Now that you have created a sample business, it is time to consider what kinds of goods and services it will require and how you will get them. this is the buisnness Producers:
Producers are individuals or organizations involved in creating goods or services to be sold to consumers. Example: The local farm, as producers of organic vegetables, supplies fresh produce to the community.
Raw-goods Producers:
Raw-goods producers focus on extracting and harvesting natural resources or raw materials that can be used by manufacturers.
Example: A logging company is a raw-goods producer that supplies timber to furniture manufacturers.
Manufacturers:
Manufacturers take raw materials and convert them into finished products through various processes, usually at a large scale.
Example: The automobile manufacturer produced thousands of vehicles each year, turning steel and rubber into cars.
Builders:
Builders are businesses or individuals that construct buildings and other infrastructure.
Example: The construction company specializes in residential buildings, having built dozens of homes in the new development.
Trade Industries:
Trade industries encompass sectors that involve the exchange of goods and services, including retail and wholesale operations.
Example: The trade industry's annual expo showcased innovations from manufacturers and retailers, fostering networking and new partnerships.
Retailers:
Retailers sell products directly to consumers for personal use. They typically purchase goods from wholesalers or manufacturers.
Example: The local bookstore, as a retailer, offers a wide selection of novels and academic texts to customers in the community.
Wholesalers:
Wholesalers buy goods in bulk from manufacturers and sell them in smaller quantities to retailers or other businesses.
Example: A wholesaler specializing in electronics supplies multiple local retailers with the latest smartphones and accessories.
Service Businesses:
Service businesses provide intangible products or services to consumers, often involving professional expertise or labor.
Example: The local hair salon is a service business where clients receive haircuts and styling.
Types of Businesses that Market Goods and Services
1. Production Sector: This includes primary (raw-goods producers) and secondary (manufacturers) industries.
- Example: A steel mill (primary) and a car manufacturer (secondary).
2. Trade Sector: This includes both wholesalers and retailers.
- Example: A wholesaler selling clothing items to various retail stores.
3. Service Sector: This includes all businesses providing services rather than goods.
- Example: An insurance company providing policies to clients.
These classifications help in understanding the supply chain and market dynamics. For instance, a car manufacturer depends on raw-goods producers for steel, uses parts supplied by wholesalers, and sells directly to retailers or consumers.
2. Online Retail:
- Positives: Lower overhead costs, global reach, convenience for customers.
- Negatives: High competition, reliance on technology and logistics.
3. Pop-Up Shops:
- Positives: Low startup costs, flexibility, ability to test the market.
- Negatives: Short-term presence, less brand recognition.
4. Specialty Stores:
- Positives: Niche marketing, loyal customer base, less direct competition.
- Negatives: Limited product range, vulnerability to market fluctuations.
5. Department Stores:
- Positives: Wide product range, one-stop shopping for customers.
- Negatives: High operational costs, struggle against online competition.
After considering these options, I would be most interested in starting an online retail business. The low overhead costs and ability to reach a wider audience are compelling. Additionally, the flexibility to adapt quickly to market trends makes it an attractive choice.
Private Enterprise and the Role of Retailers
Private enterprise refers to the system wherein private individuals or companies own and operate businesses and manage their production and sales without excessive government intervention. This concept exists as it promotes innovation, efficiency, and personal responsibility in the economy.
Retailers play an essential role in the private enterprise system by acting as intermediaries between producers/manufacturers and the end consumers. They make products accessible to consumers, provide important market feedback to manufacturers, and stimulate economic activity by employing workers and generating sales tax revenue.
Retailers also facilitate competition, leading to better prices and services for consumers, and they often develop strong brand identities that contribute to the overall vitality of the private enterprise ecosystem.
Role of Wholesalers in Business and Free Enterprise
Wholesalers are critical players in the supply chain, serving as intermediaries between manufacturers and retailers. They buy large quantities of products from manufacturers, allowing manufacturers to produce large volumes without needing to sell directly to every retailer.
In a free enterprise system, wholesalers facilitate market efficiency by distributing goods to retailers, optimizing freight and storage, and allowing retailers to purchase smaller quantities tailored to their needs.
Businesses that would likely use wholesalers include:
- Grocery Stores: They purchase a variety of goods in bulk, such as canned goods and snacks.
- Clothing Retailers: They buy seasonal items from wholesalers to stock up their inventories.
