Perspectives

General Trade vs Modern Trade

Surbhi Bhadauria
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General Trade vs Modern Trade

General trade is the older of the two models, and was established before India opened its markets to organized retailing. Modern trade, on the other hand, is a purely urban phenomenon that grew in popularity between the 1990s and early 2000s, when many corporates and first-generation entrepreneurs entered the retail business.

Let’s understand the difference between general trade and modern trade in detail.

5 Main Differences Between General Trade and Modern Trade

Before we dive into too many nuances, if you are not clear about what they mean, let’s understand the main difference.

General trade meaning: Local shop/store owned by individuals and catering to the local customers’ requirements.

Modern trade meaning: Chain stores (supermarkets, hypermarkets, or mini-markets) functioning in a more organized and sophisticated manner.

General Trade

  1. Also known as unorganized retail
  2. Covers a wide range of outlets including small shops, kiosks, and even street vendors
  3. Usually family owned businesses that have been passed down for generations
  4. Most common in rural areas, but can also be found in urban areas
  5. Products are often sold at discounted rates

Modern Trade

  1. Also known as organized retail
  2. Covers a smaller range of outlets including supermarkets, hypermarkets, and convenience stores
  3. Usually corporate owned businesses that have only been around for a few years
  4. Only found in urban areas
  5. Products are usually sold at full price

General Trade vs. Modern Trade in FMCG

By some estimates, the total value of trade in FMCG products exceeds US$1 trillion annually. General trade is more convenient for customers because it is easily accessible and generally located closer to residential areas. However, modern trade generally offers a wider variety of products and better service.

Modern trade is also more efficient for FMCG companies because it involves fewer middlemen and has a larger turnover. However, modern trade can be difficult to penetrate for new companies because it requires large investments and a sophisticated distribution network.

General Trade in FMCG

General trade is a vital part of the FMCG industry, as it helps to ensure that products are available to consumers in a timely and efficient manner.

  1. It's where the big brands battle it out for shelf space and consumers' attention, and it's where the biggest volume sales are generated. But it's also a highly competitive, cut-throat environment, with razor-thin margins and fierce price wars.
  2. In many cases, general trade businesses are responsible for delivering products directly to retail outlets, such as supermarkets and convenience stores. This type of trade is often conducted on a larger scale than other types of FMCG trade, such as specialty trade or direct-to-consumer trade. As a result, general trade plays a significant role in the overall FMCG industry.
  3. In order to succeed in the general trade, FMCG companies need to have a deep understanding of consumer behavior and how to influence it.
  4. They need to be experts in retail activation, and they need to have the right products at the right price points.

Modern Trade in FMCG

Modern trade in FMCG is a very different beast to what it was even a decade ago. There have been numerous changes, both in terms of the type of products being traded and the way that trade is conducted.

  1. One of the most significant changes has been the rise of online trade, that is, e-commerce.
  2. Another significant change has been the growth of private label brands. These are products that are manufactured by one company, but sold under another company's brand. This has become increasingly common in recent years, as companies look to cut costs and offer customers more choice.
  3. Finally, there has been a shift in the geographical focus of trade. In the past, much of the trade in FMCG was conducted between developed countries. However, in recent years, there has been a growing trend for companies to source products from emerging markets. This is partly due to the fact that these markets are often able to offer lower prices, but it is also due to the fact that they often have a greater variety of products available.

In the end, it is up to the FMCG company to decide which type of trade is best for them based on their products, target market, and resources. If you're selling products that appeal to a wider, more rural audience, then general trade is probably your best bet. But if you're selling products that are targeting urban, middle to upper-class consumers, then modern trade is likely a better option.

No matter which type of trade you choose, always remember to keep your target market in mind. This will help you make the best decision for your business.

The Future

According to McKinsey & Co consulting firm, general trade or traditional trade will decline from 85% to 65-70% in the next 4 to 5 years. E-commerce and modern trade channels could corner 30% share. As far as overall FMCG market is concerned, it will grow at the rate of 6-7% annually by 2025. In any trade, selling online is non-negotiable.

Modern trade in India has come a long way in recent years. With the advent of online platforms and mobile apps, businesses are now able to reach a wider audience than ever before. This has made it easier for brands to connect with potential customers and promote their products and services.

However, modern trade in India is not without its challenges. For one, the country's vast size and population make it difficult to reach all potential customers. In addition, the competition is fierce, with many brands vying for attention. As a result, businesses need to be creative and strategic in their approach to modern trade in India if they want to succeed.

Conclusion

You have just read so many details about general trade and modern trade. Hopefully, now you understand their meanings and differences better. We, at Edistera, are well-versed with the Indian market and understand the complexities very well. If you are ready to jump into the future of trade, feel free to contact us.

Last Updated :
August 30, 2022
Published :
13/6/2021

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