Difference Between Traditional Trade and Modern Trade

Main Difference

The main difference between traditional trade and modern trade is of the overall system and innovation. The traditional system of trade is based on physical retail stores operated by owners, having a limited inventory, and targeting a specific niche of products. On the flip side, the modern trade is the innovative form of trading that has introduced a variety of new things in trading like the formation of supermarkets, franchise chain system, targeting vast products, home delivery, cash on delivery and various other services for the buyer’s convenience.

Traditional Trade vs. Modern Trade

Traditional trade and modern trade are the two basic kinds of trading types, kinds, or even we can term them as methods. These two methods of trading are strongly interlinked and intermixed with each other despite being different in a variety of aspects and overall functionality.

Buying and selling of goods and products is the most common sort of business and trade that is in professional continuity from the beginning of the civilized human world. Even in the pre-historic times, old Homo sapiens used to exchange the desired goods and services with each other to accommodate each other’s necessity. In that time the person possessing a certain product, for example, some vegetables, exchange his or her product for getting a service or another usable product like medicine, security, etc. That thing led to the traditional form of the trading system.

A trading system in which an owner owns limited stock of products and sell them to the buyers in the nearby area. The buyers visit the shop time to time for the products they want to buy. Such trading system has been working for thousands of years. In the traditional trading system, a particular outlet or shop possess and sells limited kind of products and have a small inventory. With the advent of globalization, the traditional trading system led to the modern trading system, which gives birth to huge brand stores, chains, and franchises. They possess a wide variety of products under one roof with various discounts offered on shopping.

Comparison Chart

Traditional TradeModern Trade
Traditional Trade is a trading method that is considered to be usual and is based on the traditional retailing system.Modern trade is a trading method that is a new form of trading that includes large stores, outlets, retail brands, along with the franchise system.
Customer Contact
Personal. The retailer gives products to customers.Created. The customer himself chose or picked the products displayed.
Order Settlement
Based on current stocks.Based on promotional demands and advance booking
Demand
SeasonalConsistent
Principal Time
Short directStructured
Product Variety
RestrictedExcessive
Order Gratification Time
No specific timeDefinite time
On-time Provisions
Minor focusMore emphasis
Credit rotation
Short credit rotationLong credit rotation
Operational
It is usually operated by the owners physically.Operated as a model branch chain network
Procedure
One way and directSimple and flexible
Finances of Sale
Products sold or traded on the maximum retail price.Products are sold or traded on a lower price to give discounts.

What is Traditional Trade?

Traditional trade covers every sort of basic to high-level trading. It led the foundations of the modern trading system that is getting popular all around the globe. A traditional trade or trading system refers to the kind of simple retailing trade, in which the products and goods are sold on a retail shop by the owner usually. The stock and inventory in the traditional trade are limited, whereas the variety of the products is not that wide as in modern trade these days. Whenever a consumer or customer needs to buy something, he or she went to the retailing store or shop and ask for a particular product, the shopkeeper picks the product, packs the product and gave it to the customer on the maximum retail price (MRP) set in the market.

All the customer orders wholly based on the presence of current stock — no promotional bookings on any sort of future inventory. The products and goods are in high demands based on the season and requirement. For example, a stationary retailing store has a higher demand for products during the exam season. The principal time is short, specific, and direct. Whenever the customer readily needs a product, he or she went to the retailer and bought it simply. Very few traditional trade stores focus on timely delivery of products, unlike the modern trade franchises. The cash flow cycle in the traditional trade is short and instant; the buyer usually pays the price at the spot when buying a particular product.

Examples

  • A book or stationery store run in an area near schools, by the owner himself.
  • A candy shop is consisting of candies, chocolates, gums, and various other similar products only.
  • The flower shop operated and ran physically by the owners.

What is Modern Trade?

All the luxury, gigantic, chains, and franchises of stores, offering a vast range of different kinds of products along with a massive onboard stock presence along with on-spot inventory access. The modern trading system, with its advent and exposure, had completely changed the overall concept and picture of tradeoff.

Modern trade refers to the ease, swiftness, and convenience that is introduced in the trading. The 24/7 availability of goods from anywhere in the world is one of the biggest and breakthrough of all the times in terms of business and trading. The modern trading has taken the things to a whole new level of incredibility. It all started with the establishment of large grocery stores that possess a vast range of products under one roof; then it led the foundations of supermarkets, the concept of choosing and selecting, the idea of paying with various credit option including cash on delivery. This concept of home delivery of the product and numerous other things that slowly and steadily led to strong foundations of modern trade.

This modern innovation helped in opening many doors of the modern trading system and establish massive business ventures. Modern trade possesses a structured lead-time along with the consistent demand for products. This system mostly emphasizes on timely delivery and availability of products to the customers.

Although the cash rotation is not that quick as compare to traditional trade but carry long term profits and benefits. Unlike the maximum retail price in the traditional trade, the modern trading system enables a variety of discounts and promotional offers by tighten margin and with the help of sponsors.

Examples

  • A giant grocery store chain run by hundreds of hired employees, offering a vast range of different products.
  • A chain of pharmacy ran under a proper administration with branches in different cities and states and offering home delivery service as well.
  • Online e-commerce store with a large inventory and stock, provides numerous products and goods as cash on delivery to anywhere in the world.

Key Differences

  1. Traditional trade retailing stores sell the products on the maximum retail price, whereas modern trade stores offer various discounts and offers.
  2. Modern trade has a slow cash rotation process; on the flip side, the cash flow is instant in traditional trade.
  3. Traditional trade involved limited stock, whereas modern trade possesses massive onboard inventory and stock.
  4. Modern trade offers convenience such as home delivery and booking, nothing such offered in traditional trade.
  5. Traditional trade possesses seasonal customers; however, on the other hand, modern trade comprises of continuous demand for.

Conclusion

Traditional trade is the local maximum retail pricing shops that possess a limited stock of specific type. On the other side, modern trade is the national or international level goods suppliers with a variety of different products, massive stock, and instant access to the warehouse inventory. Modern trade provides more options and facilitates the customers by all possible means, whereas the traditional trade still possesses high value when it comes to the instant purchase of specific products physically.