CHAPTER THREE
TRADE
Meaning of Trade
This is the buying and selling of goods and services with the aim of making a profit.
Importance of trade:
Trade plays a vital role in any economy. The various roles played by trade in the economy include;
1. Helps people to acquire what they cannot produce
2. Avails a variety of goods and services thereby improving the peoples living standards
3. Creates an outlet for goods thereby enabling the producers to dispose of their surplus produce
4. Creates employment opportunities
5. Encourages specialization and division of labour
6. Promotes peace, social relations and understanding the parties involved since they depend on one another.
7. Provides revenue to the business and the government in form of taxes and fees charged on the various
trading activities
8. Ensures steady supply of goods and services
9. Exploitation of local resources as traders create goods and services using locally available resources
10. Encourages economic growth and development.
Classification of Trade
Trade can be classified on the basis of geographical location of the portion involved, these are;
1. Home trade
Also called internal, local or domestic trade. It refers to the buying and selling of goods and services within the
boundaries of a given country.
It is further divided into retail trade and wholesale trade.
2. International trade (foreign trade)
This is trade that is carried out beyond the boundaries of a country
This is trade carried out between individuals or government of different countries e.g. trade between a citizen of
Kenya and a citizen of Tanzania, or trade between the government of Kenya and the government of Southern Sudan
International trade carried out between two countries is referred to as bilateral trade and international trade carried
out among many countries (more than two countries) is referred to as multilateral trade.
International trade is classified into the following;
1. Export Trade-Which is the sale of goods and services by a country to another country or individuals in
one country to another country or individuals in one country to individuals in another country.
2. Import Trade-Which is the buying of goods and services by one country from another country or by
individuals in one country from individuals in another country.
Forms of Home Trade
1. Retail Trade
2. Wholesale Trade
RETAIL TRADE
Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to
earn a profit. Retailers satisfy demand identified through a supply chain. The term "retailer" is typically applied
where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a
small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying
COMMERCE COURSE NOTES CHAPTER 3 – TRADE PREPARED BY MR. ANTONY AMBIA Page 1
,products. Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it
takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does
not always result in a purchase.
Retail trade involves the buying of goods and selling them to the final consumer. A retailer is the trader who buys
goods with a view of selling them to the final consumer.
Classification of Retail Traders
Retailers are classified/categorized according to the amount of capital they need to start and operate their businesses
and their sales volume. Thus retailers can be classified as;
i) Small scale retailers
ii) Large scale retailers
i) Small-scale Retail businesses/small scale Retailers
These are retailers whose capital requirement is low and their sales volume also low. They form the majority of
retail traders and all found in all parts of the country.
Small scale businesses are easy to start and in most cases they are operated as one-man’s business.
A small scale trader serves the needs of people in the immediate neighborhood and deal mainly in fast moving goods
such as foodstuffs, detergents, kerosene etc.
Categories and Types of small scale
These are two main categories of small scale traders as shown below;
a) Small scale Traders without shops
Itinerant Traders (Hawkers and peddlers)
Roadside sellers
Open air market Traders
b) Small scale retailers with shops
Single shops
Tied shops
Kiosks
Mobile shops
Market stalls
Canteens
Mail order stores
a) Small scale Retailers without shops
i) Itinerant Traders
These are retailers who move from place to place selling their goods either on foot, by bicycles or motor cycles
They move from town to town, door to door and from village to village selling their goods. Their goods may include
clothes, utensils and foodstuffs. Customers can buy goods without having to travel to look for them
Examples of itinerant traders are hawkers and peddlers (Hawkers move around on bicycles, handcarts or
motorcycles while peddlers walk around)
The itinerant traders require a license from the local authorities in order to sell their goods.
Characteristics of itinerant Traders
i. Are found mainly in densely populated areas
ii. Move from place to place in search of customers
iii. They are very persuasive
iv. Their prices are not controlled.
Advantages of itinerant Traders
They require little capital to start
They are convenient because they bring goods closer to the people
The business is flexible in that they can move from place to place. They can also change from line of business
to another
Few legal formalities are required
They usually do not suffer bad debts because they sell in cash.
COMMERCE COURSE NOTES CHAPTER 3 – TRADE PREPARED BY MR. ANTONY AMBIA Page 2
, Disadvantages of itinerant Traders
o The traders get tired because of moving from one place to another while carrying goods.
o The business is affected by bad weather conditions
o The traders sale a limited range of goods
o It is difficult to transport goods from one place to another.
o Do not offer guarantee, in case items are to be found defective
o They are constantly in conflict with the local government.
ii) Roadside sellers
These are traders who sell their goods at places where other people pass by and at busy places such as along busy
roads, bus stages, road junctions and entrances to public buildings.
