Types Of Small Scale Retail, Advantages and Disadvantages

Hello, welcome to this hall on the types of SMALL SCALE RETAIL TRADE.

Table Of Content

1. Classification or types of small scale retail trade
2. Method of classification of retail trade.
3. Small scale retailing
4. Advantages of small scale Retail Trade
5. Disadvantages of small scale retail trade
6. Reasons for the survivor of small scale retailers
7. Reasons why retail business May fail.

Classification or Types of Small Scale Retail Trade

Retail activities can be classified into small scale and large scale as represented here

Types of small scale retail (Retailers)

Retailers

• Hawkers/itinerant/traders
• Mobile shops
• Street traders
• Market traders
• Stores (urban & rural)

Large scale

• Chain stores
• Departmental stores
• Supermarkets
• Mail order
• Hypermarkets
• Retail co-operative
• Discount houses
• Franchising
• Variety stores

Methods of Classification or Types of small scale of Retail Stores

1. By the type of the range of goods offered for sale
2. By the functions performed.
3. By size based on the number of employees or turnover.
4. By ownership, e.g, independent, co-operative.
5. By location, e.g, rural or urban.

Small scale Retailing

Small scale retailing is retail trading with small scope of operations. Little capital can be used to set up small scale retailing trade such as:

1. Hawking/itinerant/peddling
2. Mobile shops
3. Street or roadside trading
4. Market trader or stall holder
5. Unit stores/tied shops
6. Small stores
7. Kiosks

Advantages of Small Scale Retailing Trade

1. Low running cost: Small scale retail trade requires a low running expenses as it does not need to pay for rentage.
2. Requires small capital: Small scale retail trade requires a small amount of capital to set up.
3. Employment opportunities: This retail trade also provides employment opportunity to those who could not acquire higher certificates and also to those who could not secure White collar jobs.
4. Nearest to customers: Small scale retail trade is always located near the consumers residential houses.
5. Close supervision: The small scale retail trading is closely supervised by its owner in order to ensure efficient delivery.
6. Medium of advertisement: Small scale retail trade serves as a small medium for advertising goods to consumers or customers.
7. Long hours of operation: Small scale retail trades opens for longer hours of selling from morning to late in the night.
8. New field for entrepreneurs: Small scale retail trade often serves as a new business for many traders on new entrepreneurs.
9. Traders are involved in other businesses: Majority of the small scale retail traders do involve themselves in many other businesses.
10. Customers are respected: Customers in small scale retail trade are highly recognized and respected.

Disadvantages of Small Scale Retail Trade

Here we take a look at the disadvantages of small retail trade in Commerce:

1. Low profit: The amount of profit made by small scale retail traders is usually low due to low capital base.
2. Poor competition: The small scale retail trade cannot compete favorably with the large scale retail trade.
3. Inadequate capital: The small scale retail trade have the problem of inadequate capital to run the business.
4. Lack economics of scale: The small scale retail trade does not enjoy economics of scale as the trader cannot buy goods in large quantities.
5. Limited expansion: The small scale retail trade does not encourage expansion due to low capital base.
6. Lack of expertise: They Lack expertise regarding the functions of retailing.
7. Poor location: Small scale retail trades are not located in major shopping centers where customers can exercise free choice over a wide range of purchases.

Reasons for the survivor of Small Scale Retailers

The reasons small scale retailers survive despite the dominance of large scale retail outlet includes:

1. Small capital: The amount of capital required for a small scale retail business is small or minimal and this offers an opportunity to many in an economy where income is generally low.
2. Combination with other work: Ability of small scale retailers to combine retailing business with other work such as farming.
3. Quick decision making: Quick decision making allow small scale retailers to adopt to changing situation.
4. Low overhead costs: The overhead cost involved in small scale retail business is very low.
5. Family Assistance: The retailer can obtain the help of his family cheaply, often on part time basis.
6. Personal relationship: The small retailer gives personal services and attention to customers in such a way that the large firms cannot.
7. Sales in small units: The small scale retailer sells in smaller units and as a result attracts more buyers.
8. No special requirements in setting up the business: There is little or no orality required in their setting up or operation.
9. Convenience: It is very convenient to operate as they are located near customer’s houses or places of work.
10. Easy relocation: The small scale retailer can easily locate to take advantage of market situation.

Reasons why Retail Business May Fail

1. Competition: Competition from bigger businesses can lead to failure of retail business.
2. Lack of technical knowledge: Retailer have no specialised or technical knowledge of the goods they are selling.
3. Insufficient capital: Lack of adequate capital for expansion of business operation can lead to failure.
4. Indiscriminate credit facilities: Indiscriminate granting of credit facilities can ruin the business.
5. Proper records are not kept: Proper records of account are not kept due to the employment of a novice in accounting procedures.
6. Business not separated from owner: Business money is not usually separated from personal money.
7. No advertisement: Aggressive advertising is not embark upon to create awareness for the products.
8. Goods are not insured: Goods are not insured, hence there exist high burden of risk.

Revision Questions

1. What are the classification of retail trade.
2. What are the methods of classification of retail stores?
3. Outline small scale retailing business
4. List five advantages of small scale retail trade
5. State four disadvantages of small scale retail trade.
6. What are the reasons for the survivor of small scale retailers
7. Write the reasons why retail business may fail.