UNIT 4: PRICING DECISIONS

Introduction: Pricing the product or service is a critical business decision, representing the amount of money
for which something is sold and purchased. This unit delves into the significance of pricing, its role in the
marketing mix, and the various objectives that guide pricing decisions.
Definition of Price: Price is a multifaceted concept expressed through terms like cost, selling price, charge,
fees, payment, rate, fare, toll, amount, sum, figure, etc. It stands as a crucial element in the marketing mix,
alongside Product, Promotion, and Place, contributing to revenue while other elements produce costs.
Pricing: Pricing is the method or process adopted by organizations to set selling prices. It involves translating
the value of goods and services into monetary terms, considering the firm's objectives and policies. Philip Kotler
emphasizes that price is the element in the marketing mix creating sales revenue, distinguishing it from costs.
Objectives of Pricing:
1. Maximization of Profit: Setting prices to maximize profits by striking a balance between revenue and cost.
Focus on reducing production costs while maintaining a competitive selling price.
2. Return on Investment: Ensuring the firm's Return on Investment (ROI) exceeds total production costs,
leading to profitability. Pricing policies are aligned to yield an average return on the total investment.
3. Increase in Sales: Setting prices strategically to boost sales volume, with the assumption that increased sales
positively impact profits. Regularly adjusting pricing to enhance sales performance.
4. Increase in Market Share: Utilizing pricing strategies to retain existing customers and attract new ones,
aiming to increase the firm's market share. Price becomes a tool for customer acquisition.
5. Facing Competition: Adapting pricing policies to effectively compete in a market characterized by intense
competition. Understanding customers, responding to competitors, and modifying pricing strategies to gain a
competitive edge.
6. Achieving Quality Leadership by Pricing: Creating a positive image of high-quality products through pricing
strategies. Associating higher prices with superior quality to establish the firm as a quality leader in the market.
7. Customer Satisfaction: Studying and analyzing the purchasing power of the target market to design pricing
that maximizes consumer satisfaction. Continuously adjusting pricing to meet customer expectations.
8. Promoting a New Product: Setting initial low prices when introducing a new product to encourage trial and
repeat buying. Sound pricing plays a crucial role in successfully launching new products.
9. Survival and Growth: Recognizing that price is the primary revenue-generating element, pricing strategies
contribute to the survival and growth of a firm. Higher profits enable development and sustainability in the market.
Importance of Pricing:
1. Transfer of ownership: The exchange of goods and services takes place at the price which the buyer and
seller agree upon immediately after the exchange.
2. The element of economic growth: In a country like India, the entire economy is dependent on trading activity.
Price influences profit, rent, interest, and wages, which are the prices paid to the factors of production. Price acts
as a regulator of the economy, influencing the allocation of factors of production.
3. It is the determinant of profitability: The price set by the firm influences the profit margin. Higher prices
result in higher profits. Price is often used to cover losses created by other elements of the marketing mix.
4. It regulates demand: The demand for a product can be directed and controlled by proper pricing strategies.
Generally, prices are reduced to increase demand and increased to reduce demand. Changes in the price of a
product influence its demand.
5. It acts as a competitive tool: Companies use price as a weapon against competitors. By comparing
competitors' prices, a company can set prices for its own products. The firm may charge higher, lower, or equal
prices compared to its competitors.
6. Crucial decision input: Price is a determinant of profit, making it a crucial decision input. Factors like demand,
profit, market share, and competition are dependent on price. Companies use price as an input to increase
market share and attract customers.
Factors affecting Pricing Decisions:
Internal factors: These are controllable factors studied by marketing managers within the business organization.
1. Cost of production: - Cost and price of a product are interrelated. The price of the product depends on costs
incurred on producing a product or service. Keeping the selling price constant, if the costs are reduced the profit
can be automatically increased. (Cost + profit=Sales price)
2. Objectives of the firm: - While fixing the prices of the product, the marketer should consider the objectives
and policies of the firm. For instance, if the objective of a firm is to increase returns or profit then it may charge
a higher price, and if the objective is to capture a large market share, then it may charge a lower price.