They place their goods on trays, cardboards, empty sacks and mails
They sell items such as fruits, utensils, sweets, clothing and some hardware.
iii) Open-air market Traders.
Open air markets are places set aside by the government through the local authorities where people meet to buy and
sell goods. Traders selling similar commodities are allocated a special area. Such markets are open on particular
days of the week.
The variety of goods sold here is wide and include agricultural produce, clothing, household items, animals,
foodstuffs and even furniture.
The traders move from one market to another depending on the various market days.
Advantages of small-scale retailers without shops
They require a small amount of capital to start and operate their businesses.
They are convenient since they take goods to the customers within their reach.
They incur low costs of doing business
Most of their goods are low-priced and hence more affordable to customers.
The business is flexible. It is easy to change from one business to another
They require few legal requirements
The financial risks involved in these businesses are minimal
They do not suffer bad debts since they sell on cash bases
They interact at personal level with the customers and can convince them to buy their goods.
Disadvantages of small-scale retailers without shops
o It is tiring for traders to move from place to place especially if the goods are heavy and the distance covered are
long
o The traders face stiff competition from other traders with more resources
o They offer a limited variety of goods
o They are affected by unfavorable weather condition
o Lack of permanent operating premises denies them a chance to develop permanent customers
o They face a lot of certainty, especially in terms of a steady flow of income
o They sometimes sell defective or low quality goods because customers expect to pay little money for them.
b) Small scale Retailers with shops
These are small scale retailers with permanent locations to operate from. They include;
i) Kiosks
These are small shops or structures found mostly in residential areas, busy streets, highly populated areas or inside
building where people pass by or work
They deal in fast-moving items and groceries such as; sodas, cakes, sweets, cigarettes, and newspapers etc. some
kiosks also sell food
ii) Market stalls
These are permanent stands found in market places, especially those operated by the various local authorities
They are of different designs depending on the goods they sell or services they offer.
They are rented or leased by individuals from local authorities
They deal in fast moving household goods though some may specialize in other products such as clothing and shoes.
Examples are stalls at Muthurwa markets, Kariokor, and most municipal markets.
Advantages of kiosks and market stalls
They are small, hence easy to start and operate
COMMERCE COURSE NOTES CHAPTER 3 – TRADE PREPARED BY MR. ANTONY AMBIA Page 3
TRADE
Meaning of Trade
This is the buying and selling of goods and services with the aim of making a profit.
Importance of trade:
Trade plays a vital role in any economy. The various roles played by trade in the economy include;
1. Helps people to acquire what they cannot produce
2. Avails a variety of goods and services thereby improving the peoples living standards
3. Creates an outlet for goods thereby enabling the producers to dispose of their surplus produce
4. Creates employment opportunities
5. Encourages specialization and division of labour
6. Promotes peace, social relations and understanding the parties involved since they depend on one another.
7. Provides revenue to the business and the government in form of taxes and fees charged on the various
trading activities
8. Ensures steady supply of goods and services
9. Exploitation of local resources as traders create goods and services using locally available resources
10. Encourages economic growth and development.
Classification of Trade
Trade can be classified on the basis of geographical location of the portion involved, these are;
1. Home trade
Also called internal, local or domestic trade. It refers to the buying and selling of goods and services within the
boundaries of a given country.
It is further divided into retail trade and wholesale trade.
2. International trade (foreign trade)
This is trade that is carried out beyond the boundaries of a country
This is trade carried out between individuals or government of different countries e.g. trade between a citizen of
Kenya and a citizen of Tanzania, or trade between the government of Kenya and the government of Southern Sudan
International trade carried out between two countries is referred to as bilateral trade and international trade carried
out among many countries (more than two countries) is referred to as multilateral trade.
International trade is classified into the following;
1. Export Trade-Which is the sale of goods and services by a country to another country or individuals in
one country to another country or individuals in one country to individuals in another country.
2. Import Trade-Which is the buying of goods and services by one country from another country or by
individuals in one country from individuals in another country.
Forms of Home Trade
1. Retail Trade
2. Wholesale Trade
RETAIL TRADE
Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to
earn a profit. Retailers satisfy demand identified through a supply chain. The term "retailer" is typically applied
where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a
small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying
COMMERCE COURSE NOTES CHAPTER 3 – TRADE PREPARED BY MR. ANTONY AMBIA Page 1
,products. Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it
takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does
not always result in a purchase.
Retail trade involves the buying of goods and selling them to the final consumer. A retailer is the trader who buys
goods with a view of selling them to the final consumer.