- Electronics Shops: They obtain tech products from wholesalers to carry a range of devices.
Benefits of wholesalers include bulk purchasing, lower prices per unit, and simplified logistics for retailers. However, drawbacks can include dependency on wholesalers for inventory, potential issues with stock consistency, and the challenge of finding the right wholesale partner to meet business needs.
In summary, wholesalers play a pivotal role in distributing goods, enabling small and large retailers to meet consumer demand efficiently while enhancing the overall functioning of the free enterprise system.
If the primary function of your business is to provide goods, assume that your business is starting off small, and you will not immediately be able to work directly with producers and will have to go through wholesalers or distributors. If you are providing a service, you will not necessarily need to worry about bringing goods to your door.
For this activity, you are going to make a list of the goods and services that you will need to start your business. Even a service-oriented business will need a physical location and basic supplies. You can stick to categories (i.e., “office supplies” instead of “pens, paper, paperclips, staplers, highlighters, tape…”) for both goods and services. Be sure to consider the services you will need to set it up based on the type of business structure that you chose in the previous unit. As you make your list, be sure to note whether the item falls into the category of goods or services. For goods, you should indicate if you would get them from a wholesaler/distributor or retailer. So, if you are selling shoes, you’ll want to work with a distributor. If you are designing web pages, a regular retailer will probably be all you need for the few materials your business requires. Next to each item or service, explain why this it is necessary for starting your business.
Once you have made a list of at least 10 goods/services your business will require to get up and running, imagine that it is now 5 years later, and your business is thriving and about to expand. How will this change the list? What services or goods will drop off or decrease now that you are up and running? How might some services change due to the higher volume of your business and the increased demand? Are there some services that it might be worth hiring someone to do for your company instead of depending on another business? Write a paragraph addressing these questions.
1 answer
Initial List of Goods and Services for Starting an Online Retail Business
Website Development Services (Service): This is critical for establishing an online presence and facilitating sales. A user-friendly and attractive website is essential for attracting and retaining customers. A professional web designer or development service would be used for this.
E-commerce Platform Subscription (Service): An e-commerce platform (like Shopify or WooCommerce) is necessary for managing online transactions, inventory, and customer accounts efficiently.
Product Inventory (Goods): This includes the initial stock of products to be sold, sourced from wholesalers or distributors. Having a diverse inventory is essential for meeting customer demand.
Shipping Materials (Goods): Items such as boxes, packing tape, and labels are needed to ensure products are shipped securely to customers. These can be purchased from a retailer or wholesaler.
Office Supplies (Goods): Basic supplies like paper, pens, and printing materials are necessary for administrative tasks and efficient order processing, sourced from a retailer or wholesaler.
Marketing Services (Service): Hiring a marketing consultant or agency can help develop advertising strategies to attract customers, crucial for brand awareness and sales growth.
Payment Processing Services (Service): This service is vital for securely processing customer payments online. Partnering with payment processors like PayPal or Stripe is essential for smooth transactions.
Customer Service Software (Service): To manage customer inquiries and support, a customer relationship management (CRM) system will be needed.
Legal Services (Service): Consulting with a lawyer to ensure compliance with business regulations and to establish contracts or agreements is necessary for protecting the business.
Insurance (Service): Business insurance is essential to protect against various risks such as liability, inventory loss, and other unforeseen events.
Expansion Considerations After 5 Years
After five years of operations, your online retail business may undergo significant changes. As demand increases and the business expands, some initial goods and services may drop off the list or decrease in usage. For instance, the need for basic office supplies might diminish as administrative tasks become streamlined, possibly due to a digital transition. Moreover, instead of outsourcing marketing services, you may hire an in-house marketing team to have more control over your branding and customer outreach strategies as your brand identity solidifies.
Additionally, as business volume grows, the inventory needs will increase, requiring more significant partnerships with manufacturers rather than relying solely on wholesalers or distributors. Payment processing may warrant a more complex solution to handle larger transaction volumes effectively. Likewise, as customer interactions scale, investing in advanced customer service software or hiring dedicated customer service representatives could enhance customer satisfaction. Legal services might be required less frequently as initial setups are complete, but ongoing consulting may still be needed for new contracts or compliance with changing regulations.
In summary, expansion will necessitate a transition from relying solely on external services to building an internal infrastructure that supports growth while optimizing operations and maintaining high customer satisfaction.
