Commercial sector

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The concept of the commercial sector shall cover the activities of all economic operators for which the principal activity is the wholesale and retail sale of goods (D. Lederman, W. Maloney, 2002, pp. 2-5). Commercial sector plays an important role in the economy of each country. It is also important to stress the importance of trade as a binding force for other sectors of the economy and as a factor in changing lifestyles and including conscious consumption (M. Baxter, M. A. Kouparitsas, 2003, p. 3-4.). Commercial sector includes not only real market space, but also virtual space in the form of e-commerce (D. Lederman, W. Maloney, 2002, pp. 2-5). The dynamic development of e-commerce is a very important process in recent years. Worldwide, the internet is currently being used for a variety of activities, including product information and purchase. The commercde sector is divided into retail and wholesale (M. Baxter, M. A. Kouparitsas, 2003, p. 3-4).

Retail commercial

Retail commercial is a type of trade consisting in retail sale in small quantities, taking place in retail outlets, shops, kiosks, stalls, by delivery to flats. It is the last link in the trade in goods. The basic tasks of the retail commercial include (H. Nagy, T. Tóth, I. Oláh, 2012, pp. 27-31):

  • Supplying consumers with goods that fully and properly meet their needs,
  • Offering additional services (e.g. home delivery, hire-purchase, telephone orders), appropriate packaging,
  • The targeted shaping of consumption through advertising, offering, additional services at the time of purchase, etc.,
  • Participation in price formation for goods by recording the reaction of the market to price changes,
  • Carrying out production and processing to supplement and enrich the offer.

Wholesale commercial

Wholesale commercial is the purchase of large quantities of goods, their small processing, e.g. sorting or packing, and then reselling them to retailers, most often through an appropriate commercial network. Its most important tasks are (C. Brown, S. Miller 2008, pp. 1296-1302):

  • Proper supply of retail outlets,
  • Taking care of the proper quality of goods and protecting their usable values, organisation of goods movements,
  • Levelling out the time gap between production and sale of goods (e.g. through storage),
  • Cooperation with producers in shaping supply in line with demand patterns.

In performing these tasks, the food wholesale company performs the following functions:

  • Transforms the production assortment into commercial assortment by completing supplies in terms of assortment,
  • Overcomes time differences between production and retail by storing food products,
  • Overcomes the differences in space between food producers and consumers.

Wholesale trade may take the form (C. Brown, S. Miller 2008, pp. 1296-1302):

  • Storage turnover - goods are periodically stored in wholesale warehouses,
  • Transit traffic - when goods move directly from producers to retailers.

Retail market partitioning - Types of stores

In the nomenclature used by the main market participants, i.e. manufacturers and retailers, the retail market is divided into two segments separated by their store formats. These are (E. Helpman, 1998, pp. 573-589):

  • Small-format segment - includes small retail formats, i.e. large, medium and small grocery stores, chemical and chemical-cosmetic stores and specialist grocery stores,
  • The large-format trade segment - until recently called modern - is represented by retail formats such as supermarkets, hypermarkets and discount stores.

The definitions of stores in the two retail segments described above are based on sales area. Among small format stores, this area does not exceed 300 sqm. However, the smallest shops (small grocery stores) have store rooms smaller than 40 sqm (E. Helpman, 1998, pp. 573-589). Supermarkets and discount stores range from 300 to 2500 sqm. Hypermarkets are stores with much larger areas. Here, the store room has an area of more than 2500 square meters. Usually it is 4000-5000 thousand square meters. Large retail format stores with sales areas exceeding 300 sqm. The sales halls of supermarkets and discount stores range from 300 to 2500 square meters. Hypermarkets are stores with much larger areas. Here, the store room has an area of more than 2500 square meters. Usually it is 4000-5000 thousand square metres (E. Helpman, 1998, pp. 573-589).

Place of commercial sector in the labour market

Commercial segment generates a huge amount of jobs, with far more people employed in retail than in wholesale, and this trend is continuing. Commercial jobs are created for typical trade professions that do not require specific vocational training (M. O'Kelly, 2001, pp. 39-40):

  • Vendor,
  • Cashier,
  • Warehouseman.

But also for a number of new professions related to (M. O'Kelly, 2001, pp. 39-40):

Commercial sector therefore combines two characteristics as an employer: it offers jobs to people with poor professional preparation, assuming that the profession teaches them during their employment; and offers jobs to people with the highest organizational and technical qualifications (S. Ignjatijevic, M. Ćirić, M. Carić, 2013, p. 267). This has a number of consequences, including a significant variation in wages in this sector. Modern trade (but also the so-called traditional trade, in the face of the challenges of the modernising market) has undertaken extensive training and educational activities, creating previously non-existent professions and raising the position of people on the labour market who change their trading company or even leave the trade (S. Ignjatijevic, M. Ćirić, M. Carić, 2013, p. 267-268).

Wages and salaries in commercial sector

Wages and salaries in commercial sector vary considerably from one country to another (C. Brown, S. Miller 2008, pp. 1298-1299):

  • Of its type (wholesale, retail, international, electronic),
  • The position held,
  • The gender of the employee,
  • The location of the trading company,
  • Ownership of capital.

