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:
- Hawking /itinerant/peddling.
- Mobile shops.
- Street or roadside trading.
- Market trader or stall holder.
- Unit stores/tied shops.
- Small stores.
Hawking is a form of itinerant trade in which the merchants move their goods from one place to another on their heads, bicycles or vehicles, etc. Peddling involves the movement of goods from one house to another or from one place to another. It requires small capital to operate. They go from one area to another and settlement to settlement, selling various articles to the consumers. They include hawkers, and other door-to-door salesmen. They can be seen in motor parks and bus-stops, hawking on the street.
Characteristics of Hawking
- Variety of goods: Variety or different types of goods are sold to consumers in small quantities.
- Personal contact: Goods which are carried on the head are moved from one place to another to enable sellers get to the final consumers.
- Small size: The hawking is usually operated in small size. In other words, the scale or size of business is very
- Small capital required: The capital required to set up hawking business is very small.
- Low prices: The products involved in hawking business are normally offered at low and negotiable prices.
- Door-to-door service: Hawking involves the delivery of goods to final consumers at reduce prices.
- No cost of advertisement: Hawking involves no cost of advertising, as product advertising are mostly by words of mouth, horn, bells, trumpet or local speakers to attract customers as they move around.
- No payment of rent: Hawking do not involve the payment of rent as goods are moved from one place to another.
- Hawking is a one-man business: Hawking because of its nature and mode of operation is fully a one-man business as one individual is involved.
- Consumable Goods are Sold: Consumable goods such as food and wears are offered for sales.
Advantages of Hawking
- It requires small amount of capital: Small amount of capital can be used to set up the business.
- Provision of door-to-door services: Hawking provides door-to-door services to the ultimate customers or consumers.
- Provision of employment opportunity: Hawking provides opportunity for self employment to many people e.g. young school leavers.
- Flexibility in operation: Hawking by its operation can easily change from one form of business to another if the formal business is not doing well.
- Increase in sales and profit: Hawking can reach many people and this increases sales and profit.
- Form of advertisement: Hawking is a form of advertisement as the hawkers render songs, use horns, trumpets, speakers to advertise their goods as they move from one place to another.
- Low prices of products: The prices of the products sold by hawkers are generally very low.
- Low cost of running the business: The running cost of the business is low since rent on shop, will not be paid and this makes the goods to be very cheap.
Disadvantages of Hawking
- Exposure to road accident: Hawkers are exposed to the danger of road mishap e.g. accidents since their trading activities are along the roads.
- Limitation in terms of quantity: There is limitation to the quantity that can be carried about for sale.
- It disturbs free flow of traffic: Hawking activities are known to disturb free flow of traffic on our roads.
- Consumers may be cheated: Consumers may be cheated as some hawkers usually sell fake or adulterated goods.
- Exclusion of heavy goods: Heavy or bulky goods are normally excluded from hawking business because they cannot carry heavy goods about.
- Deprivation of education: Majority of those involved in hawking business are deprived of education as they spent all their lives in hawking business.
- Environmental pollution: Hawking contributes to the refuse problem in the cities as wrapping papers and other wastes are thrown carelessly on the ground and gutters.
- Bad influence: Young hawkers are exposed to bad influence as they interact with social miscreants e.g. area boys while the ladies get involved in early pregnancies.
- Mobile Shops
Mobile shops are where goods are arranged in a motor van and are moved from one place to another to reach the final consumers. The shops can be taken to rural areas to provide services. A wide variety of goods are sold through mobile shops. They are moved from one place to another in lorries, wheelbarrows, motor vans, bicycles or motor bikes to sell goods and different advertising techniques are used to create awareness for the wares.
Characteristics of Mobile Shop
- Use special motor vans: Mobile shop makes use of special motor vans which carry the vendor and their goods from one place to another.
- Deal in limited range of goods: Mobile shops deal in limited range of goods based on the capacity of the motor vans.
- Operation can be affected by weather: The operation of mobile shop can be affected by extremes of rain or hot weather which might prevent sales of goods.
- Play music to attract customers: Mobile shop do advertise their wares through music; ringing of bells, etc in order to attract customers.
- Display of goods: Mobile shops do display the goods inside the motor van in a well arranged pattern.
- They can reach many customers: They can reach many customers because of their mobility.
Advantages of Mobile Shop
- It stocks variety of goods: Mobile shop can stock variety of goods which are in popular demand by customers.
- It can seek customers anywhere: Owners of mobile shop can seek for customers wherever they can be found, either in the cities or villages.
- Inability to return goods: Goods once sold to the customers cannot be easily returned since mobile shop are always on the move.
- Increase in sales: Mobile shop operators can increase their sales because of their ability to reach many customers.
