsuitable goods.
(iii) Where multiple stores deal in one type of goods, consumers are made to visit several stores
looking for goods they want.
3. Variety Chain Stores
A variety chain store is a retail shop that sells a wide variety of goods with several branches in a town or
scattered all over the country under single ownership usually by limited companies.
Main Features of Variety Chain Stores
The main features of variety chain stores include the following;
(a) They have several branches in many parts of the country under single ownership.
(b) Branches are run by Branch Managers.
(c) Branches are controlled from the Head Office.
(e) Variety Chain stores have centralized policy making, centralized buying of goods and centralized
accounting and centralized advertising.
 (f) They sell similar goods catering for all income types.
(g) Variety chain stores are easily recognized because branches have similar standardized shop fronts and
fittings through out the country.
(h) A loss made in one branch can be offset by profits made in other branches.
(i) Staff and goods can be transferred between branches.
(j) they offer self service with shopping baskets and trolleys available to customers.
(k) Variety chain stores use loss leaders to attract customers into shops.
(l) Goods are attractively displayed on shelves to encourage impulse buying.
(m) Variety chain stores have large trading space designed to make shopping simple, speedy and luxurious
by the provision of walk-throughs.
(h) they have checkout points where customers make payments as they leave the shop.
(o) Variety chain stores are located in town centres and other prominent areas. The main reasons for
locating them in town centres include;
(i) Main potential customers are found in town centres.
(ii) They need to be near to other large retail shops to attract shoppers in town centres.
(iii) They are able to achieve large sales in town centres.
Differences between Multiple Stores and Variety Chain Stores
Multiple Stores Variety Chain Stores
(i) May sell one type of goods e.g. Bata Shoe (i) Sell a wider variety of goods e.g. Shoprite
Company Stores. Checkers Stores.
(ii) May sell goods by both personal and self (ii) Sell goods by self service.
service.
(iii) Usually shopping baskets and trolleys are not (iii) Shopping baskets and trolleys are provided
provided to customers. to Customers.
(iv) Operate from buildings with smaller trading (iv) Operate from buildings with large trading
space. space.
The advantages and disadvantages of Variety Chain Stores are the same as those of Multiple Stores.
4. Department Stores
A Department Store is a retail shop with many departments organized under one roof and under one
management.
Main Features of Department Stores
The main features of department stores include the following;
(a) Department Stores sell a wide variety of goods.
(b) They have many departments organized under one roof and one management.
(c) They have many floors, which are connected to one another by means of stairs, escalators and lifts.
(d) Department Stores provide luxury shopping for customers.
(e) Department Stores provide additional customer facilities such as banks, restaurants, hair saloons, car
parks, etc.
(f) Emphasis is on attractive shelf and window displays to encourage impulse buying.
(g) Each department is managed by a buyer or Department Manager.
(h) Department Stores offer credit facilities to customers, for example, they may allow customers to buy
goods on hire purchase.
(i) Department Stores may offer delivery services on certain goods such as furniture, fridges, etc.
(j) Department Stores may offer Mail Order Business.
(k) Department Stores may sell their own brands.
(l) Department Stores may belong to chain stores with many branches in many parts of the country.
(m) Department Stores often sell expensive things as they operate from expensively furnished buildings.
(n) They goods by self service as well as personal service on some goods.
(o) Department Stores are located in town centres or in other busy shopping centres of a town. The reasons
for locating them in town centres include the following;
(i) Many potential customers to support the shop are found in town centres.
(ii) Department Stores need to be near other large retail shops in town centres where many people
congregate.
 (iii) Pleasant surroundings offered for customers such as banks, restaurants, etc could only be
maintained in town centres where high sales turnover can be achieved to meet high overheads.
Advantages of Department Stores to
(a) The Retailer (The owner of the shop)
(i) A loss made in one department is offset by profits made in other departments.
(ii) Department Stores save money in rents and rates because departments are placed in different
floors of the same building.
(iii) Department Stores are located in town centres where potential customers to support the shop
are found and business are good.
(iv) Loss leaders are used to attract customers into the shops.
(v) Attractive display of goods on shelves and windows encourage impulse buying leading to high
sales and profits.
(vi) Department Stores can afford to employ highly qualified experts to run the business.
(vii) Department Stores are able to buy goods in bulk direct from manufacturers at factory prices.
