From the early days of mankind, we have found evidence of trade in one form or another. Where it started as a simple barter system initially, over time and with advancing civilisation, it gradually evolved into currency-based transactions. With the centuries and then millenia, we have invented ingenious and a variety of ways to trade among ourselves but the principles of buyers and sellers and product availability remains the same. For trading to happen, you must have a product, a party that owns the product (seller), a party that buys the product (buyer), and a pre-decided or accepted mode of payment. Today we have money to fulfil that mode.
As we stand in the 21st century, we have two primary types of trade – General and Modern – and we are going to discuss general trade vs modern trade in this post.
What is General Trade?
General trade is a traditional form of trading that includes local standalone stores, roadside stalls, and kiosks that do not have a huge infrastructure and are run by entrepreneurs as opposed to investors or shareholders. Kirana stores in India, Sari-Sari stores in the Philippines, and Mom & Pop shops in the USA are examples of local standalone stores covered by the general trade channel. The most important distinction of general trade from all other types of trade, however, is the fact that sales reps are responsible for taking orders from store owners. As a result, sales reps play a very important role in identifying opportunities, onboarding, and sustaining relations with general store owners.
Advantages of General Trade for Brands
General trade stores, being traditional, have certain unique advantages. We discuss these below.
- Deeper penetration whereby brands are able to reach consumers who live in areas such as older and traditional neighbourhoods, remote villages, and in tier 3 and tier 4 cities where modern stores are not prevalent. As general stores are closer to residential areas than their modern counterparts, they enable consumers to easily buy products without having to travel a long distance.
- Brands have a strong affinity for stores who have a captive consumer base as it significantly increases chances of offtake. General stores focus on developing interpersonal relationships between store owners and consumers that are mutually beneficial. When store owners comprehend the preferences of consumers, sometimes on a personal level, it helps grow familiarity between retailer and consumer. Also, such understanding pushes store owners to tailor their secondary trade orders in accordance with consumer needs. This readily available consumer loyalty is what brands count on when partnering with general stores.
- Brands will always look to access as much of the economic strata of consumers as possible. Carrying out distribution via general trade gives them the opportunity to do so; products at general stores are usually non-premium and therefore, may not be as extravagantly priced as in modern stores. Alongside this, bargaining is also a common practice at general stores, making it even more economically feasible for low to middle income consumers to buy your products.
Challenges of General Trade
General trade suffers from the major lack of infrastructure and clout that would otherwise open up new business opportunities for them. What this means is that they are not recognised on a global or national level, making it difficult for them to acquire a wide range of products. In the same vein, with restricted renown among consumers outside their neighbourhood or small area, their revenue is also limited. Opportunities for expansion or advertising are therefore limited too, making it a very confined trade channel overall.
- Restricted purchasing ability – General stores have a limited budget and prefer buying in smaller batches that don’t always meet the expectations of brands. This sometimes limits the range and definitely limits the amount of items in a general store. This limitation stems from the fact that general stores don’t see as large a cash inflow from business transactions as modern stores do.
- Space constraints – General stores that are handed down from generation to generation usually continue business operations within the same space. A space that may be, from lack of funds or foresight, quite limited. This results in both a poorly lit store and compact shelf space for displaying products making it challenging to keep point of sale equipment or materials like a visi-cooler. As a brand, you may find that kind of a setup challenging unless you have a reliable visual merchandising app to document and flag store issues accurately.
- Pushing new products is hard – Small-time retailers of general stores store a small number of products due to limited buying ability. Persuading them to buy more from your brand is therefore a significant challenge. The consequence of such an approach is that general stores run out of products faster, necessitating frequent deliveries. More frequency means the cost of delivery goes up, making these businesses untenable at times.
- Lack of foresight and market insights – Some general store owners don’t have the resources to carry out extensive market research before investing in a product. As such, this leads to poor purchase decisions that bring low returns and debt issues.
- Environmental hazard: General trade stores, with their sheer number, involve the movement of a large number of goods across huge distances, leading to a huge carbon footprint and pollution. This can directly cause deforestation and increased waste production. A sales enablement tool that also provides the most optimised delivery routes with visibility for both brand and retailer can ensure unhindered and optimised deliveries, reducing carbon emissions.
Smart Tip: Consider getting an application that can give more power to your sales reps, offers order-maximisation value prop, can help onboard the right kind of stores through data based store profiling and gamification.
What is Modern Trade?
Modern trade is the antithesis of general trade in that it operates on a much bigger scale and infrastructure, with a national or a global presence. All orders placed in modern trade are placed on the company level where specialised teams are responsible for orders or the retail HQ sends the order request to the brand HQ. There is no involvement of sales reps in the ordering process and they are mostly limited to ensuring product availability and visibility at the stores, footfall conversion and capturing feedback, etc.