3. Image of the firm: - The price of the product of any company can be determined on the basis of the image or
goodwill it have gained in the market. The companies which have good reputation in the market can quote high
prices for its goods and services.
4. Product life cycle: - Every product from the introduction of a new product till the point of saturation will pass
different stages in its life cycle. The price of the product in every stage of the life cycle affects its price.
5. Credit period offered: - Credit sales is the part and parcel of any business firm. The price of the product is
also affected by the credit period offered by the company offered to the buyers. Longer the credit period, higher
may be the price, and shorter the credit period, lower may be the price of the product.
6. Promotional activity: - The promotional activity is very important to publicize his products in the market. The
price of the product depends on the cost incurred for the publicity of the product. If the firm incurs heavy costs
on advertising and sales promotion then the pricing of the product shall be kept high in order to recover the cost.
External factors: These are uncontrollable environmental factors outside the business organization.
1. Competition: While fixing the price of the product, the firm needs to study the degree of competition in the
market. If there is no competition price, it can be fixed freely. If there is high competition, the prices may be kept
low to effectively face the competition, and if competition is low, the prices may be kept high.
2. Suppliers: The firm or organization which provides necessary inputs like equipment, raw materials, machines,
operating means, etc. to the manufactures is called supplier. If the suppliers provide such inputs at an easy price,
the price of products also becomes low and if they charge high, then the price also increases accordingly.
3. Consumers: The marketer should consider various consumer factors like purchasing power, loyalty, price
sensitivity of the buyer etc., while fixing the prices. Variations in the price should be made to retain the old
customers and attract new customers. Low prices are suitable to attract new customers.
4. Government control: Government makes arrangements of different policies, rules and regulations giving
priority to the interest of the nation and people’s welfare. Such policies, rules and regulations also affect price
determination.
5. Economic conditions: Economic condition of the country cannot be controlled by the business firm.
Situations of inflation, deflation, recession or boom may appear in markets. The marketer may also have to
consider the economic condition prevailing in the market while fixing the prices.
6. Channel intermediaries: Channel intermediaries are those who make the firm’s goods and services available
to the ultimate consumers. The firm must consider a number of channel intermediaries and their terms &
conditions. The longer the chain of intermediaries, the higher would be the prices of the goods.
7. Market demand: Demand for a product will also influence the pricing. The demand for products may decrease
or increase due to the reasons of total number of customers, their income, purchasing power, priority, competition
etc. The situation arises when the total demand for products declines, price should be decreased and when
demand is increased it should be increased.
Pricing Policies & Strategies: 1. Penetration Pricing: It is a strategy used by businesses to attract customers to a
new product or service by offering a lower price initially. The lower price helps a new product or service penetrate the
market and attract customers away from competitors. Penetration pricing comes with the risk that new customers
may choose the brand initially, but once prices increase, switch to a competitor. Ex: Jio
2. Skimming Pricing: It is a product pricing strategy by which the Company enters the market by setting high
price and then slowly lowers the price to make the product available to a wider market. The objective is to
skim profits by selling the products to creamy layer of the market (i.e., customers who are ready to pay higher
prices).
Ex: iPhone or Mobile phones
3. Prestige Pricing: It is a price set for prestigious products. The prices are set at a high level to provide a
prestige or quality image. It is used especially when buyers are capable and willing to pay price with higher
quality.
4. Professional Pricing: Professional pricing is a strategy adopted by people who have great skill or experience
in a particular field or activity. The concept of professional pricing carries with it the idea that professionals have
an ethical responsibility not to charge high prices to the unknowing customers.
For ex: Doctors, Lawyers, Tax consultants etc.
