Small Scale Retail Trade: Types, Advantages and Disadvantages

Small scale retail trade is a type of business activity that involves the selling of goods and services on a smaller, localized level. In this type of trade, individuals or small business owners operate retail outlets that cater to the immediate needs of local communities. These retail establishments are often characterized by their limited size, range of products, and customer base.

Small scale retail trade may include activities such as street vending, operating market stalls, running corner stores, and managing mobile shops.

This form of retailing focuses on providing convenience and personalized services to customers within a specific area. There is often door-to-door interactions and close relationships between the retailer and the consumers.

Read: Differences Between a Wholesaler and a Retailer

Types of Small Scale Retail Trade

Street Retailing: Street retailing involves traders who display their goods along major urban streets. This form of retailing is visible and accessible to passing pedestrians and motorists.

Market Place Retailing: Market place retailing refers to the practice of retail traders gathering in a common market area to buy and sell goods. It’s a method that encourages interaction and exchange within a local community.

Small Stores: Small stores are establishments where goods are retailed either in front of residential houses or in rented buildings dedicated to this type of business. These stores often cater to immediate local demand.

Mobile Shops: Mobile shops are small retail outlets that can be moved from one location to another using motor vans or lorries. This approach allows traders to reach different areas and target diverse customer groups.

Read: Retail Trade

Tied Shops: Tied shops specialize in selling a single commodity that is directly supplied to them by specific producers. These stores focus on a narrow product range, often maintaining close relationships with their suppliers.

Vending Machines: Vending machines offer self-service retail experiences for items like tea, soft drinks, coffee, cigarettes, and sweets. These machines provide convenience and accessibility to customers.

Reasons for Prevalence of Small Scale Retail Trade in West Africa

1. Lack of Sufficient Capital: Limited resources hinder the establishment of large businesses.
2. Low Savings and Income: Low per capita income and savings lead to smaller-scale purchases.
3. Low Income Demographics: Most people fall into a low-income bracket, making unit purchases more feasible.
4. Unemployment: Lack of employment opportunities drives individuals to buy goods in smaller quantities.
5. Entrepreneurship and Market Development: Limited entrepreneurial culture and underdeveloped markets influence the prevalence of small scale trade.
6. Transport and Communication Limitations: Inadequate infrastructure affects the reach of large businesses.
7. Low Production Levels: Smaller production capacities contribute to the prevalence of small scale trade.
8. Lower Running Expenses: Operating costs are typically lower in small businesses compared to larger enterprises.
9. Small Capital Requirement: Small scale retail trade demands less initial investment.
10. Flexibility: Small scale trade offers more flexibility than larger counterparts.

Read: Factors that should be Considered When Starting a Retail Business

Why Small Scale Retail Trade Continues to Exist Despite Stiff Competition from Bigger Businesses

1. Low Capital Requirement: Small businesses remain accessible due to their minimal capital needs.
2. Personalized Services: Owners of small businesses offer personalized door-to-door services.
3. Personal Attention: Owners’ direct involvement ensures personal interest and attention.
4. Customer Respect: Smaller retailers often demonstrate greater respect for their customers.
5. Flexible Policies: Small scale businesses can implement flexible policies and regulations.
6. Extended Hours: These businesses operate extended hours, including weekends and holidays.
7. Affordable Prices: Goods in small scale retail are usually priced competitively.
8. Credit Facilities: Small businesses often offer better credit terms to customers.
9. Product Replacement: Owners are willing to replace defective products promptly.
10. Popular Goods Availability: Small businesses often stock popular goods, like food items.

Advantages of Small Scale Retail Trade

1. Low Capital Requirement.
2. Proximity to Residential Areas.
3. Customer Recognition and Respect.
4. Extended Operating Hours.
5. Employment Generation.
6. Lower Running Expenses.
7. Compatibility with Other Ventures.
8. Entry Point for New Businesses.
9. Effective Advertising Medium.
10. Path to Larger Business Ventures.
11. Close Supervision and Efficiency.

Disadvantages of Small Scale Retail Trade

1. Inadequate Capital.
2. Limited Expansion Opportunities.
3. Lack of Economies of Scale.
4. Lower Profit Margins.
5. Competition Challenges.
6. Absence of Trade and Cash Discounts.