(viii) Department Stores are easily supervised because departments are located in one building and
each department’s tasks clearly defined.
(ix) Each department promotes other departments as customers move from one department to
another shopping goods.
(b) The Consumer
(i) Consumers buy goods under one roof and may get all their requirements from one Department
Store.
(ii) Customers are offered a wide variety of goods.
(iii) Customers are provided with luxury shopping with additional customer facilities such as banks,
saloons, music, etc.
(iv) Delivery services may be provided for customers on certain goods.
(v) Shop assistants help customers to find goods they want.
(vi) Customers are free to walk around the shop without being asked to buy anything.
Disadvantages of Department Stores to;
(a) The Retailer (Owner of the business)
(i) Shop sites in town/city centres are very expensive.
(ii) Pilfering (theft) by customers may result in great losses to a business.
(iii) A very large amount of capital is required to start the business and to provide customer
amenities like restaurants, banks, etc.
(iv) Goods can be dirty and even damaged by customers as they browse them.
(v) Competition with other retail shops may be stiff.
(vi) Employment of sales Assistants may lead to an increase in operational costs.
(vii) Department Stores operate from expensively furnished buildings.
(b) The Consumer
(i) Prices are slightly higher in Department Stores than other retail shops.
(ii) The majority of customers do not live in town centres, and therefore have to meet high
travelling expenses to and from the store in town centres.
(iii) Customers may be delayed at checkout points especially at peak shopping hours.
5. Hypermarkets
A Hypermarket is a retail shop with a large selling space located on outskirts of towns close to main roads.
Main Features of Hypermarkets
The main features of Hypermarkets include the following;
(a) Hypermarkets are very large shops with very large trading space.
(b) They are located on the outskirts of town close to main roads.
(c) They offer a wide variety of goods.
(d) They sell goods at cheap prices.
(e) They have checkout points where customers pay money for goods on their way out of the shop.
(f) They sell goods by self service with trolleys and shopping baskets available to customers.
 (g) Hypermarkets provide customer facilities such as car parks, restaurants, etc.
(h) They buy goods direct from manufacturers at factory prices.
(i) Hypermarkets may sell their own brands.
(j) They sell already priced goods. Prices may be written on bar codes.
(k) Customers may use credit cards to buy goods.
(l) Hypermarkets may conduct special business promotions.
(m) Goods are attractively displayed in appropriate sections to encourage impulse buying.
Hypermarkets are located on outskirts of town for the following reasons;
(i) Abundant land for large shop buildings, large car parks, filling stations, restaurants, warehouses,
children playgrounds, etc is easier to find on outskirts of towns.
(ii) Land is cheaper on outskirts than in town centres.
(iii) Motorists have easier access to Hypermarkets than to shops in town centres where the problem
of traffic congestion is common.
Advantages of Hypermarkets to;
(a) The Retailer
(i) Abundant land for large shop buildings, large car parks, filling stations, etc is easily found on
outskirts of towns.
(ii) Land is cheaper on outskirts than in town centres.
(iii) Hypermarkets buy goods in bulk direct from manufacturers at factory prices.
(iv Self service offered encourages impulse buying leading to high sales and profits.
(v) Hypermarkets are NOT luxurious and therefore cheaper to operate than department stores.
(vi) They do not have many sales assistants because customers serve themselves (self service) and
therefore less costs on salaries.
(b) The Consumer
(i) Consumers are offered a wide variety of goods at cheap prices under one roof.
(ii) Consumers are offered free large car packing areas.
(iii)Motorists easily reach Hypermarkets because there is no traffic congestion on outskirts of
towns.
(iv) Long opening hours of Hypermarkets enable workers and are consumers to buy goods in
evenings when most shops are closed.
(v) Consumers enjoy many customer facilities offered such as hair saloons, restaurants, music, etc.
(vi) Consumers buy goods on self service and therefore they have more time to browse and choose
goods.
(vii) Trolleys and shopping baskets are provided to customers for easy shopping.
Disadvantages of Hypermarkets to;
(a) The Retailer
(i) Pilfering (theft) by customers is a common problem.
(ii) Hypermarkets depend on motorists for custom and therefore high sales turnover may not be
achieved.
(iii) They require land tracks of large for shopping buildings, large car parks, restaurants, etc.
(b) The Consumer
(i) People without vehicles have difficulties in reaching Hypermarkets.
(ii) Personal service is not offered and customers may therefore be delayed in finding goods they
want to buy.
6. Mail Order Business
Mail Order Business is shopping by post. The customer does not visit the shop to look for goods to buy. He/she
simply prepare an order at home, sends it to Mail Order Business Company, and goods are later sent in parcels
to him/her through the post office.
Mail Order Business was introduced as a form of retailing to solve problems such;