5. Economy Pricing: An economy pricing strategy sets prices at minimum to make a small profit. Companies
minimize their marketing and promotional costs. The key objective of the economy pricing is to sell a high volume
of products and services at low prices to selected products. For Ex: Generic medicine
6. Competition Pricing: Competitive pricing is the process of selling the products or services at the same or a
lower price than your competitors. When there is more demand for the product in the market, then the company
can charge higher than the competitor’s price.
7. Product Line Pricing: A product line is a range of product or group of related products sold under a single
brand by the same company. Pricing different products within the same product range. The greater the features
and the benefit obtained the greater the consumer will pay.
8. Bundle Pricing: The Company charges a bundle of products at a reduced price. Common methods are ‘buy
one and get one free’ promotions. Businesses use bundle pricing to sell multiple products together for a lower
price than if they were purchased separately. This is an effective strategy to move unsold products from the
market.
9. Premium Pricing: Premium pricing strategy sets a price higher than the competitors. It's a strategy that can
be effectively used when there is something unique about the product. Or when the product is first to market and
the business has a distinct competitive advantage.
10. Psychological Pricing: Marketers use psychological pricing that encourages consumer to buy products
based on emotions rather than on common-sense logic. It can also be described as setting prices lower than a
whole number.
For ex: when a firm sets the prices of its product at Rs.199 instead of Rs.200. Even though the difference is
small, consumers perceive Rs.199 as cheaper.
11. Optional Pricing: Optional product pricing is when a business decides to sell their product for a much
cheaper price than they ordinarily. The Company sells optional products or accessories along with the main
product to maximize its turnover. It sets low prices for the most basic product and then makes profit from selling
more expensive accessories.
Ex: A software options, Apps, service plans, hard drive etc. can or cannot be purchased with new PC, Printer
and Ink, Airlines and special requests etc …
12. Cost Plus Pricing: The price of the product is production costs plus a certain amount of profit. It's a pricing
method where a fixed percentage is added on top of the cost it takes to produce one unit of a product (return
the company wants to make).
13. Value Based Pricing: This method of pricing are based mostly on consumer’s perceived value of the
product or service rather than the costs. The firm makes a detailed analysis of the product benefits perceived
by the customer instead of focusing on the exact cost of developing the product.
For example, a painting may be priced as much more than the price of canvas and Paints, the price in fact
depends a lot on who the painter is or how the painting is.
Methods of Pricing:
A. Cost–oriented methods:
1. Cost plus pricing
2. Marginal cost pricing or variable cost pricing
3. Break–even pricing
4. Target Pricing
B. Demand/Customer-oriented methods:
1. Perceived value pricing
2. What the traffic can bear pricing
3. Skimming pricing
4. Penetration pricing
C. Competition-based pricing:
1. Going rate/Parity pricing
2. Competitive Bidding Price
A. Cost-oriented pricing Method: These are the traditional methods of product pricing. Cost based pricing
method is most simple and easy. It is widely adopted by the companies because, cost provides the base for a
price. Cost incurred for the product is taken as a base and a percent of profit is added to it to calculate the
price of the product.
Cost-oriented methods of pricing are as follows:
1. Cost plus pricing: Cost plus pricing involves adding a predetermined percentage of profit to the costs (All
direct and indirect costs) incurred in order to fix the selling price. The predetermined percent of profit is called as
margin or markup pricing
Adding a predetermined percentage of profit to all costs (direct and indirect) incurred to fix the selling price.
2. Marginal cost pricing or Variable cost pricing: In this method only the variable costs which are incurred
for manufacturing a product are considered while determining the price of a product. Marginal cost is the
practice of setting the price of a product to equal the extra cost of producing an extra unit of output.
Considering only variable costs while determining the price of a product.
3. Break-even pricing (BEP method): It is also called as cost-volume profit analysis. Break-even is a situation
where a company is neither making profit nor loss, but all the costs have been covered.
Break even pricing is the practice of setting a price at a point where a business will earn zero profits on a sale.
At this point a company will increase its production volume to such an extent that it can reduce costs and then
earn a profit.
