What Is Retailing ?
Retailers purchase goods or services from wholesalers or suppliers and sell to the consumers.They are known as the link between suppliers and final consumers. So, retailing is an act of obtaining products from wholesalers and selling to the ultimate users. There are several benefits as well as some limitations of retailing which are discussed in this post.
Benefits Or Advantages Of Retailers
The main advantages of retailers can be described as follows:
1. Less Capital Requirement
It does not require huge investment to start retail business. Retailers buy goods from wholesalers in small quantity and sell to ultimate customers. It does not need large space to store goods. So, retailing can be commenced with little investment.
2. More Profit Margin
There is fixed margin of profit for wholesalers. Generally they earn 3% to 8% profit on sale. But there is no fixed margin for retailers, shopkeepers may fix profit margin up to 20% in some cases.
3. Credit Facility
Another benefit of retailers is that they get credit facility from wholesalers or dealers. But they sell products on cash which helps to maintain adequate liquidity in the business.
4. Better Customer Relation
Retailing is directly linked with the customers. Retailers can understand the interests, preferences and buying behavior of customers. It helps to build better customer relation and loyalty.
5. No Liability
In case of faulty or defective products, the manufacturer should replace the product. So, retailers do not need to bear the loss.
Drawbacks Or Disadvantages Of Retailers
The main disadvantages of retailers can be described as follows:
1. High Marketing Cost
Retailers should make investment in decoration of shop and display of goods to attract more customers. So, it requires more marketing or advertising cost than wholesalers.
Also Read:
Advantages And Disadvantages Of Wholesalers
Difference Between Wholesalers And Retailers
2. Selling Skill Required
It requires good selling skill to attract customers. Retailers should possess the art of good communication and convincing power to influence consumers.
3. Very High Competition
Another disadvantage of retailing is that there is tough competition in the market because several retailers sell similar types of products. So, it is difficult to remain in the competitive environment.
4. No Economies Of Buying
Retailers buy small volume of products from wholesalers. So, they miss the opportunity to enjoy he benefit of economies of buying.
It is difficult to find out proper location to start retail store. It requires highly dense area with fewer competitors.
Pros And Cons Of Retailers In Short
Pros:
- Retailing business can be started with less investment and less space
- Retailers can enjoy more profit margin
- Retailers can get trade credit facility from suppliers which increases the liquidity in the business
- There will be no liability towards the buyers
- It helps to increase customer relation and loyalty
Cons:
- It consumes high marketing expenses
- Retailers have to face high competition in the market
- There will be no economies of buying
- It requires better selling and marketing skills to run retail business
