This is an attempt to differentiate between Traditional Retail channel and Non-Traditional or Modern Retail. Before spotting the difference, its important to understand what exactly are the two channels?
Traditional Channel comprises of the regular trade partners like
1. Direct Dealers: Companies sell directly to them and in turn they directly sell to the end consumer or user. Number of outlets owned by them may vary anywhere between 1 to 10 in any specific location/ city. Their presence is limited to specific geography – within a city or a region
2. Distributors: Companies sell directly to them and they in turn service the smaller retail shops (known as sub-dealers) in the area designated to them by the company. The sub-dealers then sell to the end consumers
3. Wholesalers: This one is a disorganized channel. Either companies or a bigger direct dealer will sell them the products in bulk and they in turn sell to the smaller retailers comparatively at a lower cost than the distributor. They run like a parallel channel to distribution and at times may lead to market imbalances.
4. Brand Shops: These are company owned or franchised retail outlets selling products of only one company. They act as usually the place to showcase the entire range of the products sold by the company.
Non-Traditional or Modern Retail Channel refers to all other formats of retail stores like Hyper markets, Department Stores, Discount Stores, Electric Multiple stores, Cash and Carry Stores, Specialty Stores, Online, Direct selling
Now let us make an attempt to differenciate between the two on certain parameters as mentioned below:
1. Presence: Usually Traditional channel has limited geographical presence say within a city or a specific region while Non-Tradtional or Modern Channel has national presence.
2. Service: Traditional channel (Example: say a neighbourhood Kirana store) has high involvement with the consumer during the sale is made. It can be even to the level of free home delivery of small value goods bought. However the expectation of the consumer is low in terms of service standards at the time of sale. On the other hand in Modern Retail usually there is low involvement with the consumers on the shopfloor. Usually consumers are free to roam around and choose on their own what they wish to buy. Not much personal attention given. At the same time consumer expectations are high.
3. Delivery: There are no strict norms for the delivery of goods from the company to the retailer where as in Modern Retail there are defined delivery norms such as specific time schedule for deliver, barcodes, delivery to happen before expiry of PO etc
4. Volumes: Traditional trade usually sells/ buys consistent volumes with increase during the season/ festivals while on the other hand modern trade sells/ buys higher volumes throughout the year due to promotions and regular expansions.
5. Margins: Traditional trade demands higher margins while retention is low. Modern Trade however demands high margin and also there is fixed percentage of retention.
6. Merchandise: High visibility is ensured in traditional trade with a slight cluttered display. Whereas modern trade has innovative merchandising.
7. Promotions: Promotions in traditional channel are usually seasonal while modern retail channel believes in monthly and daily promotions on products.
8. Training of staff: There is a moderate focus on training of staff in traditional trade while modern trade ensures high level of training of their staff.
9. Credit terms: Companies usually give lower credit periods to traditional trade while modern trade enjoys higher credit limits and periods.
10. Relationships: Traditional trade is managed usually on personal relationship of the sales personnel with the owner while the relationship of modern trade with companies is professional and legal