Setting a price at a point where a business earns zero profits on a sale, covering all costs but making no profit.
4. Target Pricing: This method is also called as Rate of return pricing. In this method, the (profit percentage)
target rate of return is pre-determined based on capital invested. The firm fixes the prices of a product in such a
way that the firm can achieve the return or profit on the capital employed.
Example:
- Manufacturer invested capital of Rs. 10,00,000/-
- Desired return on investment is 30%
- Target Price = Unit cost + (desired return x invested capital)/unit sales
- Target Price = Rs. 16 + (0.3 x 10,00,000) / 50,000 = Rs. 22/-
B. Demand/Customer-oriented Methods: This method utilizes customer demand to set product prices. Prices
may be high when demand is high and low when demand is low. Different types include:
1. Perceived Value Pricing: Under this method, the firms fix the price of their products on the basis of
customers” perceived value as a primary factor. If customers perceive a higher value for the product, then the
price fixed will be high and vice versa. This method requires market research to study the perception of the
consumers before fixing the price.
Setting prices based on customers' perceived value as a primary factor. Requires market research to understand
consumer perceptions.
2. 'What the Traffic Can Bear' Pricing: Under this method, the firm sets the maximum price that the buyers are
willing to pay under any given circumstances.
For example- Professionals like doctors, lawyers, chartered accountants etc., adopt this pricing. They charge
fees on the basis of ability of the clients, patients etc. to pay. They may charge higher prices for the rich and vice
versa
3. Skimming pricing: Under this method, the firm sets a relatively high price when the product is introduced
and then lowers the price overtime.
4. Penetration pricing: Under this method, the product is introduced at low prices initially and the price is
increased subsequently with increase in demand and market share.
C. Competition-based Pricing: Competition-based pricing refers to a method in which a firm considers the
prices of competitors’ products to set the prices of its own products. The firm may charge higher, lower, or equal
prices as compared to the prices of its competitors. There are different types of competition-based pricing
methods such as-
1. Going Rate/Parity Pricing: Going rate pricing is the method of setting the prices in relation to the prices of
competitors. The firm bases its prices largely on the competitors’ prices with less attention paid to its own costs
or demand. Therefore, the firm may charge the same, more or less than the major competitor or competitors.
2. Competitive Bidding Price: This is also called as tender pricing. This method is adopted in construction or
contract business. Price is set on the basis of sealed bids (quotation or estimated price) for the jobs. Man y
competitors submit the offers or proposals. The firm which wants to win the contract requires quoting lower prices
than the competitors.
Marketing Channels of Distribution:
Meaning: Marketing channels, or distribution channels, are paths through which goods and services travel from
manufacturers to end users. These channels involve intermediaries like dealers, wholesalers, and retailers,
making products available to consumers.
Definitions:
- According to Philip Kotler: Marketing channels are interdependent organizations involved in making a product
or service available for use or consumption.
- According to the American Marketing Association: A channel of distribution is the structure of intra-company
organization units and extra-company agents and dealers through which a commodity, product, or service is
marketed.
Functions of Distribution Channels:
1. Provides Information: Distribution channels serves as the medium through which customers acquires
information about companies. Companies also collect the required information from the market and its customers
through their distribution network. They receive all suggestions and complaints from their customers through this
channel.
- Distributes information about companies and collects market information from customers through
intermediaries.
2. Product Promotion: The middlemen involved in the channel of distribution sometimes in a directly or indirectly
promotes the sales of a particular item through a special display, loyalty programme, discounts or sale, etc. They
understand the customer need and accordingly introduce them with the products. Intermediaries explain
customer’s features of products properly and motivate them to buy it.
- Promotes sales through displays, loyalty programs, discounts, etc. Intermediaries understand customer
needs and introduce products accordingly.
3. Transfer of Ownership: The channel members examine the actual transfer of ownership from one
organization to another and from one person to another.
- Examines the actual transfer of ownership from one organization or person to another.