(a) Providing goods to customers living in remote areas who could not reach shopping centres in town
centres.
(b) Reducing traffic congestion on roads in towns and cities.
A Mail Order Business can be run by manufacturers, or by wholesalers or by large scale retailers.
Main Features of Mail Order Business
(a) Customers shop by post.
(b) Goods are ordered by mail or by fax or by telephone or by internet.
(c) Colourful catalogues are sent to customers and serve as shop windows for business.
(d) Credits are offered to customers.
(e) Mail Order Business may have own retail shops.
(f) Goods may be ordered from overseas.
(g) Mail Order Business may be conducted from warehouse premises. Expensively furnished shops are not
necessary because customers do not visit Mail Order Businesses.
(h) Mail Order Businesses sell goods to customers on Cash On Delivery (C.O.D.) or Cash With Order (C.W.O.)
basis.
(i) Customers enjoy armchair shopping. Armchair Shopping is shopping whilst at home by selecting goods
wanted from a catalogue and then send an order for the actual wanted to Mail Order Business which
later consigns goods by post.
(j) Mail Order Business may send goods to customers on approval.
(k) Mail Order Businesses sell a wide variety of goods such as shoes, clothing, cutleries, beddings and many
more goods that can be sent by post.
(l) Mail Order Businesses may deliver goods to customers’ homes.
(m) Mail Order Businesses may reach customers in any of the following ways;
(i) By sending catalogues directly to customers.
(ii) By advertising in newspapers. Customers then respond to newspapers advertisement by
ordering goods from Mail Order Businesses.
(iii) Customers may order goods by internets or by telephone.
(iv) By appointing part-time agents and then pay them on commission basis. Housewives are usually
employed as agents to sell goods in the neighbourhood.
(n) Mail Order Businesses are located on outskirts of town for the following reasons;
(i) Land on outskirts is cheaper than in town centres.
(ii) Mail Order Businesses do not need to be attractive or to be in town centres because customers
do not visit them.
Advantages of Mail Order Businesses to
(a) The Retailer (Owner of Mail Order Business)
(i) The shop may be located on outskirts of the town where land is cheaper.
(ii) Workers are free from disturbances as customers do not come in contact with them.
(iii) Goods are not soiled or damaged in any way because customers do not handle them.
(iv) Shop buildings do not need to be expensively furnished because customers do not visit them.
(v) Sales are promoted when local agents like housewives are employed to sell goods in local areas
where they are well known by customers.
(vi) Mail Order Business can by goods in bulk direct from manufacturers at factory prices.
(vii) Mail Order Businesses employ fewer workers to package goods before posting them to
customers. Fewer workers employed mean less operational costs.
(b) The Consumer
(i) Consumers are offered a wide variety of goods.
(ii) Consumers enjoy the use of imported goods made in other countries, which may not be
available in the home country or locally.
(iii) Consumers enjoy armchair shopping i.e. they choose goods from catalogues in the leisure of
their homes then order goods by post.
(iv) Money back guarantee is offered where a customer is not satisfied with goods received.
(v) A customer is allowed to pay in installments where he/she is not able to pay at once.
(vi) local people are employed on commission basis to sell goods to their neighbours, wake mates,
etc.
(vii) Free gifts are given to customers.
(viii) Mail order trading is convenient and useful to customers in remote areas.
 (ix) Goods are delivered at homes of consumers by postmen.
(x) Credits are offered to customers.
Disadvantages of Mail Order Business
(a) The Retailer
(i) Poor postal services may hinder Mail Order Business.
(ii) Operational costs are increased by printing of catalogues, packing of goods, commissions paid to
agents and post office.
(iii) Goods may be damaged in transit due to poor handling. The risk of damage may necessitate
insurance cover which only adds to business overheads.
(iv) Mail Order Business bear risks of fashion change, change in demand, falling prices, theft, fire, etc
whilst goods are in warehouses.
(v) Changes in currency rates may affect international mail orders. For example when a country’s
currency is devalued, customers be discouraged from importing by mail order.
(vii) Changes in government policy may affect international Mail Order Business. For example when
government restricts availability of foreign currency to consumers, the Mail Order Business
suffers.
(b) The Consumer
(i) Consumers may be misled in buying poor quality goods by the beautiful and nice colourful
pictures of catalogues. It is difficult for consumers to assess the quality of goods from
catalogues.
(ii) It takes a long time to replace wrong goods received by a customer.
(iii) Goods bought by mail order business tend to be more expensive than those bought from
ordinary shops because of customs duty paid on imported goods, commissions paid to agents,
packaging costs etc.
(iv) Goods may be delayed or even lost in post.
(v) Consumers do not inspect goods before buying them.

