General trade

General trade is the older of the two models, and was established before India opened its markets to organized retailing. Modern trade, on the other hand, is a purely urban phenomenon that grew in popularity between the 1990s and early 2000s, when many corporates and first-generation entrepreneurs entered the retail business.

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

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

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.

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

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

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.

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

FAQs

How do manufacturers benefit from general trade?

Manufacturers can reach a larger number of consumers through general trade, especially in regions where organized retail is not prevalent. It provides an opportunity for small manufacturers to distribute their products widely.

What are the advantages of general trade?

General trade allows for wider product availability, especially in remote or rural areas. It involves numerous small retailers, promoting healthy competition and providing business opportunities for various stakeholders.

Who are the key participants in general trade?

The key participants in general trade include manufacturers, distributors, wholesalers, and retailers. Each plays a role in getting products from the manufacturer to the end consumer.

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