4. Negotiating: Companies do not interact directly with their customers. It is the intermediaries involved in the
distribution network that reaches the customers physically. They give all detail information about quality, price
and various terms and conditions to customers. Customers interact with these intermediaries and negotiate for
a fair deal.
- Intermediaries negotiate with customers, providing details about quality, price, and terms.
5. Ordering and Distributing Products: Ordering of goods and delivering them according to needs is important
role played by the distribution channels. Intermediaries involved in distribution, orders and buys goods in large
bulk from the producers. They divide these large stocks by assorting and grading as per customer requirements.
- Orders goods in bulk from manufacturers and distributes them based on customer requirements.
6. Financing: The channel procures funds and disperses it at different level to cover the cost of inventions. It
provides proper finance to the businesses for carrying out these activities smoothly. They ensure a regular flow
of funds to the manufacturers. Intermediaries buys the products from manufacturers in large bulk and make
payment for their purchases.
- Procures and disperses funds at different levels to cover the cost of inventories, ensuring a regular flow of
funds to manufacturers.
7. Risk Taking: The channel members like wholesalers and retailers take lots of risk while carrying out the
distribution work. The risk associated with any product from expiry, damage, breakage, and spoilage, etc. These
risks even include issues related to transportation and warehousing.
- Takes risks associated with products, including issues related to expiration, damage, transportation, and
warehousing.
8. Storage: The channel takes the proper measures for storing the inventories and distributing the same to the
consumers in a good condition
- Ensures proper storage of inventories and distribution to consumers in good condition.
9. Transportation: The wholesalers hire or own a vehicle for the purpose of transportation of the goods. The
assembled products are transported to the warehouse and the same is delivered to the retailers as and when
required. The transportation is done on economic basis to reduce the cost.
- Handles the transportation of goods from manufacturers to customers, ensuring economic and efficient
transport.
Importance of Distribution Channels:

1.It helps in Providing information to both manufacturers and customers.

2. It helps in directly or indirectly promoting the sales of a products.
3. Helps customers negotiating for a fair deal.
4. Intermediaries involved in ordering and distributing the from the producers to customers.
5. It provides proper finance to the businesses for carrying out business smoothly.
6. It takes risk associated with any products from storing, expiry, damage, breakage, and spoilage, etc.
7. Helps in storing the goods in proper condition.
8. Helps in transporting goods from the place of manufacturer to the customers.
9. Helps in transferring the ownership from the manufacturer to the customers.
Types of Distribution Channels:
1. Direct or Short Channel: Here, the manufacture sells the products directly to the consumers without taking
the help of intermediaries. Manufacturer of perishable goods adopt direct distribution method to avoid physical
damage or destruction of the goods. Goods which are in technical in nature are directly sold to the consumers.
Example: Door to door sales, online shopping, telemarketing, T V Selling etc.
2. Indirect Distribution Channel: In this type of channel, the manufacturer takes the help of number of middleman or
intermediaries like - wholesaler, Retailer and agents to sell his goods and services to the end users.

- Different types include:

a. Manufacturer to wholesaler to consumers - In this type of channel, the goods are sold from manufacturer
to the wholesalers to consumers without involving the retailers. This channel is adopted when the consumers
are not individual buyers, but are institutional buyers such as hospitals, schools, colleges, Government agencies,
sports clubs etc.., who purchase in bulk.
b. Manufacturer to retailer to consumers - In this type of channel the manufacturer sells his goods by
involving only retailers in his channel. This is possible only when the manufacturer produces durable and
specialty goods such as high fashioned and high-class goods.
c. Manufacturer to wholesaler to retailer to consumers (most common) - This is the most popular channel
adopted by both large and small companies. There are two intermediaries between the manufacturer and
consumers, namely the wholesalers and retailers. The manufacturer takes the help of these intermediaries to
dispatch his product into the market. The manufacturer producing non-durable goods use this channel more
convenient.
d. Manufacturer to agent to wholesalers to retailer to consumers: This is the longest channel that the
manufacturer uses to sell his goods to the consumers. The manufacturer sells the products to the commission
agent who in turn sells it to the wholesaler, the wholesaler sell to the retailers and finally reaches to the
consumers. This manufacturer adopts this channel when he totally wants to concentrate on production activities
rather than selling the goods. An agent manages the marketing affairs on behalf of manufacturer to sell the
products.