7. Discount Shops
Discount Shops are retail shops that are located out of town centres and work on principle of low mark up but
large turnover.
Main Features of Discount Shops:
(a) Discount Shops work on the principle of low mark up but large turnover.
(b) They specialise in branded durable goods such as electrical appliances, furniture, fridges, television sets
etc.
(c) Discount Shops do not deliver even for bulky goods to consumers’ homes instead customers collect their
own goods bought.
(d) Discount Shops operate from large warehouses where customers buy their requirements.
(e) Discount Shops sell goods at lower prices.
(f) Discount Shops do not usually display goods.
(g) Discount Shops are located out of town centres for the following reasons;
(i) Land is cheaper out of town centres.
(ii) Overheads are low out of town centres.
(iii) Enough land is available for car parks, large warehouses etc out of town centres.
Advantages of Discount Shops to:
(a) The Retailer (Owner of Discount Shop)
(i) Discount Shops are located out of town centres where land is cheaper and hence low
overheads.
(ii) The principle of Discount Shops of low mark up but large turn over enables Discount Shops to
make huge profits.
(iii) Discount Shops are operated from warehouses which are not expensively furnished.
(iv) Discount Shops do not deliver goods to consumers’ homes and therefore less business
expenditure incurred.
 (v) No problem of pilfering since goods are not displayed.
(b) The consumer
(i) Consumers are sold goods at lower prices.
(ii) Consumers are provided with car parks.
Disadvantages of Discount Shops to:
(a) The Retailer (Owner of Discount Shop)
(i) Discount Shops are located out of town centres where customers may not be many.
(ii) A large piece of land is required for warehouses and car parks.
(b) The Consumer
(i) Goods bought are not delivered to consumers’ homes.
(ii) Consumers may find it difficult to reach Discount Shops since they are located out of town
centres.
(iii) Consumers may not easily find goods since they are not displayed.
8. Co-operative Retail Societies
A Co-operative Retail Society is a business run and owned by consumers who wish to provide them selves with
good quality products at reasonable prices.
Main Features of Co-operative Retail Societies
(a) A Co-operative Retail Society is owned by members who purchase at least one share in the society.
There is however a limit to the number of shares a member can buy in a society.
(b) A Co-operative Retail Society is run by a management committee (i.e. Board of Directors) elected by the
members of the society.
(c) Members are paid interest on the share capital.
(d) All members have equal right irrespective of the number of shares the hold in the society.
(e) Profits are divided to members in relation to the amount of purchases each member made from the Co-
operative Retail Store. Dividends are meant to encourage members’ patronage to their Co-operative
Retail Store.
(f) Co-operative Retail Societies may offer special benefits to members such as scholarships, loans, death
benefits etc.
(g) Co-operative Retail Societies purchase goods from Co-operative Wholesale Societies. This enables Co-
operative Retail Societies to sell goods to members at lower prices.
(h) Co-operative Retail Societies may give dividends of stamps to customers as a way of encouraging
members to be regular buyers.
(i) Co-operative Retail Societies sell a wide range of goods.
(j) The purpose of forming a Co-operative Retail Society is to provide members with good quality goods at
cheaper prices than those offered in other retail shops.
(k) All members of a Co-operative Retail Society have limited liability.
(l) Co-operative Retail Societies sell goods to both members and none members.
Advantages of Co-operative Retail Societies to:
(a) The Retailer (Owners of Co-operative Retail Society)
(i) Co-operative Retail Societies buy goods in bulk at lower prices from Co-operative Wholesale
Societies.
(ii) Payment of dividends encourage members to buy goods from the Co-operative Retail Society.
(iii) Co-operative Retail Societies may sell their own brands through Co-operative Wholesale
Societies.
(iv) Co-operative Retail Societies encourage adult education amongst members.
(b) The Consumer
i) A wide variety of goods is offered to consumers.
ii) Goods are sold to consumers at lower prices.
iii) Consumers may work hard to improve on poor services offered since they are at the same time
the owners of the shop.
iv) Some of the consumers may be employed since they are the owners of the retail shop.
v) Consumers are offered special benefits such as scholarships, funeral benefits etc.
 vi) Consumers have to the right to vote.
vii) Consumers receive double benefits from the Co-operative Retail Society.
They receive dividend as a share in the profits of the retail shop.
They receive interest for contributing capital to the business.
DIVIDEND
The amount of dividend a member gets is based on total value of goods a member buys from
the retail shop. The more goods a member buys from the shop, the larger the dividend a
member receives.
Before profits are shared out to members, a rate of dividend is first calculated. A rate of
dividend is used as a scale in distributing profits to ensure that each member receives a fair
dividend. The rate of dividend is calculated as follows:

