The compilation of these Internal Trade Notes makes students exam preparation simpler and organised.
Mail Order Houses, Consumer Cooperative Stores, and Supermarkets
Retail sale in itself has many forms and types. These days we obviously have online shopping, which has revolutionized shopping in the 21st century. But in the last few decades before this, there were some rather inventive forms of retailing. Let us see learn more about Mail Order Houses, Consumer Cooperative Stores, and Supermarkets.
Mail Order Houses
Did you know that shopping can be done over the post? Yes, mail order houses facilitate shopping by post. The companies/sellers send their potential customers catalogues, circulars, price lists, etc by post. They could even advertise in magazines or newspapers. All relevant details of the goods (price, physical descriptions, sizes, etc) must be mentioned.
The buyer will preview the samples, catalogues and picks the products he desires to buy. The buyer will place an order, which will also be done through the medium of the post. When it comes to payment of the goods, the payment has to be done in advance by the buyer to avoid bad debts. The payment can be done in one of three ways,
- Customers have to make the entire payment in advance.
- The product could be shipped via Valuable Payment Post (VPP). Here the goods can only be collected once the payment is made by the buyer.
- Alternatively, the goods can even be sent via a bank through which the payment can be made.
One thing to understand is that not all goods can use mail-order houses as a model of business. The whole process takes fairly longer than usual and is not suitable for all goods. For example, it cannot be used in case of perishable goods. The ideal goods to adapt mail-order houses have the following characteristics
- Non-perishable
- Can be depicted effectively via pictures
- Are standardized products. So there is uniformity in the quality
- Should be easy to transport (not fragile or perishable)
- Can be produced and stored in large quantities.
Advantages of Mail-Order Houses
- Capital requirements are relatively lower since no shops or infrastructure has to be set up.
- There is no need to set up a distribution channel. Agents and wholesalers are eliminated from the process, this helps in reducing the costs.
- Since the payment is done prior to delivery, there is no chance of bad debts
- Since we utilize to post and mail service they can reach a large number of people over a large geographical area with very little effort.
Disadvantages of Mail-Order Houses
- Mail order houses cannot be utilized for all types and kinds of products.
- There is no direct or personal contact between the buyer and the seller. This can create a disconnect and even cause the buyer to mistrust or doubt the credibility of the seller.
- Also, mail order houses have to depend heavily on postal and mail services. These are not under their control and can cause delays and mix-ups affecting the reputation of the firms.
- And mail-order shopping has to incur heavy promotional costs to get the buyer’s attention.
Consumer Cooperative Stores
These are retail stores owned by the consumers themselves for their own benefit. These stores are owned and managed by a group of consumers, and their primary aim is not profit-making, but mutual benefits for consumers. They source their goods and products directly from the producers, eliminating the agents, wholesalers, and all other middlemen. This allows them to greatly reduce the costs of the product.
When the Consumer Cooperative Stores make a profit, such profits can be divided amongst the members as a bonus. Alternatively, a part of such profits can also be utilized to boosts the reserves of the association (eg: General welfare Fund, General Reserves, etc)
In India, consumer cooperative stores have the legal identity of an “Association of Persons”. So you need a minimum of 10 persons to form the association and register it under the Cooperative Societies Act.
The members are issued shares for their contribution, and anyone can become a member by buying such shares. The liability is limited in this case, not unlimited. The store is run democratically and is overseen by the elected managing committee.
Advantages of Consumer Cooperative Stores
- It is easy to form a voluntary association under the Cooperative Societies Act. The cost and the formalities are quite low, and there is an ease of formation.
- Since the stores order in bulk and even eliminate the middlemen the cost of the goods is relatively low. This means they can provide their consumers with quality products but at lower and competitive prices.
- No single person or group of persons can have undue influence over the cooperative society store. The management is designed to be democratic and represent all members fairly.
- The accounts are audited regularly by the Registrar or any such authority. This ensures accuracy and transparency in accounting.
Disadvantages of Consumer Cooperative Stores
- The management has to be put in the trust of amateurs and novices. Society cannot afford to bring in professionals to be a part of the management committee. The members themselves take up the opportunity. Their lack of experience could be detrimental.
- Cooperative Stores generally do not have enough finances to expand their operations. Therefore their scale always remains somewhat limited.
Supermarkets
As the name itself suggests, supermarkets are large retail stores that sell a variety of products to their customers. They sell everything from food to household items and at times even clothes and electronic appliances and other such utilities. They generally offer their customers a huge variety of products and choices as well.
The products are arranged in aisles according to their categories. So if a customer is looking for cereal, he will find all his options in one aisle. The goods are kept on shelves with clear labels and price tags, so that the customer can attain all the information he requires, without interacting with the store employees. The goods are accessible to the customers to pick up and examine as well.
Advantages of Supermarkets
- Supermarkets are very convenient for the customers. They offer almost all the products one requires in their daily lives under one roof. It is also economical and time-saving than running to a bunch of different shops for all your shopping needs.
- The supermarket also offers a variety of choices for each product. The consumer is spoilt for choice, and can the best selection according to their needs.
- Supermarkets are famous as large-scale retailers. So they enjoy economies of scale and all the benefits of bulk buying. It also allows them to offer discounts on their products.
- Supermarkets also tend to be centrally and conveniently located so as to be accessible by large sections of the public.
Disadvantages of Supermarkets
- Customers do not get any personal attention when shopping in a supermarket. This may lead to some loss of potential sales because there is no one to change your mind or convince you to buy the product.
- Supermarkets require large capital investments, for real estate especially. Leasing or buying a large space can be quite expensive.
- Even the operating costs of supermarkets are much higher than that of small-scale or medium-scale retail stores.
- Since the goods are displayed and easily accessible to the customer they may mishandle and damage the goods causing losses to the supermarket.
- Supermarkets do not offer credit facilities to their customers, something a local grocer may offer.
Example:
Question:
Mail Order Houses are a good platform to sell food items. True or False?
Answer:
The statement is False. Perishable items, like food, should not be sold through mail-order houses. There is a great risk of spoilage since the whole selling process can take up to a few days even weeks.