Factors Influencing Selection of Distribution Channels:

1.Product factors: Product-related factors are among most important, relevant and powerful factors affecting
channel decision. Several product factors which influence the choice of distribution channels are-
a. Unit value of the product: If the price of the product is high, then the manufacturer selects the shorter channel
to gain more profit from units sold.
b. Type of product: Products may be standard and non-standard (customized). For standardized product long
channel of distribution is adopted. Non-standard products are sold using short or direct channel of distribution.
c. Physical features of the product: If the product is perishable(nondurable) in nature, such products are sold
adopting short channel. If the products are durable in nature, then the long chain of distribution in adopted.
d. Technical features of the product: If the product is technical and complex in its nature, then, the manufacturer
as well as consumers prefer direct channel of distribution, because such products require explanation,
demonstration, installation and tests. Whereas, simple and non-technical products which has self-explanatory
about the use can be sold through long chain of distribution.
2. Market Factors: The factors which influence the choice of distribution channels are as follows:
A. Size of the market: If the size of the market is larger, then long marketing channel is adopted and if the
market size is small then, the shorter channel of distribution can be adopted.
B. Location of the market: Where the location of the manufacturing firm is nearer to the customers, then, direct
channel can be used. If the customers are scattered all over the world far away from the manufacturing unit then,
long distribution channel is adopted.
C. Type of Buyers: There are industrial buyers and general buyers in the market. Industrial buyers require direct
or shorter channel of distribution whereas, the general E:uyers require long channel of distribution.
D. Buying quantity: If the buyers buy the products frequently in large or bulk quantities, such products require
a greater number of middlemen. Whereas, the products purchased rarely and in smaller quantity leads to shorter
channel of distribution.
3. Company Factors: Company’s factors which influence the choice of marketing channels are-
A. Company’s Financial Ability: Large firms with sufficient funds have the ability to set up their own retail shops
to sell directly to customers. In case of weak enterprises, they need to depend on middlemen for their products
to reach the end user.
B. Volume of Production: Large firms whose output or production is bulk find it suitable to set up their own retail
outlets. Companies having small outputs, they find it economical to distribute through middlemen.
C. Company’s Marketing Policies: Every company will have policies regarding marketing channels which lay
down norms relating to it. These policies and norms also strongly influence on the choice of channels of
distribution.
4. Middlemen Factors: Choice of distribution channel influence on the qualities of marketing middlemen or
intermediaries. Such factors are-
A. Middlemen services: The products require some special kind of promotion or special kind of storage facilities.
If the manufacturer cannot provide it, then the manufacturer has to utilize the services of the middlemen who
conveniently provide all such facilities.
B. Availability of middlemen: When the desired type of middlemen are available the manufacturer can utilize
their services. If the middlemen are not available as per the requirement of manufacturer then, the manufacturer
has to establish their own distribution network.
C. Attitudes: If the middlemen do not obey and oblige the policies, terms and conditions of the manufacturer,
then the manufacturer can
5. Government Factors: Government factor is also one of the factors which influence while selecting the
distribution channel. Though the marketing activities are freedom of the marketer, he is still under the control of
laws and regulations of the government. The manufacturer must be aware of these laws while selecting the
channel on distribution.
For Example: Only a license holder can sell medicines, liquors and drugs in the market according to the law.
Wholesalers - A wholesaler is an individual or organizations that buys from producers and sell it to retailers
and others for the purpose of resale.