Advantages of Modern Trade for Brands
Modern trade brings to brands certain unique benefits not found in general trade. These are:
- Stronger infrastructure that allows for huge scalability for brands. Direct negotiation between brand and retail chain eliminates the role of sales reps, making the process booth streamlined and efficient. Brands get access to the entire network of stores under a retail corporation without having to go and visit each and every store. This means that your products will reach more stores with a single agreement, translating to less effort and more store space.
- Higher revenue per retail outlet as modern stores are more spacious to accommodate more of your products and have generally better visual merchandising opportunities because of the space. As such, consumers buy more from a huge variety of products, resulting in generally excellent sales.
- The ability to sell premium products targeted towards the higher economic strata of consumers. As opposed to general stores, brands with high-priced, premium products find a better footing in modern stores to sell their products.
- Bigger pack sizes in modern trade owing to the fact that more high-income consumers are likely to visit and buy from modern stores. Naturally, when you sell in bigger quantities, you are generating more revenue for your brand but faster.
Challenges of Modern Trade
Modern trade, with all its organisational prowess and infrastructure, does have its disadvantages.
- Limited reach – Unlike general trade, which has penetrated the smallest of neighbourhoods to the largest of cities, modern trade, as in supermarkets and hypermarkets, are mostly limited to top-tier cities and posh localities. This severely limits the market reach of the so called big players in trade, even with their immense infrastructure, resources, and fame.
- Rigid regulations – Some countries may have rigid regulations and laws in place that can inadvertently affect a modern trade business, such as limiting the number of employees who can work in-store. This can adversely affect consumer experience and lead to missed opportunities.
Smart Tip: Consider an app that provides an all-round solution ranging from customer relationship/feedback management to inventory management to data analytics to marketing automation.
General Trade vs Modern Trade
| Modern Trade | General Trade |
| Comprises chains across many locations | Usually comprises one store |
| Run by investors or management teams | Operated by an entrepreneur and maybe their family |
| Minimal focus on interpersonal relationships between store and consumer | Major focus on interpersonal relationships |
| Stores a wide range of products including supposedly seasonal products all year round | Keeps products based on season and demand |
| Consumer base runs into thousands | Consumer base usually comprises of locals |
| Stock outage less common with more efficient inventory management | Stock outage is common as purchase power is limited and inventory management is not up to par with modern stores |
| No credit to consumers | Credit is often provided to consumers based on relationship |
| Spacious to accommodate visual merchandising props and equipment | Limited space that limits visual merchandising strategy |
How BeatRoute Helps…
Trade is an irreversible reality of life and it has been so for time immemorial. In the 21st century, as more and more new frontiers open up, general and modern trade are still two of the most dominant trade channels out there. One focuses on meeting local or neighbourhood shopping needs while the other is a vast enterprise scattered across a nation or nations.
With BeatRoute, you have the ability to ensure that no matter who your retailer is, you can carry out effective secondary sales with them and accomplish everything leading up to it. We are here to help you establish your goals clearly, collaborate with your channel partners on the route-to-market, and positively impact your offtake. Additionally, with the help of accurate store data, such as behavioural and transactional patterns, you can also make informed decisions about onboarding.
The impact and promise of collaborative automation as a major driver of sales success is massive. Once put in practice, it will help you create better schemes for your B2B customers, run more successful visual merchandising campaigns for in-store sales success, and make even better decisions about resource allocation. With goal-driven sales enablement, we enable you and your stakeholders to work together towards common goals.
Why don’t you try out our free demo? We promise you it’s worthwhile.
FAQ
1. Which trade system offers greater market reach?
Ans: General trade offers greater market reach than modern trade simply because general trade is available everywhere from the smallest and remotest locations to huge, bustling city centres.
2. How are supply chain management approaches different in general trade and modern trade?
Ans: General trade stores partner with local distributors and their inventory management is also less structured and sophisticated than modern trade. At the same time, modern trade operates with advanced logistical capabilities and technology, giving it access to better logistics. A more centralised and streamlined distribution system also allows for adequate deliveries as needed.
3. Can general trade and modern trade coexist?
Ans: Yes they can coexist because they both serve different consumer segments and have unique advantages and disadvantages that make them both critical to their consumers. Their coexistence is important to brands as well; big brands may easily penetrate modern trade, while small brands are more dependent on general trade and local retailers to reach less financially-able buyers.
4. What are the future trends in trade practices?
Ans: The future trends could be as follows:
- Rise of B2B marketplaces and eB2B channel
- Growth of omnichannel retail practices
- Greater focus on personalised customer experiences
- Ethical practices such as better working conditions and environmental concerns will become more prevalent
- Greater dependency on machine learning and AI
- Enhanced collaborative efforts among stakeholders
