Copyright 2010, The World Bank Group. All Rights Reserved. Domestic trade statistics 1. Scope and...

Copyright 2010, The World Bank Group. All Rights Reserved.

Domestic trade statistics

1. Scope and concepts

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Business statistics and registers


Resale without transformation

• By convention, resale of goods represents sale without transformation

• Goods are transformed if they undergo a substantial change in form, appearance or nature

• Some specified actions are not considered substantial transformations of goods

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Role of distributive trade

• Distributive trade as an activity consists of:Provision of a service to various types of

customers by storing, displaying and making available for buying of goods

Provision of other services incidental to the sale of those goods

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Scope and structure of distributive trade

• In the ISIC, Rev.4, the scope of distributive trade is defined as section G

• Section G has three divisions– Division 45 includes all activities related to the sale

and repair of motor vehicles and motorcycles– Divisions 46 and 47 include all other sale activities– The distinction between divisions 46 (wholesale) and

47 (retail sale) is based on the predominant type of customer

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Retail trade• Retail trade is defined as the resale of new and used

goods mainly to the general public for personal or household consumption or utilization, by shops, department stores, etc.

• The goods sold are limited to those usually referred to as consumer goods or retail goods

• Goods not usually entering the retail trade, such as cereal grains, ores, industrial machinery, etc., are excluded

• Some processing of goods may be involved, but only as incidental to selling

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Wholesale trade

• Wholesale trade is defined as the resale (sale without transformation) of new and used goods to retailers, business-to-business trade (for example, to industrial, commercial, institutional or professional users) or resale to other wholesalers

• It may also involve acting as an agent or broker in buying merchandise for, or selling merchandise to, such persons or companies

• The principal types of wholesale trade businesses are merchant wholesalers

• Other types of wholesale trade businesses are merchandise and commodity brokers, commission merchants and agents and assemblers, buyers and cooperative associations etc.

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Boundary of distributive trade• Certain activities are not considered to entail transformation of

goods and are included in distributive trade, e.g.

• Packaging• Repackaging for distribution in smaller lots• Mixing (blending) of goods • Bottling • Storage • Refrigerating• Delivering• After-sale installation• Washing, polishing of vehicles

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Exclusions from distributive trade

• The following activities do not count as distributive trade:

– Renting of motor vehicles or motorcycles– Renting and leasing of goods– Sale of farmers’ products by farmers– Sale of food and drinks for consumption on the

premises or takeaway– Renting of personal and household goods to the

general public

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ISIC Division 45

• Wholesale and retail trade; repair of motor vehicles and motorcycles includes:

• Retail sale of automotive fuel and lubricating or cooling products

• Renting of motor vehicles or motorcycles• Some other related activities are classified elsewhere

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ISIC Division 46

• ISIC 46 includes all wholesale activities, with the exception of those related to motor vehicles and motorcycles: – Wholesale on a fee or contract basis– Wholesale of agricultural raw materials and live animals– Wholesale of food, beverages and tobacco– Wholesale of household goods– Wholesale of machinery, equipment and supplies– Other specialized wholesale– Non-specialized wholesale trade

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ISIC Division 47• ISIC 47 includes all retail trade, except related to motor vehicles and

motorcycles:

– 471 - Retail sale in non-specialized stores– 472 - Retail sale of food, beverages and tobacco in specialized stores– 473 - Retail sale of automotive fuel in specialized stores– 474 - Retail sale of information and communications equipment in

specialized stores– 475 - Retail sale of other household equipment in specialized stores– 476 - Retail sale of cultural and recreation goods in specialized stores– 477 - Retail sale of other goods in specialized stores– 478 - Retail sale via stalls and markets– 479 - Retail trade not in stores, stalls or markets

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CPC• In terms of products, the Central Product

Classification defines distributive trade services in divisions 61 and 62

• There are two criteria: (a) type of provided service(b) type of traded goods

• As a result, the list of commodities that can be sold is classified in seven groups: two groups for wholesale trade services and five groups for retail trade services

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COICOP• Another option for classifying products of distributive trade is the Classification of

Individual Consumption According to Purpose (COICOP)• For the purpose of achieving comparability of distributive trade data by products,

countries are encouraged to present retail products by 7 product categories:• Food, beverages and tobacco• Clothing and footwear• Household appliances, articles and equipment

Of which: Furniture• Machinery, equipment and supplies

Of which: Information-processing equipmentOf which: Motor vehicles and associated goods

• Personal and other goods• Construction materials• Other

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Boundary between wholesaling and manufacturing

• Outsourcing takes place when the principal productive unit contracts another productive unit (the contractor) to carry out specific functions

• The activity classification of the principal is affected by the nature and extent of the outsourcing

• The classification of the principal units is a significant boundary issue between manufacturing and wholesale (or retail trade) divisions

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Boundary between retail and financial services