Classification of Retail Traders
Retailers are classified/categorized according to the amount of capital they need to start and operate their businesses
and their sales volume. Thus retailers can be classified as;
i) Small scale retailers
ii) Large scale retailers
i) Small-scale Retail businesses/small scale Retailers
These are retailers whose capital requirement is low and their sales volume also low. They form the majority of
retail traders and all found in all parts of the country.
Small scale businesses are easy to start and in most cases they are operated as one-man’s business.
A small scale trader serves the needs of people in the immediate neighborhood and deal mainly in fast moving goods
such as foodstuffs, detergents, kerosene etc.
Categories and Types of small scale
These are two main categories of small scale traders as shown below;
a) Small scale Traders without shops
Itinerant Traders (Hawkers and peddlers)
Roadside sellers
Open air market Traders
b) Small scale retailers with shops
Single shops
Tied shops
Kiosks
Mobile shops
Market stalls
Canteens
Mail order stores
a) Small scale Retailers without shops
i) Itinerant Traders
These are retailers who move from place to place selling their goods either on foot, by bicycles or motor cycles
They move from town to town, door to door and from village to village selling their goods. Their goods may include
clothes, utensils and foodstuffs. Customers can buy goods without having to travel to look for them
Examples of itinerant traders are hawkers and peddlers (Hawkers move around on bicycles, handcarts or
motorcycles while peddlers walk around)
The itinerant traders require a license from the local authorities in order to sell their goods.
Characteristics of itinerant Traders
i. Are found mainly in densely populated areas
ii. Move from place to place in search of customers
iii. They are very persuasive
iv. Their prices are not controlled.
Advantages of itinerant Traders
They require little capital to start
They are convenient because they bring goods closer to the people
The business is flexible in that they can move from place to place. They can also change from line of business
to another
Few legal formalities are required
They usually do not suffer bad debts because they sell in cash.
COMMERCE COURSE NOTES CHAPTER 3 – TRADE PREPARED BY MR. ANTONY AMBIA Page 2
, Disadvantages of itinerant Traders
o The traders get tired because of moving from one place to another while carrying goods.
o The business is affected by bad weather conditions
o The traders sale a limited range of goods
o It is difficult to transport goods from one place to another.
o Do not offer guarantee, in case items are to be found defective
o They are constantly in conflict with the local government.
ii) Roadside sellers
These are traders who sell their goods at places where other people pass by and at busy places such as along busy
roads, bus stages, road junctions and entrances to public buildings.
They place their goods on trays, cardboards, empty sacks and mails
They sell items such as fruits, utensils, sweets, clothing and some hardware.
iii) Open-air market Traders.
Open air markets are places set aside by the government through the local authorities where people meet to buy and
sell goods. Traders selling similar commodities are allocated a special area. Such markets are open on particular
days of the week.
The variety of goods sold here is wide and include agricultural produce, clothing, household items, animals,
foodstuffs and even furniture.
The traders move from one market to another depending on the various market days.
Advantages of small-scale retailers without shops
They require a small amount of capital to start and operate their businesses.
They are convenient since they take goods to the customers within their reach.
They incur low costs of doing business
Most of their goods are low-priced and hence more affordable to customers.
The business is flexible. It is easy to change from one business to another
They require few legal requirements
The financial risks involved in these businesses are minimal
They do not suffer bad debts since they sell on cash bases
They interact at personal level with the customers and can convince them to buy their goods.
Disadvantages of small-scale retailers without shops
o It is tiring for traders to move from place to place especially if the goods are heavy and the distance covered are
long
o The traders face stiff competition from other traders with more resources
o They offer a limited variety of goods
o They are affected by unfavorable weather condition
o Lack of permanent operating premises denies them a chance to develop permanent customers
o They face a lot of certainty, especially in terms of a steady flow of income
o They sometimes sell defective or low quality goods because customers expect to pay little money for them.
b) Small scale Retailers with shops
These are small scale retailers with permanent locations to operate from. They include;
i) Kiosks
These are small shops or structures found mostly in residential areas, busy streets, highly populated areas or inside
building where people pass by or work
They deal in fast-moving items and groceries such as; sodas, cakes, sweets, cigarettes, and newspapers etc. some
kiosks also sell food
ii) Market stalls
These are permanent stands found in market places, especially those operated by the various local authorities
They are of different designs depending on the goods they sell or services they offer.
They are rented or leased by individuals from local authorities
They deal in fast moving household goods though some may specialize in other products such as clothing and shoes.
Examples are stalls at Muthurwa markets, Kariokor, and most municipal markets.
Advantages of kiosks and market stalls
They are small, hence easy to start and operate
COMMERCE COURSE NOTES CHAPTER 3 – TRADE PREPARED BY MR. ANTONY AMBIA Page 3
