Consumer Credit

Credit:It is principle of buying now and pay later
Types of Credit:
Store Cards:These are plastic cards provided to their customere by latge retailers.They encourage shoppers to use particular stores.They encourage consumer loyalty.
Advantages to consumer:
1.Buy without cash
2.Interest-free credit if paid off each month
3.Incentives and additional services such as gifts and delivery.
4.Used in every branch of a particular store.
Disadvantages to consumer:
1.Overspending.It encourages impulse buying and irrational buying.
2.Interest has to be paid if all of the amount is not paid in one month.Some stores charge high interest rates.
Advantages to retailer:
1.Higher turnover
2.Consumer loyalty
Disadvantages to retailer:
1.Higher administrative costs as a credit control department must be set up.
2.Delay in payments.Risk of bad debts
Credit cards:These are plastic cards showing the cardholder's name, 16-digit account number, issue date, expiry date on the front side and signature of cardholder and security code on backside.Two most well known types are MasterCard and Visa.Businesses sign up with credit card company to be ablebto take payments on credit.
Advantages to cardholder:
1.Instant credit
2.Easy to carry
3.Free credit for at least one month.
4.Can be used in many different outlets e.g shops,hotels,garages in many countries.
5. May offer 0%interest for up to 12 months for transfer of balance from another credit card.
6.Can be used to charge expenses.
Disadvantages to cardholder:
1.Not accepted in many outlets.
2.Higher rate of interest compared to other types.
3.Encourages overspending and impulse buying.
4.Higher prices are charged by retailers.
5.In case of card being stolen, many unauthorised transactions already take place before fraud is discovered.
6.If cardholder does not report then he could be liable for losses from misuse.
Advantages to business:
1.Higher turnover and competitive edge which results in more customers attracted.
2.Less security risks.
Disadvantages to business:
1.Commission has to be sent to credit card company which reduces profits.
2.Higher administrative costs due to more paperwork and record keeping
3.Extra time to check whether card is stolen or credit limit exceeded.
4.Delay in payments and risk of bad debts.
5.Fraud leads to losses for credit card company.

Specialisation,Commerce and Direct Services

Specialisation: It is the tendency of people to concentrate on what they do best.
Specialisation takes place in a number of ways: by region, by country, by city, by factory and industry, by an individual.
Specialisation in workplace is specialisation by process.
Division of labour: It is breaking down a productive task into small portions and placing each portion under an individual so that each individual performs a different portion of the actual task. It allows a task to be completed quickly.
Specialisation allows manufacturers to take advantage of economies of scale.
Comparative advantage: The concept of countries specialising in producing one particular line of goods in which it is most efficient. It can trade them to buy the goods and services it needs but is unable to produce at home.
Commerce: It is concerned with distribution of goods and services .It is not concerned with producing goods but with providing services which make it easy to exchange goods and services. It is trade and aids to trade.Examples: Banking, Retailing, Transport, Advertising etc.
Aids to trade: Commercial services that help trade to function.
Industry,Commerce and Direct services are interdependent in the following ways:
1. Industry needs commercial activity and direct service to function properly.
2.Commercial activity would be meaningless if goods and services were not produced.
3.Countries are becoming interdependent.They rely on each other for raw material and modified goods.This is happening due to improved communication and transport facilities and the development of  a worldwide financial system. 

Large Scale Retailing

Advantages of Retailing on a large scale
1.Retailers earn large turnover
2.They have financial resources to do bulk buying which enables them to enjoy trade discounts from suppliers.Thus, there is a higher margin for profits and competitive prices can be offered which attract customers.
3.Specialist staff can be employed.
4.Greater automation and computerisation ensures accurate stock control.RDC can be established.
5.Can afford delivery vehicles and own warehouses.They can supply shop anytime they want.They can save on delivery charges.
6.They can use their purchasing power to buy standardised goods from several different manufacturers.
7.They can generate the capital for establishing business and working capital to cater the day-to-day business activity by operating as public limited company.
8.Economies of scale:as size increases , expenses are spread over a large area so there is lower cost per unit of advertising,bulk buying from suppliers, paperwork for administrative purposes.
Disadvantages of Retailing on a large scale:
1.Self service has lead to decline in personal contact between retailer and consumers.
2.They do not cater for individual needs so there is lack of individuality.
3.Shoplifting,pilfering and theft is a constant problem.Security costs e.g cameras,guards,televisions add to business expenses,leading to lower net profits.
4.Retailers employ low paid staff.This may reflect business image and affect sales.
5.Due to large area, the overall costs of rents and overheads is high.There are many specialists employed and have to  be paid high wages.These costs as well as advertising costs increase expenses