• Many retail stores offer their customers the option of purchasing on credit

• Compilers of distributive trade statistics must pay attention to cases where the holder of consumer credits is a retail trade unit that has a separate establishment dealing with, or ancillary activities involving consumer credits

• SNA distinguishes non-financial and financial sectors separately• It is recommended that in such cases two separate units be

defined, one financial institution and one a retail unit• if the unit providing consumer credits is not statistically observable

separately it is recommended that it be treated as a part of the relevant statistical unit involved in an ancillary activity

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Economic entities• Economic entities in distributive trade range from small entities

engaged in one activity from one geographical location, to large and complex entities working from many geographical locations

• In large and complex entities, the units at which economic activity takes place are grouped for management, administrative and decision-making purposes into hierarchic structures

• Higher-level organizational units own, control or manage the lower-level production units at which production decisions are made or production takes place

• In complex entities, management of the financial affairs of the business is usually conducted at a higher organizational level than management of wholesaling or retailing operations

• The ability to report data will vary with the structural level• Choice of proper statistical units is therefore important

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Statistical units

• A statistical unit is an entity about which information is sought and for which statistics are ultimately compiled

• Units can be divided into two categories:(a) Observation units: identifiable legal/organizational or physical entities(b) Analytical units: entities created by statisticians (also referred to as statistical constructs)

• A collection unit is the unit from which data are obtained and by which statistical forms are completed

• A reporting unit is the unit about which data are reported

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Establishment

• An establishment is defined as an enterprise or part of an enterprise that is situated in a single location and in which only a single productive activity is carried out

• Although an establishment may have one or more secondary activities, their magnitude should be small compared with that of the principal activity

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Units for distributive trade• Two main types of data are required to describe the economic activity of

distributive trade units: 1. production data, based on management and cost accounts of trade units;2. financial data, based on their accounting records.

• The establishment is the most appropriate statistical unit for production and employment data

• In the majority of cases, the establishment and the enterprise are the same• Hence all types of data can be obtained from the same source• If an establishment is a part of a multi-establishment enterprise, it may not have

access to all the necessary (for example, financial) information• Under these circumstances, the enterprise may serve as a collection unit

• Some countries are using the establishment as the statistical unit for the collection of non-financial data items and the enterprise for the collection of financial data

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Retail chains

• The dominance of retail chain stores is an important development in the retail markets

• Retail chains encompass a range of retail outlets• Such stores may be branches, owned by one legal unit, or

franchises• In the case where a retail chain operates under a single ownership,

there will exist one trade enterprise with many establishments• In the case where a retail chain operates under a franchise

agreement, there will be many enterprises, corresponding to the number of franchisees

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Shops within shops

• A department store is a retail establishment that specializes in selling a wide range of products without a single predominant merchandise line (non-specialized stores)

• Department stores are organizational forms of retail trade that may complicate the implementation of rules for identifying the local units

• In principle, in almost all cases, the retail local units will be precisely equivalent to retail stores

• One exception are “shops-within-shops,” where a department store lets out part of its retail space to other retailers

• In the case of shops-within-shops trade, the department store and all other shops on the same premises should be treated as separate statistical units

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Franchising• Franchisees are independent legal units that sign a contract with

another legal unit, the franchiser, to engage in an activity making use of trademarks, trading styles and marketing support provided by the franchiser, usually in return for a fee or a share of the sales or profits

• A franchise contract typically includes a number of restrictive clauses limiting the franchisee’s freedom of choice

• The franchiser, in turn, offers scale economies without completely depriving the franchisee of its autonomy, for example, by assuming responsibility for collective marketing

• It is recommended that franchisees engaged in distributive trade activities be considered separate enterprises because they consist of a complete set of factors of production and run the full entrepreneurial risk

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Marketplaces

• Marketplaces are outdoor locations where goods and services are exchanged

• The traders have stalls, but not entire stores• However, it is also possible to have associated shops• Usually, another unit is the owner and operates the location where

the market is situated• The recommended treatment for such units will be similar to that

for department stores when they let out retail space to individual retailers

• Individual retailers at the marketplace will be treated as separate statistical units

• The marketplace will have as many local units as there are stalls

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Markets

• Marketplaces, street markets, etc. are outdoor locations where goods and services are exchanged

• They are traditionally in operation in many countries and function in a similar way irrespective of their name and location

• Often, the markets are permanent, but they can also be temporary• Usually, another unit is the owner and operates the location where

the market is situated• Traders are often required to obtain a license or pay a fee• The recommended treatment for such units is as separate statistical

units• Farmers selling their output at farmers’ markets are not treated as

trade units

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Characteristics of statistical units

• Characteristics of statistical units are data items used for their unique identification, for their classification within a particular activity area of distributive trade and for the description of various aspects of their structure

• The main characteristics of the statistical unit are its identification code, location, kind of activity, type of operation, type of economic organization, type of legal organization, type of ownership, size, and demographic characteristics