Rate of Dividend = X 100

INTEREST
Interest is the reward a member receives for investing capital in the business. The amount of
interest a member receives depends on the amount of capital he/she contributes to the
business.
Example on dividend and interest:
Mutaba Co-operative Retail Society made a profit of K450 000 for the year ended 31 December
2002. The total sells to members during the same period amounted to K3 000 000. Interest of
5% is paid annually on member share capital.
Find a) Rate of dividend
b) Total income received in dividends and interest by a member of the society who
purchases K90 000 worth of goods from the retail society and invested K40 000
in business as capital.
Answer:
a) Rate of Dividend = X 100

= X 100

= 15%
b) Dividend received by a member who bought K90 000 worth of goods:

= K90 000 X

= K13 500
Interest received on capital of K40 000

= K40 000 X

= K2 000
Therefore, the total income received by a member who invested K40 000 in
business and bought K90 000 worth of goods is
= K13 500 (Dividend) + K2 000 (Interest)
= K15 500

Disadvantages of Co-operative Retail Societies to:

a) The retailer
i) Keeping books of dividend stamps for members create a lot of paper work to staff.
 ii) Workers may be promoted on length of service rather than on their qualifications and ability to
perform work. This discourages highly qualified personnel from joining co-operatives.
iii) The restriction on the number of shares a member can buy limits the capital of the co-
operatives.
iv) Very often co-operatives are controlled by minority groups with fewer changes over the years.
This discourages capable people with progressive ideas, enthusiasm and innovations to run co-
operative societies especially the young graduates.
v) Salaries and wages paid to society workers are not usually high enough to attract qualified
workers. This has contributed to the decline of co-operative movements.
vi) Many co-operatives do not have qualified managers resulting in most of them closing down due
to poor planning, poor financial control, lack of vision and poor management.
b) The consumer
i) The general appearance of the store and the services offered may not be attractive as those
offered in other retail shops.

Characteristics of large scale retailers.

The characteristics of large scale retailers include the following:

a) They buy goods in bulk direct from manufacturers at factory prices.
b) They offer own transport and warehousing facilities.
c) They can afford to employ experts to run businesses.
d) They are able to advertise on national scale.
e) They offer self-service.
f) They provide customer facilities such as restaurants, car parks, filling stations, hair saloons etc.
g) They are located in town/city centres and in other prominent shopping areas.
h) They sell wide variety of goods.
i) They have limited liability as most of them are owned by limited companies.
j) They use loss leaders to attract customers into shops.
k) Most of the large retail shops belong to chain of stores with branches in many parts of the country under single
ownership.
l) They have checkout points where cashiers collect payments from customers.
m) They have large amounts of capital.
n) They goods at competitive prices.
o) They attractively display goods in appropriate sections to encourage impulse buying.
p) Large scale retailers that belong to chains of stores have;
i) Centralised buying of goods.
ii) Centralised accounting.
iii) Centralised policymaking.
iv) Control from head office.

Advantages of large scale retailing to:

a) The retailer (or owner of the shop)
i) Large retailers can buy goods in bulk direct from the producers at factory prices.
ii) Large retailers are able to locate their shops in town/city centres where many potential customers
congregate.
iii) Large retailers are able to attract customers into shops by attractive display of the wide variety of goods
they offer and by use of loss leaders.
iv) Most large retailers offer self-service, which reduces expenditure in salaries.
v) Large retailers have enough capital to:
• provide warehousing facilities.
• provide transport facilities.
• Carry out extensive national advertising campaigns.
• Buy latest and more advanced retailing machines.
 • Employ highly trained workers etc
b) The Consumer
i) Consumers are offered a wide variety of goods and may get all their requirements from one shop.
ii) Consumers are offered additional customer facilities such as banks, restaurants, hair saloons, car parks
etc.
iii) Consumers easily recognize branches of large retailers in other parts of the town or country by name or
similar front layouts.
iv) Consumers are offered goods at competitive prices.
v) Most large retailers offer self-service to consumers, thus serving them time.

Advantages of large scale retailing to:

a) The retailer (or owner of the shop)
i) Pilferage (theft) of goods buy customers is a common problem because of high customers’ traffic in large
retail shop.
ii) Large retail shops become difficult to manage when they increase in number.
iii) Additional costs are incurred on retailing equipment such as shopping baskets, trolleys, surveillance
cameras etc.
iv) Shop site in town/city centres are very expensive.
v) Large capital is required to start business with and to provide customer amenities such as banks,
restaurants etc.
b) The Consumer
i) Most large retailers no longer offer personal service. Customers may therefore be delayed in finding
goods they want.
ii) Most large retailers do not offer delivery service and credit facilities to consumers.
iii) Consumers travel long distances to and fro town centres to exchange unsuitable goods.
iv) The use of self-service, attractive display of goods and loss leaders by large retailers lead to consumer
overspending by way of impulse buying.

Comparing and contrasting between a retail shop operating in one shopping area with a retail shop
operating in several shopping centres of a town or country.

