What is modern trade? Difference between modern trade and traditional trade.| Modern Trade and General Trade
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What is modern trade? Difference between modern trade and traditional trade

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What is modern trade? Difference between modern trade and traditional trade

What is Modern Trade?

Keyword: what is modern trade | Benefits of Modern Trade | Modern Trade VS Traditional Trade/General trade


Modern trade is being referred to as organizational retail that involves a much more organized as well as a co-ordinated approach that happens to distribution and logistics management.

This always has an inclusion of large players such as supermarket chains, hypermarkets, mini-supermarkets as well as large retailers that deals with businesses with fast-moving consumer goods such as packaged rice, liquid soap, floor cleaners,  breakfast cereals, air fresheners, foodstuffs, drink and household equipment sold in these outlets.


what is modern trade.

Modern trade format started its origins in India in the 1990s and has been growing in popularity since that time. Modern trade now has spread across the whole wide world now. 


The growing popularity that is defined for modern trade is in fact because it is the best channel for the rapid sale of fast-moving consumer products or goods. Even though modern trade is an entirely urban phenomenon that is taking place, it has a market share of about 9.2 percent overall that is in fast-moving consumer goods.


Benefits of Modern Trade:


Even though modern trade has just found its presence in India since the 1990s, it has been able to make a significant impact on consumers and their behavior in how they shop and purchase products for daily businesses. Here are some of the factors that have vastly affected because of Modern Trade:


1) The modern Trade has influenced consumers in order to make more repetitive purchases


2) Modern Trade has led to the growth of premium products that are products from private labeled brands.


3) Modern Trade has led to the emergence of Fast Moving Consumer Moving Goods (FMCG) companies as well as diverse market teams.


What is Traditional Trade?


Traditional trade is often associated with a highly complex network that is made up of many small retailers and shop owners, dealers, stockists, wholesalers, distributors, open markets, corner stores, kiosks as well as street vendors.


Traditional Trade always builds on interpersonal relationships that exist between the customers as well as retailers. It occupies close to 80% share in many key developing economies. The majority of the people buy their foodstuff, drink and household items and goods from these outlets.


Traditional trade has always been associated with the spread out of the distribution network of small retailers, dealers, stockists, wholesalers, and distributors. It is an intricate network that spreads and serves localized customer demand through regular orders that have short lead times and exhibits varying fill rates.


Fill rate or Fulfillment rate is the immediate customer demand which can be met with an in-stock inventory. Now this is also calculated in terms of the total order that is delivered out of the total order requests that has been made. Lead time is the time it takes for a delivery to get fulfilled once the order is successfully recorded.


Traditional trade builds on interpersonal skills and relationships that exist between the customers and retailers. Even the retailers interact in a more personal and direct manner with the field service agents. The field agents take orders on behalf of the distributors.


The distributors always manage to fill the order by having a lead time of a day or two. The distributors, in turn, deal with the manufacturers in order to maintain the adequate inventory to keep a healthy fill rate for the orders. The credit cycle is always often extended to these retailers and is of short time duration.


In traditional trade, the brand choice is either limited to what is available freely or requires the shopper to ask for it by name. Vendors do normally have strong ties to the established local suppliers. Demands in this type of trade can be easily assessed and analyzed by the retailers when the order is placed. Sometimes the field agent that is responsible for taking the order is accompanied by the delivery person (in the delivery vehicle) and the order is filled on the spot.




Modern Trade VS Traditional Trade


The main difference between traditional trade and modern trade is that the distribution in modern trade is much more organized. Retailers often directly deal with manufacturers and there is no middlemen involved. Many large retail chains have integrated their services to offer their brands in groceries and other goods.


The focus is on giving the customer an overall good buying experience as well as value for money. And in order to sustain this, they require a potential logistics management system backing them up.


Modern retailers are always able to maintain their fill rate which is always above their safety stock (minimum stock they require to fulfill immediate demand, and which is also a trigger to reorder the product) to balance their inventory along with economic order quantity that minimizes carrying and ordering costs while increasing total demand fulfillment.


To achieve this, it requires them to be particular about their delivery windows. They have clear time slots for each product replenishment and they often penalize distributors if the delivery time slot is either missed or delayed. Because modern retailers such as malls and supermarkets occupy a sizable business for the distributors, the distributors or manufacturers turn their attention towards technology in order to support better schedules and route planning for their deliveries.


Traditional trade exists in small developing countries. Where people depend on small retailers to manage their livelihood and spend their lives shopping in small street shops. Modern Trade is prevalent in developed countries such as the USA or Europe, where there is a large product base and thus higher competition for being a viable product for the customer.


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Difference Between Modern trade and General Trade




Traditional trade


  Modern Trade


In traditional trade, the demand is always seasonal



In modern trade, demand is always consistent.



The main customer interaction is direct in which the product is handed out to the customer



The customer interaction happens and always has a benefit of choice. Due to the vast amount of multiple products side by side


The order fulfillment can be accommodated at different times



The order fulfillment has to be specific to pre-decided time slots



The placement of an order is based on current stocks



Order placement is appropriately planned in order to meet promotional demands



The lead time is always short and direct



The lead time is always structured



The owner of the retail shop owns the company from the beginning to the end



The retail proprietors are subject to change


The product range is limited



The product range is unlimited



The on-time deliverables have a considerably lower focus



The on-time deliverables have a comparatively higher focus



Traditional trade requires the presence of the local shop and display of all items on sale.


Modern trade can be conducted at any time and anywhere in the world. Even when the customer is flying over skies or inside moving trains. (Online)




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So now we have discussed the subtle differences that exist between modern trade and general trade. To conclude, we feel that modern trade offers a much better prospect for delivering customers. With a seamless buying experience and enhance their abilities to shop and stock goods according to the customers’ needs and objectives.

what is modern trade.

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