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Kind of activity• The kind of activity is defined as the type of production

in which a unit is engaged• It is the principal variable utilized in determining

whether or not a given statistical unit is to be included in the scope of distributive trade statistics and to what activity class of distributive trade it belongs

• It is recommended that ISIC, Rev.4, is used for determining the kind of activity of a unit

• If a different scheme of national classification of activities is followed by countries full correspondence at least at the two-digit level of ISIC, Rev.4 should exist

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Principal and other activities

• The principal activity of a unit is the activity that contributes most to the value added of that unit

• A secondary activity is an activity carried out by a unit in addition to the principal activity and whose output

• The value added of a secondary activity must be less than that of the principal activity

• A productive activity undertaken with the sole purpose of producing one or more common type of services for intermediate consumption within the same enterprise is defined as an ancillary activity

• Examples are bookkeeping, transportation, storage, purchasing, sales promotion, cleaning, repair and maintenance, security, etc.

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Criteria for allocating activity

• The following principles for determining the kind of activity of statistical units are recommended:– The kind of activity of a statistical unit is determined by the nature of

its principal activity– If the unit is engaged in several types of independent activities, but

the unit itself cannot be segregated into separate statistical units, its kind of activity should be determined according to the class of ISIC with the largest share of value added by using the “top-down” method

• The top-down method entails, first, the determination of the appropriate highest classification level (one-digit), followed by determination of the lower (two- and three-digit) levels and, finally, of the class (four-digit) level

• If value cannot be determined, substitutes may be used, notably output or input

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Vertical integration• Units where the different stages of production are

carried out in succession by the same unit (vertical integration) should generally be treated like any other form of unit involving multiple activities

• It should be classified to the class corresponding to the principal activity within that chain, as determined by the top-down method

• If value added or substitutes for the individual steps in a vertically integrated process cannot be determined comparisons with other units could be used

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Horizontal integration• Unit where activities are carried out simultaneously

using the same factors of production (horizontal integration), should be classified by application of alternative indicators, such as gross output

• It is recognized that there is no good general rule for identifying the single activity that best represents the mix included within this horizontal integration

• Countries must develop their own rules

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Specific rules for distributive trade • The general principles for determining the kind of activity

of statistical units should be supplemented by the following classification criteria specific to distributive trade:– Ideally, the principal activity of the unit should be determined

by reference to the value added of the goods sold or the services rendered

– In practice it is often not possible to obtain the information on value added for individual products or services

– As substitute criterion output should be utilized– The gross margin is the best output indicator for trade activities– Value of turnover is the second-best alternative output

indicator– Inputs indicators such as wages and salaries should be

considered where no other output substitutes are available

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Type of operation - wholesale• Type of operation refers to different methods of organization of

wholesale and retail trade and is used in defining the activities of groups and classes in section G of ISIC, Rev.4.

• Wholesale trade units can be classified into the following types of operation: Wholesale trade on own account: wholesalers who buy goods (and

thereby assume legal title to them) and sell these goods on own account. The wholesale trade on own account is further subdivided into the following two groups:

Specialized wholesale trade; Non-specialized wholesale trade;

Commission trade: agents and brokers, who buy and sell goods to others mainly on commission.

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Type of operation - retail• Two broad categories of retail trade organization can be

distinguished: store and non-store retailing. It is recommended that the following types of retail trade operations be identified:

(a) Retail trade in stores:(i) Specialized stores;(ii) Non-specialized stores :

— Food predominantly;— Others;(b) Retail trade not in stores:

(i) Retail trade via stall or markets;(ii) Others.

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E-commerce• Broad definition: includes in addition to Internet transfers,

transfers made over other computer mediated networks like telephone systems

• Broad definition is close to the entire class ‘Retail sale via mail-order houses or via the Internet’

• Narrow definition: E-commerce only refers to orders received or placed through any Internet application

• Narrow definition excludes orders received or placed by telephone, facsimile or conventional e-mail

• Units involved in e-commerce should be classified to the industry of their principal activity

• Units engaged in e-commerce will be found throughout ISIC

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Size measures• Size of a statistical unit is an important stratification

characteristic• Different size criteria are used• Size based on employment is recommended• The following size classification of distributive trade units

based on employment is recommended: 1, 2-9, 10-19, 20-49, 50-249, and 250 and more

• Size based on turnover is an alternative• Size based on sales space is another alternative

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Demographic characteristics

• Demographic characteristics provide information about the period of economic activity of a given unit

• Demographic characteristics play a significant role in identifying units as a target population for statistical surveys

• They can also provide useful information on the dynamics of units• Activity characteristics to be recorded in statistical business

registers include: (a) in operation since (date); (b) temporarily or seasonally inactive; (c) ceased operation (date); and (d) sold or leased to another operator (name of new operator)

• Besides information about the activity status of the unit (active or temporarily inactive), this also helps in interpreting the returns submitted by statistical units

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