A RETAIL SHOP WITH BRANCHES A RETAIL WITHOUT BRANCHES

1. Workers and goods can be transferred to other
branches.
2. Losses made in one branch can be offset by profits
made in other branches.
3. Can advertise on national scale, one advertisement
serving all branches through out the country.
4. Branches become difficult to control when they
increase in number.
5. Customers easily recognize branches in other
towns by name and by similar front layouts.
6. Branches do not suffer from bad trade at the same
time. If business is not good in one area, other
branches may be making profits.
1. Workers and goods cannot be transferred.
2. Losses can be difficult to offset as the shop is
localized.
3. National advertising may not greatly benefit a
localized shop. Advertising can be costly to the
business.
4. A single shop is easier to run e.g. workers are easily
supervised. Overheads are easily controlled.
5. Customers may not easily recognize a localized
shop especially new people to a town.
7. Once there is no business where a single shop is
sited, then the shop may be forced to close.

CHAPTER 6
 TRENDS IN RETAILING

Introduction
Trends in retailing are changes or developments that have taken place in retail trade and include the following: pre-
packaging, branding, shopping complexes, self-service, Electronic commerce, voluntary chains, trading stamps etc.

1. Pre-packaging
Pre-packaging is the packing of items I tubes, bottles, boxes, wrappers etc before sale. Most items are
prepackaged by manufacturers before sale to wholesalers, retailers or to consumers.

Reasons for Pre-packaging goods

a) To facilitate the branding of goods i.e. marking names on goods.

b) To give longer shelf life to goods.
c) To facilitate self-service in large shops.
d) To allow goods to be put in amounts suitable for consumers.
e) To prevent damage to goods whilst in store or in transit.
f) To reduce the possibility of goods’ contamination.
g) To make transportation, storage and display of goods easier.
h) To attract customers with distinctive packaging.
i) To protect goods when handled by customers.
j) To save time of weighing and wrapping goods each time customers ask for them.
k) To help in advertising of goods.
l) To allow customers easily identify goods they need.

Pre-packaging is suitable for goods that maintain the same size, quality and appearance when packed, for
example biscuits, bathing soap, bottled and tinned drinks etc.
Some items such as fruits and vegetables may not be pre-packaged because they cannot remain in the same
condition over a longer period of time.

Effects of Pre-packaging on retail trade

The major effect of pre-packaging on retail trade has been its contribution to the development of self-service
stores. Pre-packaged goods can be displayed on shelves and remain there for a longer time. Consumers then
serve themselves. Names of products are easily written on packages.
Advantages of Pre-packaging to:
a) The manufacturer (or producer)
i) Without packaging the brand names cannot be marked on goods.
ii) Packaging prevents damage to goods in store or in transit.
iii) Distinctive packaging attracts customers to buy goods.
iv) Packaging makes transportation and storage of goods easier.
v) Goods are put in amounts suitable for consumers.
vi) Packaging preserves the life of goods over a longer period of time.
vii) Packaging may build up brand loyalty.
viii) Packaging establishes the quality of goods.
ix) Packaging helps in advertising of goods.
b) The retailer (or trader)
i) Packaging protects goods from being soiled or made dirty handled by customers.
ii) Packaging gives longer shelf life to goods.
iii) Packaging prevents damage to goods in store and in transit.
iv) Goods are easily displayed and stored thus facilitating self-service.
v) Packaging saves time of weighing and wrapping of goods each time customers ask for them.
 vi) Well designed and attractive packages attract customers to buy goods.
vii) Packaging facilitates branding of goods.
viii) Packaging helps advertising of goods.
ix) Packaging helps to build up brand loyalty.
x) Fewer workers are employed in self-service stores because good
are pre-packaged, and customers serve themselves, thus saving money in salaries.
xi) Packaging establishes the quality of goods.
xii) The retailer does not need to understand the product he/she sells. The retailer just has to sell
whatever is in the package.
c) The consumer
i) Consumers easily carry packaged goods.
ii) Goods are easy to handle when packaged.
iii) Consumers easily identify goods buy colours or by writings on packages.
iv) Consumers benefit from improvements in hygiene and from preservation of goods due to
packaging.
v) Packaging enables goods to be packed in suitable amounts required by consumers.
vi) Consumers require less assistance from shop assistants when buying pre-packaged goods
because packages contain relevant information, and therefore saving time for consumers.
vii) Goods may be cheaper.

Disadvantages of packaging to:

a) The manufacturer.
i) Packaging costs a lot of money in materials, decorative writings etc, and therefore it may be
wasteful in terms of money and other resources spent on it.
ii) Packaging may harm the environment especially where empty cans, empty bottles; plastics, tins,
tubes etc are just thrown anywhere.
iii) Much of the space in storage houses, and in transporting vehicles is taken up by packages.

b) The retailer
i) Packaging is expensive and may be wasteful in terms of resources spent on it.

c) The consumer
i) Consumers pay for the cost of packaging in higher prices.
ii) Consumers don not inspect the goods in the package before buying them.
iii) Packaging may give misleading impression on the quantity or size of goods inside the package.
iv) Goods found faulty or damaged may not be accepted back or exchanged for better ones by
retailers.

