Lesson seven

7.1       TRADING BUSINESES 

These are businesses that buy and sell goods with an aim of making profits. They find out commodities required by their target market / customers at relatively low prices and sell them at relatively high prices.  

7.2       TYPES OF TRADING BUSINESS 

Trading business are divided into two; 

  • Retail trading businesses
  • Whole sale trading businesses 

7.3       BENEFITS OF TRADING BUSINESES 

  • They avail goods to consumers in all quantities i.e. on small and large scales, both imports and locally produced products.
  • They provide a variety of goods to consumers there by enabling their clients to exercise their choices.
  • They generate government revenue through paying taxes to the government which is used to provide social services like medical, education services etc.
  • They are a source of income to the owners thereby improving their standard of living.
  • They provide foreign exchange earnings to the country by exporting some of the products locally made.
  • They advertise products produced by manufacturers there by making consumers aware of the existence of such products.
  • They provide employment opportunities to various people such as hawkers, pedlars, barrow boys etc.
  • They contribute to community development by facilitating community development programmes like constructing bore holes, roads etc.
  • They recycle by- products by buying scrap materials that would have been dangerous to the environment. 

7.4       CHALLENGES OF TRADING BUSINESSES 

  • Bad debts: Since most of the trading businesses operate on small scale, they sell to low income earners and eventually fail to pay thus causing loses.
  • Expiry of goods. Trading businesses face a challenge of goods getting expired before they are sold their by leading to a big loss.
  • Limited capital. This is a big challenge to retail trading businesses and this makes them inactive / inefficient in meeting customer’s needs.
  • Un-favourable government policies and low monetary / assistance given to producers. High taxes reduce on profitability of trading businesses since they increase expenses production.
  • Political unrests: Trading businesses face a challenge of political unrest in form of riots, strikes, demonstrations, which limit their trading activities especially in urban centres.
  • Poor state infrastructureg. poor roads, inadequate and unstable power supply which all increase transport costs and other expenses.
  • Limited facilities to boost the capital base of traders
  • Inadequate space for expansion of the businesses is also a challenge facing trading business.

7.5       SOLUTIONS TO THE CHALLENGES 

  • The people who after trading businesses should offer credit facilities to only trustworthy customers in order to solve the problem of bad debts.
  • The traders should decrease the prices of goods which are about to get expired in order to solve the problem of expiry of the goods.
  • The government should set up some financial institutions like banks to provide retailers with loans in order to control the problem of limited capital
  • The government should set favourable government policies like charging low taxes on goods sold by the traders.
  • The government should set a strong law against people who riot, demonstrate among others in order to solve the problem of political unrests especially in urban areas.
  • The government should improve on the state of infrastructures like roads, power supply among others in order to solve the problem of high costs of transport and other expenses.
  • The traders should get land which is very large in order to be easy to expand the business in the future. 

7.6       TYPES OF TRADING BUSINESSE 

  1. Retail trading businesses, these are businesses which deal in selling of goods to consumers. 

Features of retail trading businesses 

  • The trader mainly sells goods to the consumers 
  • It involves the trader buying goods in large quantities from the whole saler and selling them in small and affordable quantities to consumers.
  • It is a link between the whole-seller and the final consumers
  • It is characterized by small purchase i.e. goods are sold in small quantities from the retailers.

 General functions of retail trading businesses. 

  • Retailers transport goods from their suppliers to their shops and at times they transport goods for the consumers who buy in large quantities.
  • Retailers sell goods to consumers in small and affordable quantities
  •  Retailers buy goods from the whole sellers and other suppliers. 
  • Retailers store goods until they are demanded by customers
  • Retailers bridge the gap between the whole seller and the consumers 

(ii) Whole sale trading businesses 

These are trading businesses which deal in a wide range of products and they stock goods according to the needs of the consumers. 

Features of wholesale trading businesses

  • Large capital is invested in the business since a whole seller requires a lot of money to run the business.
  • It involves packaging, branding, and advertising.
  • It is characterized by bulky purchase i.e. goods are bought in large quantities from the producers.
  • It is a link between the producer, retailer and the final consumer
  • It involves storage of goods in large quantities and large ware houses on behalf of the producer
  • It involves transportation of goods by the wholesaler from the producer to his premises.

General functions of whole sale trading businesse

  • A whole seller buys goods in large quantities from the producers and breaks the goods in affordable quantities for retailers.
  • A whole-seller finances the producer to a retailer in the chain of distribution.
  • A whole-seller finances the producers by paying them promptly
  • A whole-seller provides ware housing facilities on behalf of the producer
  • A whole-seller prepares goods for sale by branding and packing them
  • A whole-seller also transports goods brought from the producer to his own premises.
  • A wholesaler keeps the prices stable by regulating the flow of goods to the market.