O-LevelCommerceRetail trade7100/22 · Oct/Nov 2015 · Q220 Marks

Pete operates a mobile shop selling fruit and vegetables from a van that he owns.

(a)(i)A mobile shop is a small-scale retailer. Give one other type of small-scale retailer.[1]
(a)(ii)State three advantages to Pete of operating his business as a sole trader.[3]
(b)Explain why Pete needs to insure his van.[4]
(c)(i)Explain what is meant by informal credit.[2]
(c)(ii)Explain how offering credit may affect Pete's business.[4]
(d)Pete's mobile shop is facing competition from other retail outlets. Discuss the actions that Pete might take to help his business survive this competition. Which would you recommend? Give reasons for your answer.[6]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2015). The mark or mark type is shown in brackets.

[1] One example for 1 mark such as tuck shop, kiosk, unit retailer, hawker i.e. different types of retail but not e.g. shoe or paper shop but allow newspaper stand.
[3] Any three advantages × 1 mark each
quick decision making
own boss/total control
easy to set up legally
can be flexible in time worked
keeps all the profits himself
can offer personal service to his customers
can develop his own ideas
Any other relevant advantage.
[4] Any four points × 1 mark each or two well explained points × 2 marks each
required to have third party insurance (1) by law (1)
the van may be at risk of being damaged/stolen so the insurance company will provide compensation
without the van Pete will be unable to carry out his business as the business takes place in the van
will need comprehensive insurance to cover the van and the contents of the van
insurance gives confidence
Any other relevant point.
[2] Any two points × 1 mark each or one well developed point × 2 marks
credit offered to customers well known to Pete
no documentation/oral agreement
normally for low value goods
customers pay weekly or monthly
saves having to pay individual small amounts
may involve putting aside goods for a time and taking them on payment (lay-by)
Any other relevant point.
[4] Any four points × 1 mark each or two well explained points × 2 marks
may help to maintain his existing customer base (1) as people can postpone payment (1)
may have increased business (1) because people who are short of money may still purchase from him (1) or may purchase more from him/stay loyal (1)
may give him competitive advantage (1) over other mobile shops (1)
saves him dealing with small amounts of cash at frequent intervals (1)
may mean he is handling less cash at certain times of the week (1)
may experience delays in payment from people (1) who cannot settle their bills so affecting his cash flow (1)
may be unable to buy new stock (1) as may have insufficient working capital (1)
may run the risk of bad debts from people who do not pay (1)
may mean increased paperwork (1) – records of the credit transactions (1)
security risk of many payments being made at the end of the week/month (1)
increased profit (1) by charging interest (1)
Any other relevant point.
[6] Level 2 (4-6 marks) Has discussed some actions that Pete might take to survive the competition and has recommended which ones to use. (If a candidate has discussed only one action award 4 marks max)
Pete may have a loyal range of customers. He should do everything he can to retain these customers such as listen to their needs, supply new products to them, offer quality products to them and give them good service. He may need to advertise more using cheap media such as leaflets and flyers and encourage word of mouth recommendations. He must make sure that the outside of his van shows details of the service he offers so that it is very visible to people as he moves around. He may extend his working hours by trying to sell in new areas but he will have to make sure that there is not a cheaper competitor operating in these areas. Pete may introduce special offers such as buy one, get one free or half price or offer extra services such as cookery instructions for his produce. Pete may also look for cheaper suppliers so that he can pass on lower prices to his customers. He could also extend his range of goods. Pete should also look at other selling techniques. Customers could order online for Pete to deliver.
Pete may try to use all of these strategies to meet the competition. He should encourage his existing customers to remain with him and so any actions he might take to do this would be recommended. He could, of course, do nothing and trade in the same way as before and hope for the best.
NB. Up to 5 marks without a recommendation.
Level 1 (1-3 marks) Has commented on one or more possible actions for survival with/without a recommendation.
Pete might offer his customers special offers. He might lower his prices. He might display his produce more attractively. He might advertise more. I think I should advertise his business more.