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 GT (General Trade)?
GT, or General Trade, refers to the traditional distribution channel encompassing a wide range of retail outlets such as convenience stores, independent grocers, and small-scale retailers. It is characterized by a diverse and widespread network of non-specialized retail establishments.General Trade (GT) represents the conventional distribution model where products are supplied to a broad spectrum of retail outlets, excluding specialized or exclusive channels. This encompasses small and independent retailers, local grocery stores, convenience stores, and other non-specialized establishments. Unlike modern trade channels such as supermarkets or hypermarkets, GT relies on a decentralized network, often involving smaller transactions and a more personalized approach to customer interactions. GT plays a foundational role in the retail landscape, particularly in regions where traditional and independent stores continue to thrive.
General trade meaning: Local shop/store owned by individuals and catering to the local customers’ requirements.
Modern trade meaning: Chain stores (supermarkets, hypermarkets, or mini-markets) functioning in a more organized and sophisticated manner.
General Trade
- Also known as unorganized retail
- Covers a wide range of outlets including small shops, kiosks, and even street vendors
- Usually family owned businesses that have been passed down for generations
- Most common in rural areas, but can also be found in urban areas
- Products are often sold at discounted rates
Modern Trade
- Also known as organized retail
- Covers a smaller range of outlets including supermarkets, hypermarkets, and convenience stores
- Usually corporate owned businesses that have only been around for a few years
- Only found in urban areas
- Products are usually sold at full price
General Trade vs. Modern Trade in FMCG
General Trade in FMCG
General trade is a vital part of the FMCG industry, as it helps to ensure that products are available to consumers in a timely and efficient manner.
- It’s where the big brands battle it out for shelf space and consumers’ attention, and it’s where the biggest volume sales are generated. But it’s also a highly competitive, cut-throat environment, with razor-thin margins and fierce price wars.
- In many cases, general trade businesses are responsible for delivering products directly to retail outlets, such as supermarkets and convenience stores. This type of trade is often conducted on a larger scale than other types of FMCG trade, such as specialty trade or direct-to-consumer trade. As a result, general trade plays a significant role in the overall FMCG industry.
- In order to succeed in the general trade, FMCG companies need to have a deep understanding of consumer behavior and how to influence it.
- They need to be experts in retail activation, and they need to have the right products at the right price points.
Modern Trade in FMCG
Modern trade in FMCG is a very different beast to what it was even a decade ago. There have been numerous changes, both in terms of the type of products being traded and the way that trade is conducted.
- One of the most significant changes has been the rise of online trade, that is, e-commerce.
- Another significant change has been the growth of private label brands. These are products that are manufactured by one company, but sold under another company’s brand. This has become increasingly common in recent years, as companies look to cut costs and offer customers more choice.
- Finally, there has been a shift in the geographical focus of trade. In the past, much of the trade in FMCG was conducted between developed countries. However, in recent years, there has been a growing trend for companies to source products from emerging markets. This is partly due to the fact that these markets are often able to offer lower prices, but it is also due to the fact that they often have a greater variety of products available.
FAQs
How does General Trade differ from Modern Trade?
General Trade differs from Modern Trade in terms of the retail outlets involved. While General Trade includes a diverse range of non-specialized retail establishments such as local grocery stores and independent retailers, Modern Trade involves large-format stores like supermarkets, hypermarkets, and chain retailers. General Trade is often characterized by a more decentralized and personalized approach to retail.
Why is General Trade important for FMCG companies?
General Trade is important for FMCG companies because it provides access to a diverse and extensive network of small retailers, allowing products to reach local communities and diverse consumer segments. This channel is crucial for FMCG companies to tap into markets where personalized relationships with retailers play a significant role in influencing consumer purchasing decisions.