According to American Management Association, “Wholesaler sell to retailers or other merchants and/or
individual, institutional and commercial users but they do not sell in significant amounts to ultimate consumers”.
Types of wholesalers

1. Full function wholesaler

2. Limited function wholesaler

1.Full Function Wholesaler: They are middleman who performs all the functions of marketing such as buying,
selling, assembling, financing, storage, transportation and grants credit to the retailers. There are three types of
full function wholesaler-
a. Merchant Wholesaler- Merchant wholesaler is large in numbers. They perform all the functions of marketing
to sell the products of the manufacturer. They buy and sell in their own name, own and operate warehouses,
store, grade, transport and also grant credit to their customers.
b. Converters - These types of wholesalers are more common in America and very few found in India. They
operate as both manufacturer and wholesaler. They purchase raw materials, process it and convert it into finished
goods as per the requirement of consumers and sell it to the retailers or industrial buyers.
c. Industrial distributors – They are merchant wholesalers who sell wide variety of industrial goods to the
industrial consumers. They sell the goods to the retailers for further operation and not for resale.
2.Limited function wholesaler: They are merchant wholesalers who perform limited or few functions of
marketing. There are of four types:
1. Cash and carry wholesaler: Wholesaler provides credit facilities to the retailers. The retailers have to visit
the wholesaler’s warehouse and purchase the goods as per the requirement and pay cash immediately for the
purchases made.
2. Truck wholesalers: These wholesalers provide transportation services by carrying a limited range of stocks
and sell it to retailers and consumers. They usually carry perishable and semi-perishable goods.
3. Drop-shipment wholesalers: These wholesalers do not store or transport the goods to the retailers instead,
they arrange for the direct delivery of goods from the manufacturer to the retailers as per their requirements.
2. RETAILERS
Retailing is marketing activity involved in selling the goods and services to the ultimate consumers. The retailing
mainly focuses on selling the consumer goods and services to the consumers for final use rather than for
industrial use or for resale. Retailer is a middleman who sells the goods and services to the final consumers for
personal or non-business use.
Types of Retailers:
A. Mobile/Itinerant Retailers: This type of retailers moves from one place to another to sell the goods to the
consumers. They have no fixed shop or place to sell the goods. They sell the goods in small lots with very small
investment.
1. Hawkers and Peddlers: Hawker is an individual carry their goods from place to place. A peddler is a person
who sells the goods and services in small quantities by travelling house to house. Goods like readymade
garments, pens, toys, towels, etc. are sold by them. There cannot be any guarantee for the quality and are sold
at low prices. Products: Readymade garments, pens, toys, towels, etc.
2. Street traders: Street retailers carry on their business on the busy streets or footpaths of big cities and towns.
They carry on their business usually at bus stops, railway stations, near cinema houses, near government and
commercial offices, schools and colleges. Selling of any articles on the street like chips, flowers, vegetables etc.
3. Market traders: Market traders are those retailers who open their shops at different places on fixed days,
known as market days. Such days may be fixed on a weekly or monthly basis. They do their business when
other shops are closed during week-ends. A person who is running a stall at a market is called market trader.
4. Cheap Jacks: Cheap Jacks are a type of retailers who have their small shops in a business locality with
changing location. Individual who sells the cheap and inferior goods at a market or fair is called cheap jacks.
B. Fixed shop retailers: Retailers who have a fixed and permanent place or shop for selling the goods and
services are called fixed shop retailers. There are five types-
1.Syndicate stores: Syndicate stores sell variety of products. These retailers buy unbranded products and sell
them in the market under their name. They sell readymade garments, toys and other products.
2. General stores: General stores are usually found in small locality that sells many different things including
groceries. It sells goods which are required for day to day use such as biscuits, toothpaste, soaps, oils, hardware
etc., but it is not divided into departments.
3. Street stall holders: These retailers sell goods of small size on a busy streets or locations. Once the stall is
installed in one locality, it is almost permanent to engage in the business. They sell variety of products but in
small quantity. They sell pens, cosmetics, socks, handkerchiefs, masks, fruits, vegetables etc.