- It operates low prices: Mobile shop because it deals on a wide range of goods is able to sell at low prices to customers.
Disadvantages of mobile shop
- Motor van may breakdown: A breakdown in a vehicle might be the end of the day business to the mobile shop vendors.
- Irregular supply of goods: Due to the continuous movement of the mobile shops, supply of goods is always irregular.
- High cost of maintenance: High cost of maintaining the motor vans can cripple the whole business.
- Exposure to thieves: Cash from sales may be lost to thieves during the periods of their sales operation.
- Street or Roadside Traders
Roadside traders are traders who display their wares along the streets, roads or outside the gates of schools, companies, offices in towns and cities. These traders sell variety of goods, such as cloth, shoes, bread, snacks, books, etc along major roads. Passersby are their major customers. This is very common around Pen Cinema, Mushin, Ogba and Oshodi areas of Lagos, Ojodu Berger, etc.
Features of Roadside Trading
- Operation is from a point: Road side trading is usually operated from one point. In order words, it does not move about.
- Stock varieties of goods: Varieties or different types of goods are usually stock in the shop.
- Found in busy roads: Road side trading are normally located or found in busy roads both in rural and urban cantres.
- Display wares in stalls: They display their goods or wares on structures in form of stalls.
- Operate low prices: In roadside trading, the prices of the goods are very low.
Advantages of Roadside Trading
- It stocks variety of goods: Roadside trading usually stock varieties of goods for easily accessibility by consumers.
- Low prices of goods: Consumers can easily buy goods since the prices are generally very low.
- It requires small amount of capital: Roadside trading requires small amount of capital to set up.
- Accessibility to travellers: In roadside trading goods are easily accessible to travellers either within or outside the town.
Disadvantages of Roadside Trading
- Goods are in limited quantity: Most of the goods stocked are limited because the operation is in small scale.
- High Cost of Rentage: The cost of rentage for the roadside trading may be high and this can reduce the profit margin of the trader.
- Goods may be wasted: Most goods stocked may not be easily sold as many may either expire or wasted due to low patronage.
- Market Trading
Market trading is another method of retail trade in Africa. There are markets where buyers and sellers are brought together to transfer ownership of goods. The market trader opens at a specific time of the day. They construct sheds and stalls in a particular location to transact business.
In Nigeria, there are many markets in the rural and urban areas. Example are Oshodi, Mushin, Iyana Ipaja, etc. There are many traders in the market, selling different products like food stuffs, clothing, electronics.
Features of Market Trading
- Availability of stalls: They always have stalls in market places where they stock their goods.
- Specific time of operation: They normally open at specific hours of the day while others may operate on daily basis e.g. Onitsha market.
- Specialization on the basis of types of goods: The traders in market trading are usually zoned according to the type of goods. Which means there could be areas or zones for cloth sales, shoe sales, book sales, meat sales, electronic sale, etc in a large market.
Advantages of Market Trading
- Stock wide variety of goods: A wide variety of goods or wares are stocked by market traders.
- Saving of time: The market saves time for consumers since they do not need to move from one market place to another.
- Competition among the traders: In market trading, there are many dealers for each item, giving rise to competition and reduces the chances of any buyer paying arbitrary prices.
- Low prices: Goods are cheaper at market trading due to competition and most of the traders are wholesalers.
- Attraction to customers: Market trading attracts customers from both far and near places as a result of availability and low prices of goods.
Disadvantages of Market Trading
- Problems of distance: Some market places could be far from some traders e.g. Onitsha, Ariara international markets.
- Exposure to thieves: Most traders that are coming to market places may be attacked by thieves as they are dispossessed of their cash or goods.
- Unit Stores/Tied shops
Tied shops are owned and controlled by the manufacturers themselves. Stores are retail outlets which operate in the rural or urban centres. They are located in rented places or residence of the trader which is easily accessible to the customers. Tied shops confine whatever they sell to a single line of commodity which their producers supply directly to them. The manufacturers of the products sold in these tied shops support the shop owners with finance and equipment for the sale of such products.
Features of tied shops
- They are owned by manufacturers: Tied shops are normally owned, managed and controlled by the manufacturers or producers themselves.
- They are confined to a single line of commodity: Tied shops confine whatever they sell to a single line of commodity which their manufacturers supply directly to them.
- Elimination of middlemen: Tied shop operations tend to eliminate middlemen as goods are transferred to them by the manufacturers themselves.
- They enjoy financial assistance: Tied shops do enjoy some financial assistance from money to set up and operate the business.
Advantages of Tied Shops
- Increase in profit: The tied shops are capable of making high profits because they receive goods directly from the manufacturers, this eliminates the middlemen.
- Elimination of middlemen: The elimination of middlemen enables the tied shop owners to make more profits.