Types of Warehouses

Bonded Warehouses:
They may be situated anywhere but they are found mainly at seaports, dry ports and airports.They are used to store dutiable goods on which duty is not paid.
Importance:
1.Importer can postpone payment of duty
2.Entrepot trade can take place without payment of duty.
3.Bonded warehouses located in cities and towns are important to producers of dutiable goods such as beer which is brewed for sale in the home market.
Cold Storage Warehouses:
These are temperature controlled warehouses that help to preserve perishable foods for long periods.
Importance:
1.Seasonal goods can be stored so that they are available in good condition to meet the demand throughout the year.
2.Countries that have export based on perishables like fish and fish products need them to ensure exports of high quality items in large quantities when demand rises.
3. General wholesalers can increase turnover by extending the wide range of goods that they offer to small-scale retailers by having a freezer section in the store.
Cash and Carry Warehouses:
These are warehouses owned by the Cash and Carry wholesalers and are regarded as wholesale supermarkets.They are important to small scale retailers,helping them to survive competition from large retailers.Self service is provided.No credit and delivery services are provided so goods are bought at competitive prices which can then be passed on to the consumer.
Advantages to wholesaler:
1.More trade from small retailers.
2.Can attract other businesses
3.May sell directly to consumers who get membership cards.
4.No problems of cash flow and bad debts.
Disadvantages to wholesaler:
1.Long working hours
2.High capital investment.
3.Large amount of cash at hand is difficult to handle.There is danger of theft.
Advantages to small scale retailers:
1.Competitive prices
2.Immediate access.
3.Retailer can obtain goods to meet sudden rise in demand and  unexpected change in consumer tastes.
4.Less storage space required.
5.Less time wastage on administrative work.
6.Retailer can travel anytime he wants as there are long working hours.
Disadvantages to small retailers:
1.No delivery service.Retailer has to own or hire transport.
2.It may not be convenient for retailer to leave shop and restock when there is scarcity and more demand from customers.
3.No credit is given.Retailer must have funds to make immediate payment.
Manufacturer's warehouse:
It will be used to store raw material,components and finished goods awaiting sale or transport.
Importance:
1.Manufacturer can produce before demand rises
2.Store goods for his factory shop.
3.If the manufacturer serves all parts of a country,regional warehouses may be set up to serve particular areas.
4.Seasonal goods can be produced throughout the year.
5.Imported parts have to be here before usage by car assembly factories.
RDC:
They are used by large retailers to supply businesses as well as online shop.They are very large warehouses,usually situated at busy road junctions where major highways meet.
Importance:
1.Easy access for manufacturer
2.Constant supply.
3.Reduces the expenses of retailer
Other warehouses:
Primary producers e.g farmers have silos and barns to store fertilizers,machinery,food,oil etc.
Transport companies have warehouses where imported goods are stored before transported to importer.
Public warehouses are used to store illegal imported goods.
General warehouses provided by Port Authority for goods awaiting export or imported goods awaiting transport that are not subject to payment of customs duties.  

Terms of payment

Mark up:
Mark-up is defined as the profit margin on a product offered for sale. It is a percentage of cost price of the product.
Two Basic Formulae:

Mark up Percentage= Selling price - Cost price  ×100
                                                       Cost price

Mark up Percentage= Gross Profit ×100
                                        Cost price     

Factors affecting percentage mark up
- Overall expenses and expected profits
- Quantity of goods that a retailer wants should be sold by his outlet
- Goods that have seasonal demand have mark up varying according to season
- Consumer durables have high mark up