Types of trade: wholesale and retail

As it was already explained in Section 2.2.6, there are two basic forms of trade: retail and wholesale. The trade system includes four major actors: the wholesaler, the

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retailer, the producer and the consumer. Let’s review what these actors do (Figure 3.2).

Figure 3.2: Retail and Wholesale Forms and the Factors Affecting Their Evolution Producers:

The producer is the actor who produces goods for sale. The overall aim is to produce something that is ultimately valued by the consumer. Producers rarely sell their products directly to consumers, but they rather sell to traders – who can either be wholesalers, or retailers.

Wholesalers:

Wholesalers purchase new or second-hand goods from the domestic producers or from abroad, in large quantities, with the aim of selling them to retailers or to large-scale users, e.g. industrial users, institutions, or even to other wholesalers.

Sometimes a wholesaler actually purchases the goods and pays for them, other times it does not buy the goods but acts as an intermediary, helping to organise the transaction between the sellers and the buyers (i.e. acts as an agent).

Wholesalers do not make a distinction between domestic and foreign partners, therefore foreign trade can also be considered as a wholesale activity (but with somewhat different features than domestic trade).

The types of wholesalers are:

 classical wholesalers,

 traditional wholesalers (selling to retailers, partners who will re-sale the goods),

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 Wholesalers with limited functions (cash and carry, Metro, self-service warehouses),

 Agents, brokers,

 Sales organisations, offices of producers.

Figure 3.3: The Roles and Functions of Wholesalers

Retailers

Retailing includes all the activities that are involved in selling goods and services directly to consumers.

Types of retailers include:

- Retail stores,

- Retail without stores, - Trade organisations,

- Internet-based online trade, e-commerce.

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Typical features of retail are:

- Retailers deal with the products created by producers focusing on their utility;

- The aim of retail is to satisfy consumer demand at a specific place and time;

- Retail focuses primarily on the personal needs of the population;

- Business entities often purchase materials or tools from retailers (e.g.

chemicals, stationery, tools of small value, etc.).

Let’s have a closer look at the various types of retaliers.

Retail stores include the following store types:

- Department store: selling a wide range of consumer goods, deep in assortment, arranged and sold in different departments.

- Discount store: offering low prices on less fashionable branded products from a range of suppliers.

- Drugstore: selling products related to household cleaning, bodycare and health-related items, often offering other services, too – in a store area of 600-800 m², in easily accessible locations.

- Retail chain: selling the same line and assortment of products arranged in similar fashion, and operating under the same ownership.

- Supermarket (with a store area of 500 - 2500m²).

- Hypermarket (with a store area of 2500m² or more).

- Shopping center, mall: an integrated unit comprising shops and other service facilities of varied types and sizes, operated together; these shops serve basically retail purposes, but they may also contain other service establishments ( e.g. restaurants) and entertainment facilities (e.g. a movie theatre).

Various types of goods are typically sold by different types of retailers. The following list summarises the most frequent matches. The two major types of purchases are convenience goods and shopping goods (see Chapter 2).

- Convenience goods are usually sold and purchased in traditional local retail stores, retails chains, supermarkets, hypermarkets and discount stores.

- Shopping goods, on the contrary are rather purchased in specialised stores, department stores, and shopping centres.

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Retail without stores includes:

- Sales by agents or brokers - Direct marketing

- Teleshop

- Catalogue sales - Multilevel marketing

- Sales by vending machines and kiosks - Street sellers

- Mobile sellers

- Online trade, webshops, e-commerce

Retail by trade organisations is another specific retail form. These trade organisations are usually classified by the types of goods they sell:

- Food items

- Newspapers, stationery, books, decoration items, toys, watches, clocks, jewellery

E-commerce (electronic commerce) is buying or selling products using online services over the internet. Electronic commerce relies on the technologies of mobile communications, electronic money transfer, internet marketing, inventory management systems, electronic data interchange (EDI), and many others.

Modern electronic commerce typically uses internet websites for at least some parts of the transaction, although it may use email communications, too. The transaction usually consists of selecting the product from a website, ordering through the website, arranging the way of the delivery and payment. The product will be delivered to the

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buyer, and payment may be directly online before the delivery, or in cash at the time of delivery. Sometimes the customer receives information about the exact delivery time of the product by email, and email may also be used to inform regular customers about new products, new discount possibilities, in the form of newsletters. Online retailing is typical for the purchase of online books. Amazon is probably the largest web-based book-store, but today they deal with a lot of other commodities, too.

Another favourite commodity sold online is music (directly downloaded from digital distribution sites, like the iTunes Store), but today the retail of clothes, electronics (computers, smartphones), household utensils, and nearly any item is available online, including non-perishable food and pharmaceuticals, too. Online auctions are exciting new features in e-commerce. There are giant global e-commerce companies which deliver worldwide both to individuals and to businesses, of which eBay, Amazon and Alibaba are probably the most popular ones.

Figure 3.4: Popularity of Online Shopping

Share of people with least 1 online purchase in the past 12 month in Europe, 2018 https://www.retailinsiders.nl/docs/77f3cdc4-38b2-4dd2-8938-cb4293cc8c19.pdf, (based on data from Eurostat)

Online purchase is an increasingly popular form of retail, as internet access grows.

However, there is still considerable difference between countries. As Figure 3.4 illustrates, 82 % of the population have used e-commerce in 2018 in the Netherlands and Switzerland, while the same proportion is less than 30% in Croatia, Bulgaria, and Macedonia, although the access to internet is above 60% throughout Europe.

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