Explain FIVE factors to be considered in setting up a retail trade. – NABTEB QUESTION

The factors to be considered in setting up a retail trade are:

i. Capital: – Money is very important for starting a retail business. The amount of capital on hand will determine the size of the retail trade. Adequate arrangements should be made to replenish the capital when it is exhausted or
expansion is needed.

ii. Location/Environment:- The business should be located in a good convenient place where customers can easily have access to it. The nature of goods to be sold and types of consumers will influence the location of retail shop. Infrastructural facilities and the market size will also affect the location.

iii. Source of stock:- A reliable source of supply of the stock of goods to be sold should be considered. This will ensure a steady and reliable source to obtain goods.

iv. Experience or skill or knowledge: – There is need for a prospective retailer to have insight into the type of retail business he intends to go into. He can acquire such knowledge or skill from apprenticeship.

v. Pricing policy: – Decision as to whether a high-profit margin will be introduced or discount will be granted by the retailer. He has to note that high prices which will bring high profit can affect the rate of turn over of stock.

vi. Storage: – A safe place to keep goods before displaying them in the shop should be considered. This is for security purposes and price stability.

vii. Operating license/Permit: – If there is any legal requirement to be fulfilled before commencement of operations, it must be obtained.

viii. Employment of assistant: – This depends on the size of the shop and how busy it is. Whenever the need arises, an assistant may be engaged.

ix. Lay-Out of the shop: – The plan or design of the shop should be attractive. The retailer must conform to the methods of display of goods adopted by other retailers.

x. Government policy/Regulation: – The prevailing government policy will influence the type of retail trade to be set up.

xi. Advertising or sales Promotion: – Decision is to be made if the goods will be advertised, the method or medium to use e.t.c. this is to create awareness for the goods.

xii. Records keeping:- Keeping the proper records of goods bought and sold, expenses incurred on them e.t.c. This will enable the retailer know if profit or loss is being made.

xiii. The Quality of goods to stock:- the retailer should consider the location of his store and the quality of the population before deciding on the quality of the goods to stock. A lower-class buyer will usually require cheap goods while people in the high-class areas will not go for such goods.

xiv. Type or nature of goods to be sold:- Consideration has to be given on the type or nature of goods to be sold. Some goods such as fresh or frozen goods are of perishable nature and require special handling and storage. Some goods will require considerable technical knowledge on the part of the retailer like radios, television, and video e.t.c.

xv. Credit facilities or terms of trade: – The retailer should consider whether he wants to grant credit facilities to customers or sell strictly on cash basis.

xvi. Hours of Business: – Some goods are mainly sold in the morning period while others are bought mainly in the evening period. The intending trader should consider when to open and close for business in the day of the week.

xvii. Means of Transport: – How to get to the area the shop is sited and means of delivery of goods to consumers should be considered.

xviii. Relationship with Customers:- The intending retailer should consider the methods to adopt to impress, recognize and respect the customer to enable him to uphold his patronage. He should not overlook that the customer is the KING and does no wrong.