With increasing competition everyday in the consumer market, the world has shifted towards modern trading concepts. The modern trading concept has two major objectives; to provide the basic necessities under one roof. Secondly, the customer should be able to touch the products in person. Metro and Macro are the examples of modern trading stores. The procedures and implementation of modern trade in other countries is different as compared withPakistanbecause of the local trading culture.
Modernization of Trading Systems
According to a research, retail markets tend to modernize from largely traditional trading techniques to modern trading techniques. As markets modernize, the share of traditional trade as a percentage of total trade declines slowly; suppliers, however, will continually need to adjust the amount of resources allocated to manage the traditional trade versus the modern trade. Smart suppliers manage this balancing act by accurately tracking (and often predicting) the pace at which key transitions or market evolution shifts are likely to occur. Three overarching factors affect the speed and nature of market transition. They include (1) consumer trends and purchasing behaviors in the market; (2) factors related to modern retail consolidation (Also called central buying, an approach in chain stores whereby all purchasing is done through a central or main office); and (3) disruptive factors such as the economy, special interests, and government regulation etc.
InPakistanthere are a number of manufacturers for various products. The normal distribution channel is that the manufacturers use their own distributors as well as independent distributors in the market, who purchase products from the factory and then deliver to the retailers and the wholesalers. On the other hand, some retailers get products directly from the distributors while some are purchasing from the wholesalers. Big cities have thousands of outlets in the market for grocery items. If we only take the example of twin cities ofPakistan, there are around 3,000 grocery outlets including the small shops inIslamabadand inRawalpindithere are around 15,000 outlets. It is impossible for the manufacturer to reach each and every outlet so they need distributors to make the products available to the outlets. Even the distributors at times cannot reach all of the outlets, so there are wholesalers in the markets who buy the products in bulk from distributors or manufacturers. They are located in certain locations where the retailers buy the products from the wholesalers. At the end of the day, it all depends on the relationships of the retailer; if he has good relationship with the distributors and can buy the products on credit from him and even return the unsold products, or he could buy the same products from a wholesaler like an end consumer. We can say that the markets in Pakistan are divided into 2 categories with respect to retailers; first are those who are getting the products from distributors and second are those who are buying the products from wholesalers. Distributors supply the product at the retailer’s shop but retailer has to go to wholesaler to purchase a product.
These consumer trends, retail consolidations, and disruptive factors heavily influence retailers’ growth strategies as well as the formats they are most likely to develop to sustain growth over the long term. As markets evolve, retailers adjust their formats and operational strategies to cater to differing shopper needs and trends-and thereby maximize retailers’ reach in an evolving market.
Advantages and Disadvantages
There are numerous advantages of modern trading system. There are 3 types of consumers who come to modern trading stores like Metro or Macro; 1) end users, 2) traders and 3) hoteliers. The system of modern trade influences the distributor business because retailers are now going directly to these stores and are purchasing...