Directors and executives working in international trade earn the best pay. In the case of domestic trade, those working in wholesale are better paid than those working in retail. Obviously, the least paid are so-called 'private workers' (C. Brown, S. Miller 2008, pp. 1300-1302). Here, too, the highest wages are in international trade, while a worker employed in a wholesale trade earns more than a retail worker. The location of the trading company also influences the level of wages in commercial sector - the highest wages are earned by workers employed in large cities - and the origin of the company's capital (C. Brown, S. Miller 2008, pp. 1302).

Commercial sector and local markets

Despite the growing number of large format stores and the growing importance of these formats in the volume and value of purchases, traditional small-format trade, often referred to as the local market is also very important (M. O'Kelly, 2001, pp. 40-41). Of course, it will never be as big a potential for retailers as it is for business. in big cities. However, given that many citizens live in rural areas, local trade has played and will continue to play a huge role. Rural areas account for the largest share of FMCG purchases (M. O'Kelly, 2001, pp. 45). Consumers living in rural areas are still responsible for the largest share of the FMCG purchase. FMCG, however, their importance is decreasing to a small extent in favour of the largest cities. The largest cities attract with their wide offer, diverse assortment and price promotions (E. Helpman, 1998, pp. 589).

New trends in the commercial sector

New trends that we see are above all (S. Ignjatijevic, M. Ćirić, M. Carić, 2013, p. 269):

  • Development of franchise stores,
  • Tailoring the offer to the local customer,
  • Striving for high satisfaction and local customer service,
  • Personalization and individualization of the assortment and offer.

Examples of Commercial sector

  • Retail businesses - These are businesses that are involved in the sale of goods or services directly to consumers. Examples include department stores, grocery stores, clothing stores, electronics stores, convenience stores, drug stores, and restaurants.
  • Wholesale businesses - These are businesses that purchase goods in bulk and then resell them to retailers or other businesses. Examples include wholesalers, distributors, and manufacturers.
  • Online businesses - These are businesses that operate solely online, such as e-commerce websites, online marketplaces, and virtual stores.
  • Financial services - These are businesses that provide financial services, such as banking, insurance, and investments.
  • Business-to-business (B2B) services - These are businesses that provide services to other businesses, such as consulting, marketing, and logistics.
  • Advertising and marketing services - These are businesses that provide services such as advertising, public relations, and market research.

Advantages of Commercial sector

The commercial sector has numerous advantages that contribute to economic growth. These include:

  • Increased competition - the introduction of new competitors in the market creates a competitive environment that encourages businesses to innovate, thus inspiring growth and development.
  • Increased employment - businesses in the commercial sector often require a large workforce, providing jobs to people who may not otherwise be employed. This helps to reduce unemployment and poverty.
  • More consumer choice - the presence of a wide range of businesses and products increases the variety of choices available to consumers, which can be beneficial for both consumers and businesses.
  • Economies of scale - businesses in the commercial sector are often able to benefit from economies of scale, reducing costs and making products more affordable.
  • Increased efficiency - businesses in the commercial sector are often able to reduce costs and make their operations more efficient, leading to higher profits.
  • Stimulates economic growth - the commercial sector provides a platform for economic growth, as businesses are able to take advantage of the new opportunities created by increased competition, employment and efficiency.

Limitations of Commercial sector

The commercial sector has some limitations, including:

  • The lack of reliable data, which can make it difficult to accurately assess the size of the sector and the impact of its activities on the economy.
  • The difficulty in understanding the changing nature and structure of demand, which can lead to inefficient allocation of resources.
  • The difficulty of determining the most efficient distribution networks and the optimal mix of products and services.
  • The cost and complexity of maintaining a competitive advantage in the market.
  • The risk of market saturation, which can lead to stagnating sales and profits.
  • The risk of fraud or illegal activities, which can lead to reputational damage or financial losses.
  • The challenge of adapting to the rapid changes in technology and consumer preferences.
  • The challenge of navigating the global marketplace, where different laws and regulations can create barriers to entry.

Other approaches related to Commercial sector

  • First of all, the commercial sector is a major driver of economic growth and job creation (G. Koopman, B. Oupadissakoon, 2009, p. 1). As such, it should be supported by public policy to promote the expansion of the sector, especially in developing countries.
  • Additionally, the commercial sector is an important source of foreign direct investment (FDI) (G. Koopman, B. Oupadissakoon, 2009, p. 1). As such, it can provide important capital for the development of infrastructure and technology in the countries that host it.
  • The commercial sector also plays an essential role in the global economy by providing goods and services to the world markets (G. Koopman, B. Oupadissakoon, 2009, p. 1). This allows countries to diversify their exports, increase their competitiveness and attract foreign investment.
  • Furthermore, the commercial sector is an important factor in the development of regional and local economies (G. Koopman, B. Oupadissakoon, 2009, p. 1). It can provide employment opportunities, increase the level of entrepreneurship, and generate wealth and economic activity.

In summary, the commercial sector is an important component of the global economy, providing jobs, investment, and goods and services to the world markets. It should be supported by public policy to promote the expansion of the sector, especially in developing countries. Additionally, it is an important source of foreign direct investment and can be a major driver of economic growth and job creation.


Commercial sector — recommended articles
Domestic market — Service economy — Internationalization — International division of labor — Activity center — Retail house — Large organizations — Local market — Related diversification

References

Author: Kinga Zmarzły

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