Classic Trade – Distribution Trading System
As we said, the task of trade is to mediate between producers and consumers and organize the market. With the advent of factories and mass production, there is a need to organize distribution channels to deliver products to distant locations.
In this simplified display of classical, traditional shops, we see that this distribution channel is made up of wholesale and retail.
Their task is to deliver the product from the manufacturer to us consumers. The reason for this is that as consumers we can not go directly to the manufacturer and buy one product that we need. At first, a large wholesale buys large quantities of products and most often places them in some of the smaller wholesale markets that deliver them to retail stores, where, finally, we come and buy the product we want. Throughout this path, the product has changed one of the only characteristics, and that is the price. We pay the price increased for all costs and margins of wholesale and retail, as well as advertising.
This is how it works for a very long time and it would not be disputable that there are no accompanying problems that dwarf the manufacturer, which, of course, ultimately reflects on what our consumers are only interested in, the quality and price of the product.
Probably the biggest problem, we can call it the business of the 21st century, is a non-payment system. Today it is so normal that it’s almost weird in a business world to come across a company that does not have a billing problem. In the increasingly fierce market competition, more and more competition, traders are struggling to gain customers in every way, giving various ways of deferred payments (checks, loans, leasing, on-line, etc.), which means that the money is slowly traveling back to the manufacturer , as opposed to products that in the opposite direction travel very quickly. It is clear that the manufacturer must regularly produce and market his products in order to remain competitive on the market, but how to achieve this when he does not get his money on time or in full.
A big manufacturer made a studio a few years ago where he monitored one of his products by code number, from the moment he left the factory to the moment he received the money for him. It turned out they were waiting for about 2.5 years to pay. Large manufacturers may be able to withstand this rhythm, but how many are really such big producers that can afford it and that production and the quality of products do not suffer?
Another problem for manufacturers is the rapprochement of traders, i.e. in a way, combining wholesale and retail into hypermarkets and megamarkets. Very financially powerful they buy huge quantities from producers, so it’s hard for small traders to survive in that marketplace where “big fish eat small fish”. And when the big fish stays alone in the sea, she sets the conditions. Search for extra rebates, deferred payments, etc. … and the manufacturer is in a growing problem. Therefore, Classic Trade is forced to deal in a variety of ways, to shift production where there is cheap labor, to decompose on raw materials … and in the end we buy worse and worse products. We are aware that advertisements are more expensive and spectacular today, objects are more glamorous …. and when we pay it all, we get a product that we are not usually happy about.