2. Branding
Branding is the marking of goods with a distinguishing name or mark that goods are easily identified from those
of other producers or those sold by other traders. For example washing detergents are known by their names
such as surf, Strike, Boom, Cold Powder, Bingo etc.

Reasons for branding goods

a) To enable the goods to be identified.
b) To allow the goods to be advertised.
c) To facilitate self-service in retail shops etc.
d) To assist producers in setting standards of quality for their goods.
e) To build up brand loyalty.
f) To enable goods to be displayed on shelves so that they are sold by self-service.

Effects of branding on retail trade

 The major effect of branding on retail trade has been the development of self-service stores. Customers no
longer depend on shop staff for selecting goods. They identify and choose goods by brand names on their own.

Advantages of branding to:

a) The manufacturer (or producer)
i) Without distinguishing name or mark, goods may not have individual identity useful in
differentiating a manufacturer’s goods from those of others.
ii) Branding enables producers to advertise their individual products.
iii) As no producer is prepared to be identified with poor quality products, branding encourages
producers to set standards of quality for their products.
iv) Brand names can build up brand loyalty.
v) Branding builds up the reputation of the business organization.

b) The retailer (or trader)

i) Branding facilitates self service.
ii) Branding helps greatly in advertising of goods.
iii) Branding may build up brand loyalty.
iv) Fewer workers are employed in self-service stores because goods have brand names and
customers save themselves in choosing and picking goods, and thus saving money in salaries.
v) National advertising by producers benefit retailers because they do not incur advertising
expenses but gain from the increase in sales of branded products.
vi) Branding aids display of goods in supermarkets etc.
vii) Branding builds up the reputation of the business organization.

c) The Consumer
i) Branding helps consumers to identify goods on their own without help from shop assistants.
ii) Branding saves consumers’ time in choosing and picking goods.
iii) Branding may imply a particular quality to the customer. For example Colgate toothpaste is
believed to be the best in all toothpastes.
iv) Branding enables customers to ask for a product by its name in a shop.

Disadvantages of branding to:

a) The manufacturer (or producer)
i) A lot of money is spent when advertising similar products in an effort to make unimportant
differences between them. for example when advertising washing detergents, each brand of
detergent is claimed to wash clothes whiter, brighter etc than the other brands.
b) The retailer (or trader)
i) A retailer may be forced to stock many brands of the same type of goods in order to satisfy the
needs of all consumers. for example a retailer may stock several types of washing detergents
such as Omo, Boom, Bingo, Cold Powder, Surf etc.
c) The Consumer
i) Consumers may be forced to pay for the cost of advertising of brands in high prices.
ii) Excessive advertising campaigns to promote the sale of brands may be false, misleading and
harmful to consumers.

3. Shopping Complexes
A shopping complex is a variety of shops in the same location and which do not directly compete with each
other but work to stimulate business for one another. For example people going to buy groceries in a
supermarket at a shopping complex expect to find other goods such as shoes, clothes, television sets, musical
systems etc in neighbouring shops.
An example of a shopping complex in Zambia is Manda Hill in Lusaka.
 Advantages of shopping complexes to:
a) Retailers (owners of the shops)
i) Shops do not directly compete with each other but work to stimulate business for one another.
ii) Shopping complexes are large enough to carry out national advertising campaigns to attract
customers from all over the surrounding areas.
iii) Shopping complexes are located out of town where land is cheaper.

b) Consumers
i) Consumers are able to purchase all their requirements from one place since shopping
complexes are a variety of shops in one area like chemists, supermarkets, department stores
etc.
ii) Shopping complexes are located in free traffic areas out of town centres and therefore gives
safety to consumers than in crowded streets of town centres.
iii) Shopping complexes are easily accessible by consumers because they are near bus stops.
iv) Shopping complexes have extensive parking facilities for consumers.
v) Shopping complexes provide customer facilities such as banks, restaurants, hair saloons etc.
vi) Consumers are sold goods at cheaper prices.
vii) Shopping complexes give pleasant atmosphere of clean, attractive and free from thefts
environments for shoppers.
viii) Shopping complexes provide to customers leisure facilities such as video shows etc.

Disadvantages of shopping complexes to:

a) Retailers (owners of the shops)
i) Supermarkets at shopping complexes incur extra expenditure on providing parking facilities and
on staff employed to retrieve trolleys used in taking goods to nearby car parks.
ii) A large area of land is required for a variety of shops and car parks.

b) The consumer
i) Consumers cover long distances to reach shopping complexes by buses, taxis etc.