- Rendering of after sales services: Customers at times can receive after sales services directly from the manufacturers.
- Meeting customer’s need: Customers in this line of business can meet and discuss directly with the manufacturers in areas where their needs are required.
- Direct contact with manufacturers: As a result of the nature of business, the customers can have a direct contact with the manufacturers.
Disadvantages of tied shops
- Limited range of goods: Since specialized type of goods are supplied to tied shops, customers are denied of other varieties of goods.
- High cost of operation: There is high cost of operation as the manufacturer has to rent shops, hire motor vans and pay salaries to workers.
- It may lead to hoarding: Once there is scarcity of the products, the few tied shops may decide to hoard available goods thereby leading to scarcity and eventually high cost of the products.
- Tie down of Funds: If the goods are not patronized by customers it may lead to tie down of capital.
- Small stores
Small stores are located in front of residential houses of the retailers. They sell in much more smaller quantity and handle mostly small unit of convenience goods. They are mainly sole proprietors. It requires small capital to set up small stores.
Kiosk is a small store located in front of residential or commercial or industrial areas where petty goods like bread, sweet, biscuit, etc are sold. They display these items inside the Kiosk or containers erected by the side of the road or foot path. This type of retail trading is common in both urban and in rural areas and they generally offer limited range of goods to customers. Very little capital is required to operate this business.
Advantages of small scale retail trade
- Low running cost: Small scale retail trade requires a low running expenses as it does not need to pay for rentage.
- Requires small capital: Small scale retail trade requires a small amount of capital to set up.
- Employment opportunities: This retail trade also provides employment to those who could not acquire higher certificates and also to those who could not secure white collar jobs.
- Nearness to customers: Small scale retail trade is always located near the consumers’ residential houses.
- Close supervision: The small scale retail trade is closely supervised by its owner in order to ensure efficient delivery.
- Medium of advertisement: Small scale retail trade serves as a good medium for advertising goods to customers or consumers.
- Long hours of operation: Small scale retail trade opens for longer hours of selling from retail morning till late in the night.
- New field often for entrepreneurs: Small scale retail trade often serves as a new business for many traders or new entrepreneurs.
- Traders are involved in other businesses: Majority of the small scale retail traders do involve themselves in many other businesses.
- Customers are respected: Customers in small scale retail trade are highly recognized and respected.
Disadvantages of small scale retail trade
- Low profit: The amount of profit made by small scale retail traders is usually low due to low capital base.
- Poor competition: The small scale retail trade cannot compete favourably with the large scale retail trade.
- Inadequate capital: The small scale retail trades have the problem of inadequate capital to run the business.
- Lack economics of scale: The small scale retail trade does not enjoy economics of scale as the trader cannot buy goods in large quantities.
- Limited expansion: The small scale retail trade does not encourage expansion due to low capital base.
- Lack expertise: They lack expertise regarding the functions of retailing.
- Poor location: Small scale retail trades are not located in major shopping centres where customers can exercise free choice over a wide range of purchases.
Reasons for the Survival of Small Scale Retailers
The reasons small scale retailers survive despite the dominance of large scale retail outlets include:
- Small capital: The amount of capital required for a small retail business is small or minimal and this offers an opportunity to many in an economy where income is generally low.
- Combination with other work: Ability of small retailers to combine retailing business with other work such as farming.
- Quick decision making: Quick decision making allows small retailers to adopt to changing situation.
- Low overhead costs: The overhead cost involved in small scale retail business is very low.
- Family assistance: The retailer can obtain the help of his family cheaply, often on part-time basis.
- Personal relationship: The small retailer gives personal service and attention to customers in such a way that the large firms cannot.
- Sales in smaller units: The small scale retailer sells in smaller unit and as a result attracts more buyers.
- No special requirement in setting up the business: There is little or no formality required in their set up or operation.
- Convenience: It is very convenient to operate as they are located near customer’s houses or places of work.
- Easy relocation: The small scale retailer can easily relocate to take advantage of market situation.
Reasons why retail business may fail
- Competition: Competition from bigger businesses can lead to failure of retail business.
- Lack of technical knowledge: Retailers have no specialised or technical knowledge of the goods they are selling.
- Insufficient capital: Lack of adequate capital for expansion of business operation can lead to failure.
- Indiscriminate credit facilities: Indiscriminate granting of credit facilities can ruin the business.
- Proper records are not kept: Proper record of accounts are not kept due to the employment of a novice in accounting procedures.
- Business not separated from owner: Business money is not usually separated from personal money.
- No advertisement: Aggressive advertising is not embarked upon to create awareness for the products.
- Goods are not insured: Goods are not insured, hence there exist high burden of risk.