Retail trade plays a critical part in any economic system by linking producers and consumers. It also provides critical information on the value and price of goods.
In North America, Native American trade consisted of barter, since there was no money in circulation. Some tribes did use seashells or wampum as currency, but trade still resembled barter. Barter is inconvenient because of the difficulty of having items of the same value immediately ready for exchange whenever a product is needed. Still, barter survives even to the twenty-first century. The history of retail trade is one of increasing complexity alongside older forms of trade. The earliest North American colonists largely followed this pattern of barter, especially when trading with Native Americans. Still, because of their European origins, the colonists were aware of the usefulness of money as a medium for exchange and gradually introduced it into the New World.
Peddlers, whether traveling on foot, on horseback, or in wagons, were the next stage in the evolution of retail trade. Even in the most modern societies, some door-to-door sales continue to take place, as happens in the case of Girl Scout cookies, for example. Parallel with the development of peddlers was the institution of open-air markets and fairs in which goods can be exchanged through barter or the use of money. Such trade institutions survive into the modern world in the form of yard sales and flea markets.
Over time, the development of fixed retail sites became increasingly common, especially in towns and villages. In the smaller collections of human habitation, the most common form of fixed site retailing was the
The general store did not disappear entirely, but it was gradually replaced by
By the end of the nineteenth century,
The mail carrier also acted as a key advertiser,
Although some stores had always offered discounted merchandise, in the second half of the twentieth century, the urge for increased sales led to
Although specialized retail outlets continued to exist, there was a return to an earlier general store concept but this time on a mammoth scale. Despite the breadth of products available in department stores during the mid-twentieth century, the 1980’s saw the dawn of the age of the
The supercenters were pioneered in 1988 by Wal-Mart, which announced the goal of having a Wal-Mart supercenter within thirty miles of any significant population concentration in the United States. In the case of small towns, the Wal-Mart supercenter often replaced an entire downtown business district. This led to widespread complaints by small merchants that they were driven out of business by Wal-Mart’s tremendous size and ability to purchase merchandise at prices far below what they could.
The franchisor is willing to do this because this business model allows for direct access to investment capital without giving up the control that the franchisor would lose if it tried to raise capital by selling stock. In some cases, franchising allows a franchisor to expand operations across the country and even across continents, where the franchisor would have a difficult time setting up business. For example, within the United States, often liquor licenses for restaurants or hotels can be acquired only by local operators, such as a franchisee. Through use of carefully worded contracts, the franchisor can operate a business far from its original location without the necessity of providing day-to-day supervision of the operations.
The franchisee benefits from being able to start a new business without having to develop a business plan for a product or service. The franchisee also benefits from whatever national or regional advertising has been done to promote the trademarked product or service. The franchisee also benefits from the training and supplies provided by the franchisor.
There are risks involved for both parties, but carefully worded contracts can minimize these problems. The franchisor suffers the danger that its trademark will be damaged by the improper or incompetent actions of the franchisee. The franchisee faces the danger of losing money expended on the business that cannot be recovered if the franchise is withdrawn.
The first franchise in the United States was granted during the 1850’s by the sewing machine manufacturer, Isaac Merrit
Franchising for restaurants, motels, and fast-food enterprises began during the 1930’s with A&W Root Beer. Howard Johnson began developing restaurant and motel franchises around 1935. Franchising expanded rapidly after World War II. As American consumers acquired the ability to travel widely, they showed a preference for trademarked enterprises because the products and services offered were familiar and of predictable quality. The McDonald’s Corporation is one of the most successful fast-food enterprises.
In addition to the new supercenter marketing concept, computerized inventory systems became available. Many retail chains began offering
The most successful computerized concept developed so far has been that of Wal-Mart. Its computerized inventory system is so sophisticated that every time a customer goes through the checkout line in any Wal-Mart store, the bar code of the computerized system provides a record of the precise item the customer purchased. When sufficient quantities of products have been sold across the entire system, new quantities can be purchased. Because the purchases are recorded on an individual store basis, Wal-Mart can calculate how much to purchase and ship to each of its individual locations. This enables Wal-Mart to avoid the loss of sales because products were not available when customers wanted them and also to avoid the danger of overstocking items. Given the massive buying power of the Wal-Mart chain, this new computerized system has made Wal-Mart one of the most efficient retail chains in the world, earning record profits.
Although many characteristics of the retail trade industry have changed over the last few centuries, it continues to be true that the retail trade industry forms a critical link between producers and consumers and also provides critical information on products and prices for the entire economic system.
Benson, John, and Gareth Shaw, eds. The Retailing Industry. 3 vols. London: Macmillan, 1999. One of the most comprehensive examinations of retailing available. Crossick, Geoffrey, and Serge Jaumain. Cathedrals of Consumption. Brookfield, Vt.: Ashgate, 1999. The architecture as an aspect of the retail industry is considered in this monograph. Davis, Dorothy. A History of Shopping. Toronto: Toronto University Press, 1996. A general overview of retailing as shopping. Dow, Louis A., and Fred Hendon. Economics and Society. Englewood Cliffs, N.J.: Prentice Hall, 1991. Strongly influenced by the free-market economics of Adam Smith, these coauthors look at economics in a societal context. Willis, James. Explorations in Microeconomics. 5th ed. Redding, Calif.: North West, 2002. This mainstream text examines construction from a microeconomic perspective explaining the impact of retailing in the individual firm. Wrigley, Neil. Reading Retail: A Geographic Perspective on Retail and Consumption Spaces. New York: Arnold, 2002. A theoretical perspective on the important issue of geographic location on retailing. Wrigley, Neil, and Michelle Lowe. Retailing, Consumption, and Capital: Towards the NEW Retail Geography. London: Harlow, 1996. Economic and geographic theories are paramount in this study of retailing.
Credit card buying
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Warehouse and discount stores