Unit – 2
Size of a Business
Wholesale Business
When goods are purchased in large quantities from the manufacturer or producer for the purpose of resale to retailers, it is known as wholesale trade. The person who is engaged in wholesale trade is known as a wholesaler. Wholesaler buy goods from manufacturers and sell it to retailers so wholesaler is buyer as well as seller.
The wholesaler may perform different functions in the process of distribution of goods and services. It enables the producers to reach the consumers.
Definition
1.) According to Philip Kotler, “wholesaling includes all activities involved in selling goods or services to those who buy for resale or for business use”.
2.) According to Evelyn Thomas , “A true wholesaler is himself neither a manufacturer nor a retailer but act as a link between the two”.
Features of wholesaler :
1.) A wholesaler purchases goods from the producer in large quantities.
2.) Wholesaler has to take risk in the process of distribution.
3.) A wholesaler deals with one or few types of goods.
4.) A large amount of capital is required in this business.
5.) A wholesaler maintains price stability by balancing supply and demand factors.
6.) The manufacturers can get direct information about market through wholesalers.
7.) A wholesaler sells the goods to the retailers as per their requirements.
8.) A wholesaler performs the marketing functions like assembling, warehousing, transporting, grading, packing, advertising and financing.
Retails Business
When goods are sold relatively in small quantity to the ultimate consumer by wholesaler or distributor or dealer is known as Retail Trade. The person who is engaged in retail trade is known as retailer. In market there is an existence of some sellers who are doing business at local level or within limited area. Such sellers are providing goods directly to ultimate consumers at reasonable prices.
Definition:
“Retail is sale of goods to the public in relatively small quantities for use or consumption rather than for resale”.
Features of Retailers:
Retailer is the link between the wholesaler and consumers who operates in local markets. He deals in wide variety of goods by investing limited capital. He establishes good relations with consumers. He undertakes less risk than wholesaler. He tries to satisfy demand of different consumers but does not hold large quantity of goods at a time.
1.) Retailer is the link between the wholesaler and consumers.
2.) He operates in local markets.
3.) Retailer deal in wide variety of goods in small quantity.
4.) Investment requirement is limited.
5.) Less risk and low amount of profit as compared to wholesaler.
Departmental Store
A departmental store is a large scale retail shop having different departmental (sections) under one roof. Each sections deals in a particular type of goods, all the departmental are organized and managed by one management. It sells a large variety of goods .i.e. foods, toys, dresses etc. e.g. Shoppers stop
“A big store engaged in the retail trade of variety of articles under the same roof”.
Features of Departmental stores
1.) Shopping convenience : Departmental stores provide a wider range of goods and services under one roof hence provide maximum shopping convenience. Customers can fulfill their wants of goods at different price levels.
2.) Centralized management : In departmental stores all the departments are independent but they are centrally owned, managed and controlled e.g. Advertising, accounting, recruitment of staff, etc. All activities of departmental stores are managed at central level.
3.) Wide variety of goods: Departmental stores provide a wide variety of goods of different brands, designs and colours.
4.) Specialization: Each departmental section deals in a separate line of product or goods with specialized services e.g. Electronics section, kitchen ware section etc.
5.) Central location: A departmental store prefers central place of the city. So the location becomes easy for customers to access.
6.) Huge capital : Departmental store requires large capital investment. This capital is required for spacious place, storing of variety goods, salary to staff, advertisement, electricity etc.
7.) No credit facility: Departmental stores work on cash basis or they accept credit cards but do not offer credit facility.
Multiple Shop
Multiple shops are, by nature and activities, large- scale retail units. These are owned and operated by companies in most cases, e.g. Bata Shoe Co., Delhi Cloth Mills, etc. So, the board of directors of a company is the highest authority which controls the affairs of the multiple shops.
Advantages of Multiple Shop System:
The multiple shop system has the following advantages:
Rapidity in Turnover:
By being located in different places the system can know the customers closely, feel their habits, and stock such varieties which sell fast. The knowledge of the current market trends increases the rapidity in the sales turnover.
Stock Adjustments or Transfers:
The inter-unit transfer of products in the same area or locality, in case .of any shortage of a particular variety in a shop, affords flexibility in the operations and minimises the chance of dead stocks.
Common Advertising:
Common types of advertisements for all shops reduce the publicity expenditure to a great extent, which afford competitive advantage.
Elimination of Bad Debts:
The multiple shops effect sales on cash basis and thereby bad debts do not occur.
Operational Economy:
The factors like rapid turnover, bad debts elimination, common advertising, simplified accounting system with no credit sales, etc. attribute to the lower operational costs for the multiple shop system.
Low Prices:
Because of economical operations, the system is able to offer goods at cheaper prices which in turn increases the sales turnover.
Disadvantages of Multiple Shop System:
The multiple shop system, in spite of the above-stated advantages, suffers from the following short-comings or disadvantages:
Absence of Varieties:
An ordinary retail store or a departmental store can offer product varieties far the choice of the customers. This is totally absent as the multiple shops deal in a limited or standardised line of products. Moreover, the customers cannot compare the goods with those of competitors on the spot.
Rise in Operational Costs:
With the increase in the number of multiple shops, administrative and supervision problems crop up and their cost increase.
Poor Public Image:
The multiple shops do not provide personal services to the consumers like credit facilities, home delivery service, etc. The present day consumers prefer to have such services in addition to quality and low price. These have adverse effects on the public image.
Loss of Initiative on the Part of Shop Managers:
The orders, instructions, and policy decisions of the company with regard to multiple shops are rigid and the shop managers have no discretionary authorities. As a result, such managers loose interest and imitativeness in the sale of the goods in stock.
Effects on Middlemen in Multiple Shop System:
The multiple shops organised and operated by the companies are a type of manufacturers’ retail stores. They are virtually integrated with the companies as regards the marketing and selling functions. These companies do not engage either the wholesalers or the retailers as they themselves perform all these activities while dealing with the customers.
Books Recommended:
- Dr. Y. P. Verma —Vyavshaya Sanghthan, Prabandh Ewan Prashashan (S. Chand & Co.)
- . 2. Yaducal Bhushan —Business Organisation
- 3. M. C. Shukla — Business Organisation
- 4. Ghosh and Om Prakash — Business Organisation
- 5. Dr. Padma Asthana — Vyavshaya Sanghthan Ewan Prabandh
- 6. R.K. Sharma, Shashi K. Gupta—Business Organisation
