home trade

Let us start with a small learning activity.

ACTIVITY 1

A document issued when payment is made is called?

Answer: Receipt

Learning Objectives

By the end of this topic, you should be able to:

• Explain the meaning and importance of trade
• Classify trade
• Explain the forms of the home trade
• Discuss the types and functions of retailers
• Discuss the types and functions of wholesalers
• Describe some documents used in the home trade

Definition and importance of trade

Trade refers to buying and selling of goods and services for money or money's worth. It involves the transfer or exchange of goods and services for money or money's worth.

Importance of trade

• Trade increases employment.
• Trade increases the quality of goods due to increased competition.
• Trade may earn a country's foreign exchange.
• Trade increases competition, therefore, lowers the prices of goods. 

Classification of trade

Trade can be divided into two types: home trade and international trade. 

1. Home Trade or Internal Trade or Domestic Trade refers to the buying and selling of goods and services within a country, with the aim of profit-making. This trade may also involve the exchange of goods for goods or services such as in barter trade. 

It is further divided into two types: 

• Retail trade
• Wholesale trade

2. International Trade or External Trade or Foreign Trade refers to the exchange of goods and services between the countries. In simple words, it means the export and import of goods and services. Export means selling goods and services out of the country, while import means goods and services flowing into the country.

It is further divided into:

• Export trade
• Import trade

In this lesson, we will discuss only the home trade and its sub-types. 

Retail Trade

Retail trade refers to the sale of goods in small quantities to consumers. This type of trade is taken care of by retailers. 

There are different types of retailers. 

Department store - The department store retailers offer products at various pricing levels. This type of retailer adds high levels of customer service by adding convenience enabling a large variety of products to be purchased from one retailer.

Supermarkets - This type of retailer concentrates in supplying a wide range of products. Supermarkets have significant buying power and therefore often retail goods at low prices.

Warehouse retailers - This type of retail is mainly found in retail or Business park and where premises rents are lower. This enables this type of retailer to stock, display, and retail a large variety of goods at very competitive prices.

Specialty retailers -Specializing in specific industries or products, this type of retailer is able to offer the customer expert knowledge and a high level of service. They also add value by offering accessories and additional related products at the same outlet.

E-tailer - This type of retailer enables customers to shop online through the internet and buy products which are then delivered.

Convenience retailer - Normally located in residential areas this type of retailer offers a limited range of products at premium prices due to the added value of convenience.

Discount retailer - This type of retailer offers a variety of discounted products. They offer low prices on less fashionable branded products from a range of suppliers by reselling end of line and returned goods at discounted prices.

Functions of retailers

• Availing goods to consumers. Consumers buy their goods from retailers.
• Storage of goods. They buy goods and store them until they are needed by consumers.
• Breaking bulk. They buy goods in large quantities from wholesalers and sell them to consumers in smaller quantities.
• Financing. They can sometimes finance consumers by providing them with credit facilities.
• After-sale services. They may provide customers with services like transportation, installation, maintenance, and repairs.
• Advice. As a result of regular contact with consumers, retailers are able to interpret the consumers' wants and therefore they are in a good position to advise the manufacturer or the wholesaler about the consumers’ needs.
• Product promotion. Retailers help promote products by activities like displays.

Wholesale trade

Wholesale trade refers to the buying of goods in large quantities from manufacturers or producers and selling them in convenient quantities.

Wholesalers may be classified according to the range of products handled, method of operation, and geographical area covered.

There are different types of wholesalers. 

Merchant wholesalers - They are the most common type of wholesalers used in the agriculture industry. These are the wholesalers who buy directly from the manufacturer, store the product, and then sell it to the customer.

Full-service wholesalers- They are most commonly found in consumer durables or engineering products. As the name suggests, these wholesalers give full service to the end retailer. They mainly operate in the retail market and sell products to a reseller. Everything except service of the product is the responsibility of the full-service wholesaler.

Limited-service wholesalers - These are those wholesalers that stock the products of a company and sell them in a limited channel. He/she does not have a large turnover or does not cover all channels of the company.

Specialized wholesalers - These are wholesalers who do wholesale of specialized items only.

Brokers and agents - They are mainly found in the real estate industry or in the chemical markets. Their work is to get a deal done and get a commission on the deal.

Function of wholesalers

• Linkage. They act as a link between retailers and producers.
• Storage. They provide storage of goods to ensure a continuous supply.
• Bulk breaking. They buy in large quantities from producers and sell in smaller quantities to retailers.
• Transportation. Wholesalers help reduce the cost of transport by providing quick delivery to retailers.
• Price stability. Wholesalers maintain price stability by storing excess supply when production is high and increasing supply when production is low.
• Provision of capital. They provide working capital to manufacturers by making prompt payments for the goods they take.
• Market research. They conduct market research and offer useful information about the conditions of the market.
• Product promotion. They do branding and packaging of products as well as advertising them.

Some documents used in the home trade

Letter of inquiry. A document that is sent by a potential buyer to a potential seller seeking to find out more about the goods that a seller has.

Quotation. This is a document that is used to reply to an inquiry that is specific in nature.

Price list. This document is used to reply to a general inquiry. It contains names and prices of branded goods.

Catalog. This is a document that is used to reply to a general inquiry in a colorful and illustrated manner.

Advice note. This is a document used to inform the buyer that the goods are on the way.

Delivery note. This document accompanies the goods when they are being sent to be received by the buyer.

Invoice. This is a document that demands payment from the buyer for all the credit transactions.

Credit note. A document sent to correct an overcharge in an invoice.

Debit note. A document sent to correct an undercharge in an invoice.