4. Self-service
Self-service is when customers serve themselves in selecting and picking goods from shelves without the help of
the shop assistants in supermarkets, clothing stores, garages etc. All supermarkets use self-service system of
retailing. It is the main feature of supermarkets.

Main features of Self-service.

a) Customers browse and choose goods at their own pace of time.
b) Goods are attractively displayed in relevant sections within reach of customers in order to encourage
impulse buying.
c) Goods are branded, packaged and priced.
d) The self-service shop has check out points where cashiers collect payments from customers for goods
bought.
e) Customers are provided with shopping baskets.
f) Loss leaders are used to attract customers into the shop.
g) Customers save on time because they serve themselves.
h) Fewer workers are employed because customers serve themselves.
i) Self-service stores have large floor space for customers’ free movements.

Developments of self-service
Self-service has developed because of its great benefits for both consumers and retailers. The development of
self-service has also been aided by both pre-packaging and branding which enables goods to be clearly
distinguished by customers without the help of shop assistants.
 Advantages of self-service to:
a) The retailer
i) Less staff are employed because customers serve themselves and thus serving ion labour costs i.e. low
wage bills to pay.
ii) Workers require less specialized knowledge.
iii) Attractive display of goods in relevant sections of the shop encourages impulse buying, which leads to
quicker turnover.
iv) The use of loss leaders attracts customers into the shop.
v) No need to give advice to customers because goods are pre-packaged and instructions of how to use the
product clearly printed on products.
vi) Self-service saves the retailer’s time and troubles of fetching goods to show customers each time they
ask for them.

b) The consumer
i) Self-service provides a quicker and time saving service for consumers.
ii) Consumers have more time to browse and choose goods.
iii) Consumers can move around a self-service shop without being asked to buy anything.
iv) Goods are attractively displayed in relevant sections thereby making it easy for consumers to find goods.
v) Goods sold in self-service stores are usually cheaper.

Disadvantages of self-service to:

a) The retailer
i) Pilfering (theft) of goods by customers is a serious problem in self-service stores.
ii) Goods are damaged or made dirty when consumers handle them many times.
iii) Extra costs are incurred on provision of baskets, trolleys, display shelves etc.

b) The consumer
i) Consumers are not given personal service.
ii) Consumers are not given advice.
iii) Consumers may be delayed at checkout points especially at peak shopping hours when crowds exist.
iv) Self-service leads to over-spending by consumers due to impulse buying.
v) Delivery service is not offered to consumers.
vi) Consumers may be delayed in finding goods needed.

5. Electronic Commerce (E-Commerce)

Electronic Commerce is the buying and selling of goods and services on internet. Electronic Commerce is also
referred to as Online Shopping.
Electronic Commerce is one of the latest trends in retailing.
Electronic Commerce is about using computers as online shops. Online shops are open 24 hours a day and 7
days a week.
Online shops offer to customers and businesses a variety of high quality but cheap in price products such as first
and second hand cars, office equipment, furniture etc.
A person wishing to purchase goods or services on internet has to visit the website of the online shop or trader.
Website is an internet provider such as Yahoo, Hotmail, Excite etc.
When a person has found the goods or services he/she wants to buy, he/she will have to make payment. The
following are some of the modes of payment used for online transactions:
a) Credit cards - The most common method of payment for online transactions.
b) Bank transfers
c) Money transfers.
d) Western Union etc.
Points to consider when shopping on internet.
When shopping on internet, you should consider the following points:
a) Carry out background check on companies offering online stores that you intend to deal with. This will avoid
internet fraud brought about by unscrupulous people who set up fake online stores that cheat people out of
their money.
b) Consider the legal terms of the online store you intend to deal with. This will enable you to know the policies
of the company on matters such as shipping, liabilities, refunds, delivery policy etc.
c) Ensure that the website is secure when you send information like bank account details to online stores.
Where a password is used, the word must have at least five letters for easy remembering. The password
must not be written down. This will prevent a wrong person from shopping at the online store using your
account.
d) It is advisable to start shopping on internet with small items and then move on to bigger things.
e) Spend more time looking for new websites and deals on offer.

Advantages of Electronic Commerce to:

a) The owner of the online store (or retailer)
i) The whole world is on one huge market for internet users. Thus the market on for online store
products is worldwide.
ii) Business is conducted on 24 hours a day and 7 days a week.
iii) Shop buildings do not need to expensively furnished because customers do not visit them.
iv) The online store may be located on outskirts of town where land is cheaper.
v) Goods are not soiled or damaged in any way because customers do not handle them.
b) Consumer
i) Electronic Commerce is open for 24 hours a day and 7 days a week, therefore consumers are
able to purchase goods and services at any time.
ii) Consumers are able to purchase a variety of high quality goods, which are cheap in price and
may not be available locally.