DISTRIBUTIVE TRADE

Distributive Trade-which is also known as the chain of distribution, refers to the various stages or channels through which finished goods are moved from the manufacturers/producers to the final consumers .

That is, it is the process of getting goods from the producer to the final consumers. There are various channels through which goods get to the final consumer commonly called channel of distribution. The common channel through which the consumer get the goods is represented as:

 

Manufacturer /Producer          Wholesaler                 Retailer                       Final consumer

 

PROCESS OF DISTRIBUTION

Process of Distribution– involves all human and physical means which aid the smooth transfer of goods from the manufacturers to the final consumers. The process of distribution involves:

1. Middlemen– the middlemen or agents are human elements involved in the distribution of goods from the producers to the final consumers, eg wholesaler and retailer
2. Transportation– is the medium through which the finished goods are moved by air, land or water from the manufacturers to the final consumers
3. Advertisement– is the process of creating awareness in the mind of the public about the existence of a product.
4. Warehousing– is a process through which the goods produced are stored until they are needed.

 

THE WHOLESALER

A wholesaler may be defined as the trader who buy goods in large quantity from the producer and sells in small quantity to the retailer. The wholesaler is an essential and desirable element in the channel of distribution and production. He is sometimes called a middleman because he is in-between the producer and the retailer.

 

FUNCTIONS OF WHOLESALER TO THE PRODUCER

1. Bulk breaking: This is one of the most essential functions of the wholesaler as he is able to satisfy the needs of purchasing in large quantity from the producer.
2. The wholesaler finances the producer by making prompt or advance payment for goods.
3. He also finances the retailer by giving credit facility to them.
4. He helps to make the prices of goods stable especially where production is irregular.
5. He provides warehousing or storage facilities for goods bought.
6. He gives vital information about market situation to the producer.
7. He completes the manufacturing of some goods by doing the packaging and branding.
8. Wholesalers help to create markets for producers and themselves through large scale advertising use of sales representatives etc.

 

FUNCTIONS OF WHOLESALER TO THE RETAILER

1. He enables the retailer to stock variety of goods
2. He provides the retailer with credit facilities
3. He advices the retailer based on his expert knowledge of the product
4. He provides a link between the producer and the retailer
5. He helps to transport goods to the retailer’s shop

 

THE RETAILER

A retailer may be defined as the trader who buys goods in small quantity from the wholesaler or directly from the manufacturer and sell in units to the final consumer.

He is essentially in the channel of distribution because he is the last link to the consumer, so he is also a middleman. Retail trade can be broadly classified into two types namely; 1. Small scale retail trade 2. Large scale retail trade

Small scale retail trade comprises of  kiosk, market or stallholder retailing, street or road side retailing, cycle boys, mobile shops retailing, itinerant or hawking retailing etc.

Large scale retailing can be the form of department stores, multiple shops, supermarkets, mail–order business, hyper markets, and retail co-operative societies.

 

FUNCTION OF THE RETAILER

1. The retailer stocks variety of goods in order to satisfy the taste of the consumer.
2. He brings goods to the consumer thus saving the consumer the inconvenience of going far.
3. He assist the producer and wholesaler in promoting lesser known goods
4. He advises the consumer and wholesaler on how to use certain products and about new development in the market
5. He provides after-sales services especially for technical products like computer, television, typewriters etc.
6. He finances the consumer by selling at time on credit.
7. He completes the distribution chain by making goods available to the consumer ; thus completing production
8. He provides market information to buyers and sellers
9. He advertises the goods through fascinating window displays

 

GENERAL REVISION

1. Outline the merit of joint stock company.
2. What are the problems partners are likely to face in partnership business.
3. Mention four reasons for government participation in business.
4. Write short note on i shares    ii debenture
5. Who is a shareholder?
6. Define distributive trade
7. Explain process of distribution
8. Who is a wholesaler?
9. How is a wholesaler regarded as a “Bulk Breaker”
10. What roles do the retailers play in the distribution process
11. What is the difference between multiple shops and departmental stores.

 

WEEKEND ASSIGNMENT

1. The wholesaler provides all the following services to the producers except (a) financing

(b) marketing the product.(c) granting credit  (d) after sales service

2. Which of the following is not an agent of distribution ( a) retailer (b) government agencies (c) co-operative society (d) consumer
3. Retailers are usually greater in number than wholesaler because ( a) all retailer business are small enterprises  (b) all wholesaler business are large enterprises (c) retailers deal with final consumers (d) Retailer business require less capital and expertise
4. Distribution is part of production because it( a) involves the use of vehicles and labour (b) involves wholesalers and retailers (c) make goods and services available to final consumers (d) require the employment of skilled labour.
5. Which of the following is the normal channel by which goods reach consumers?
6. Producers        Wholesaler            Agents            Retailer         consumers
7. Producers  Wholesaler           Retailers            Agents           Consumers
8. Producer Wholesalers           sales representative            Retailers         consumers
9. Producers Wholesalers           Retailer           Consumers

 

THEORY

1. “The wholesaler performs useful economic functions” explain .
2. Highlight five differences between a wholesaler and a retailer.

 

See also

THEORY OF MULTIPLIER

THEORY OF INCOME DETERMINATION

NATIONAL INCOME

CAPITAL MARKET

BUDGET