Marketing

Elements of costs of Retailing in Bangladesh

The costs of retailing is affected, interalia, by the rent of shops prevailing in different areas and the systems of ownership of the premises. At present in Bangladesh it is very difficult to estimate the cost of retailing because there is considerable variation in the rent of shops from area to area and also from shop to shop.

Because a shop is to pay rent according to its location (for example whether it is i located in New Market or Kauran Bazar) and the system of ownership of the premises (that is, whether the shop is owned by the government or private landlord). However, the following statistics show how the taka that the consumer pays to the retailer for his goods is divided between the different items of cost in retailing.

Cost of Goods 75%

Salaries 5%

Taxes 2%

Rent 3%

Net Profit 15%

It appears that taxes constitute a very small part of the cost of retailing and so does the rent of premises, and the salary to employees. However, when retailing will increase in size, the item of salary may increase in future. The present low figure of salary is largely because of the preponderance of self-employed retailers in Bangladesh.

The major elements of retail costs in Bangladesh are as follows :

1. Salary of Sales Personnel: Most of the retail stores in our country are operated by the owner himself in collaboration with other members of the family (such as, brother, son etc.). Some stores employ salaried staff. But the member of staff is very few, only about 2 employees per store. The actual figures seem to be higher in Dhaka and Cox’s Bazar as compared to other areas.

Shops in these two areas have more employed staff than other areas where employment opportunities in retail stores do not appear to be promising. A store, on the average, may have to pay to salaried staff between Tk. 7000 in Dhaka to Tk. 4500 in Pabna monthly. This depends on the average size of the store and the wage rate payable per employee. Where the size of the retail shops increases, the cost of the retail shops for their salaried staff also increases.

2. Rent of Premises: Rent of the premises in which the retail store is located including light charges comprise probably the most important variable and critical item in retail expenses. The amount of rent varies due to locational factors. It also varies from one town to another. Rents are higher in bigger towns as compared to smaller towns. Rental charges for the fashionable stores in the tourist resort are also high. It has been found that Dhaka as the metropolitan city pays the highest rent. No retailer in the northern portion of the country has been found to pay more than Tk. 4000.00 per month whereas 20% of Khulna retailers, 17.78% of Dhaka retailers and 12% of Cox’s Bazar retailers pay more than Tk. 10000.00 per month for rent and light charges. Only 6.67% Dhaka retailers pay more than Tk. 15000 per month.

3. Taxes: The retailers are to pay holding tax (or municipal tax), trade licence tax, finance tax and income tax. The Municipal Authority levies holding tax on a definite term. The payment of trade licence tax is necessary for obtaining permission to carry on business. If a retailer’s income is within the taxable limit, he is required to pay income tax. The retailers may also have to pay subscription to other agencies.

4. Transportation Costs: The retailers have to incur a considerable amount of expenditure for the purpose of transport in connection with their supplies. The transportation costs vary depending on the distance of the retailer’s store from the source of supply and the efficiency of transport services available. The burden of the transport cost is heavy on the retailer where the source of supply, such as, manufacturer or wholesaler, is located at a long distance. The transport costs are minimised if the manufacturers or their agents supply the goods to the retail stores.

5. Insurance: An import element of retail costs in the advanced countries is the expense for insurance. But in our country most of the retailers (about 90%) do not have insurance to cover business risks. The remaining 10 % have only fire insurance. The number of retailers insuring against civil commotion, theft, burglary and loss in transit is very few. The absence of insurance to cover the business risks is an important feature of high costs for retailing operations. When the retailers incur loss due to theft, hijacking or breakage of goods in transit,  they can not cover the loss on account of the aversion to insurance.

6. Stores Costs: When a retailer himself stores the goods after purchase, his costs increase. In our country, most of the retailers do not have seperate storage facility. Only one-tenth of the retailers have seperate storage facility outside the shop. In considering the quantity in which the retailers buy, their storage space is thought to be sufficient. That is why, the storage does not seem to be an important problem with the retailers.

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