A lookback at traditional investing options and how they fare today


Doodles signifying the distinction between modern and traditional trades Doodles signifying the distinction between modern and traditional trades

In Asia, traditional (or general) trading is more common than in Europe and North America. Things are, however, swiftly changing, and formerly unstructured distribution networks are becoming more organized. To proceed, it is necessary to comprehend how traditional and contemporary commerce vary in terms of distribution and logistics management.


Traditional vs Modern Investment Options


Many Indian investors continue to use the same traditional investment options that may have succeeded in the past. Many of these investors have been drawn to Mutual Funds as a result of the low interest rate environment over the previous several years, but with the latest interest rate rise and its effect on fixed deposit rates, many investors are wondering if traditional investing is still a viable alternative.


Traditional Trade Meaning


Small retailers, dealers, wholesalers, and distributors are all part of the traditional trading distribution network. It's a complex network that caters to localized client demand with frequent orders that have short lead periods and fluctuating fill rates. The fill rate is the percentage of inventory that can meet immediate customer demand. It's also computed as a percentage of total orders delivered against total orders sought. The time it takes for a delivery to be completed after an order has been successfully logged is known as lead time.


The merchants analyze and interpret demand before placing an order. The field agent accepting the order is sometimes accompanied by the delivery person (in the delivery van), and the order is completed on the spot.


Traditional trading is based on interpersonal relationships between consumers and merchants. Even the field agents communicate with the stores in a more personal and direct way. The distributors' orders are taken by the field agents. The distributors fulfill the order within a day or two after receiving it. The distributors, in turn, work with the manufacturers to have appropriate inventory on hand in order to maintain a good order fill rate. The credit cycle for these merchants is often short.


Traditional trading is prone to irregular demand, which might result in bare shelves or the need to persuade buyers to buy other items. As a result, rapid and ad-hoc orders emerge, putting a pressure on distributors' schedule planning and last-mile delivery.


Modern Trade Meaning


Modern commerce necessitates a more planned and structured approach to logistics and distribution. Larger actors in modern commerce include mini-markets, supermarket chains, hypermarkets, and so on. This entails aggregating demand across a wide variety of products.


The key difference, as you may have seen, is that modern trade's distribution is more structured. These merchants usually engage directly with manufacturers. In order to supply their own groceries and apparel brands, several large supermarket chains have vertically integrated. The emphasis is on providing a positive purchase experience and excellent value for money to the client. And to do so, they'll need a strong logistics management system to back them up.


To manage inventory along the economic order quantity, modern merchants keep their fill rate above their safety stock. This necessitates them being picky about delivery dates. They have set time-slots for each product restocking, and distributors who miss or prolong the delivery time-slot are often penalized. Because contemporary retailers account for a significant portion of a distributor's business, the distributors (or manufacturers) resort to technology to help them arrange better schedules and routes for their deliveries.


Other Important Takeaways


  • Traditional trading accounts for over 90% of all trade in important emerging economies. Last mile delivery may be maximized for such distribution networks by employing cloud-based technologies, bringing in ordered patterns within the business.


  • Traditional trading has a seasonal demand pattern, but modern trade has a year-round demand pattern. Customers and the proprietor engage closely in traditional trading, but there is no consumer connection in modern trade.


  • Traditional trade goods are sold at full retail price, while modern trade goods are offered at a discount. Traditional trade methods are one-way and direct, but modern trade procedures are easy and adaptable.


  • Traditional trading has a quick and immediate cash flow, but modern trade has a protracted cash flow. Traditional commerce is managed by the proprietor physically, but modern trade is controlled by a model branch network.


  • The credit rotation in traditional commerce is short, but the credit rotation in contemporary trade is lengthy. Traditional commerce had a restricted range of products, but contemporary trade has an endless range of products.


  • Modern commerce takes place over a longer period of time, while traditional trading takes place over a shorter period of time.


Wrapping Up


The exchange of products and services is known as trade. Traditional trading is a business conducted by small-scale retailers, while modern trade is a business run by a model branch network.

Aside from that, modern commerce has a big economy of scale, while traditional trading has a limited economy of scale. The most interesting aspect is that both exchanges take place throughout the globe and benefit the ultimate product customer.

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