4. Specialty goods shops: These retailers sell goods of single line. Wide varieties of goods are available in
such specialty shops. They are specialized in selling the single line products such as sports products, shoes,
watches etc.
5. Second hand goods dealer: These retailers sell second hand products at low price. Usually, the price will be
50 percent less than its original price. The low- and middle-class people who cannot buy products at higher
prices buy these goods at lower prices. The second-hand goods sold by the retailers are books, garments, plastic
products etc.
C. Large Scale Retailers: This is a type in which, single type or variety of goods is made available to a large
consumer in a big shop under a single roof or made available at the convenience of consumers.
1. Departmental stores: Departmental stores are large retailing outlets. They sold wide variety of products
under one roof. They sell products of different line which are arranged separately in different departments. These
stores are usually found in urban areas and they satisfy the higher/rich class people.
2. Multiple stores: Multiple stores are also called as chain stores. These stores have the network of number of
branches situated at different parts of the country. Thus, multiple stores are the retail outlets in different localities
of a country with variety of goods of an individual manufacturer. For example- Bata shoes are opened in different
localities with centralized management.
3. Mail order shops: This is modern type of retailing which sells directly to the customers through post either by
VPP (value payable post) or by registered parcel without taking the help of middlemen.
4. Co-operative stores: Co-operatives are the association of consumers who purchase goods in bulk and sell
through the stores to the members of the co-operatives and non-member consumers. In India co- operative
stores are found in cities and towns and are called as Apna bazaar or Janta bazaar.
5. Supermarkets: It is self-service stores which sells wide variety of food and non-food products under one roof.
The goods are displayed in open racks and the buyer roams around the shop and selects the articles he wants
to purchase. Before leaving the shop, he pays the cash to the shop boy in the counter. Example - Reliance
outlets and More outlets.
6. Hyper market: A hyper market is a super store combining a super market and a department store. It carries
a wide range of products under one roof. Hyper market allows customers to satisfy all their routine shopping
needs in one trip. They typically cover an area of 5000 to 15000 square meter (54000 to 161000 sq ft). These
hyper markets are located in suburban or out of town which have more than 2,00,000 different brands of
merchandise available at any time.
Example: U Mall & Urban Oasis Hubli, Orion & Garuda mall, Bangalore.
7. E-retailing: Electronic retailing/E-retailing means shopping through the Internet and other media forms.
Anything anywhere at the click of a button. It is the process of selling the goods and services through an electronic
media. For example, Amazon, Walmart, Best buy are some of the reputed companies selling their products
online.
III. Mercantile Agents: Agents also act as middlemen who help in selling the goods of manufacturers to the
consumers. But agents do not take the title of the goods, instead, they transfer the goods from producers to
consumers on commission basis.
1. Brokers: Brokers make a negotiation of purchase or sale of goods with taking the title of goods or handling
the goods. He brings the sellers and buyers together as per the agreement or contract. After the completion of
negotiation, he receives some amount of money in the form of commission from the seller.
2.Commission agents: Commission agent buys the goods from the manufacturers or producers and sells it to
the consumers. He does not take the title of the goods, but he possesses all the rights like grading, packing,
transporting and delivering the goods as per the orders received from the buyer
3. Manufacturer’s agents: Manufacturer’s agents are independent contractors who work on commission to sell
products for more than one manufacturer. He sells the goods of manufacturers of different products in the same
channel or to the same customers. They possess limited authority with regard to prices and terms of sales.
4. Auctioneers: Auctioneer is a person authorized or licensed by law to sell land or goods of other persons at
public auction. They are individuals who are in charge of an auction who call out the prices that people offer.
They are middlemen who sell products in auctions in which bidders competitively bid upon their offered product
with the highest offered price winning. Auctioneers are usually paid through commissions earned off the final
sale.