Scope of Distributive Trade Statistics Workshop for African countries on the Implementation of International Recommendations for Distributive Trade Statistics May 2008, Addis Ababa, Ethiopia UNITED NATIONS STATISTICS DIVISION Trade Statistics Branch Distributive Trade Statistics Section

Scope of DTS (1) Distributive trade statistics (DTS) IRDTS 2008 defines the scope of DTS as statistics reflecting characteristics and activities of the units belonging to distributive trade sector of an economy Distributive trade sector The scope of distributive trade sector is defined in terms of ISIC, Rev.4 All resident entities recognised as statistical units and classifiable in section G “Wholesale and retail trade; repair of motor vehicles and motorcycles” All units irrespective of their size, form of economic and legal organization and ownership Distributive trade activities carried out by entities not classified in Section G of ISIC, Rev.4 are not covered by distributive trade statistics

Scope of DTS (2) Data items within the scope of DTS Characteristics of entities belonging to the distributive trade sector Receipts and other revenues and purchases of those entities which are recorded in their profit and loss statements and used for calculation of trade output Intermediate consumption and value added Investments of entities in non-financial assets and changes in inventories Employment information which is closely related to the most of previous groups of items Data items outside the scope of DTS Data items on financial position of the entities – they are compiled as part of financial or other relevant statistics

Distributive trade as an economic activity Distributive trade as an economic activity consists of: Provision of a service to various types of customers (retailers and other commercial users or general public) by storing and displaying a selection of goods and making them available for buying Provision of other services incidental to the sale of those goods or subordinated to the selling such as the delivery, after-sale repair and installation services What makes distributive trade different from other economic activities? Specificity of the production process referred to as “Resale”

Resale Resale is a number of actions which might be undertaken to make goods available for buying Negotiating transactions between buyers and sellers Buying goods from the manufacturer on own account Transporting, storing, sorting, assembling, grading, packing Displaying a selection of goods in convenient locations By convention, resale of goods represents sale without transformation

Boundary of distributive trade (1) The following activities are not considered to be transformation of goods and are included in distributive trade Sorting, grading and physical assembling of goods Mixing (blending) of goods (for example sand) Bottling (with or without preceding bottle cleaning) Packing, breaking bulk and repacking for distribution in smaller lots Storage (whether or not frozen or chilled) and refrigerating Delivering and after-sale installation Cleaning and drying of agricultural products Cutting out of wood fibreboards or metal sheets as secondary activities Engaging in sales promotion for their customers including the label designing Washing, polishing of vehicles

Boundary of distributive trade (2) The following are activities considered as either transformation of goods or as not being part of relevant distributive trade divisions and classes and are excluded Renting of motor vehicles or motorcycles Renting and leasing of goods Packing of solid goods and bottling of liquid or gaseous goods, including blending and filtering, for third parties Sale of farmers' products by farmers Manufacture and sale of goods, which is generally classified as manufacturing Sale of food and drinks for consumption on the premises and sale of take-a-way food Renting of personal and household goods to the general public

Structure of distributive trade in ISIC, Rev.4 Three divisions 45 “Wholesale and retail trade and repair of motor vehicles and motorcycles” (4 groups and 4 classes) 46 “Wholesale trade, except of motor vehicles and motorcycles” (7 groups and 14 classes) 47 “Retail trade, except of motor vehicles and motorcycles” (9 groups and 25 classes) Distinction between division 46 (wholesale) and division 47 (retail sale) - based on the predominant type of customer Two additional levels of distinction within divisions 46 and 47 based on the type of operation of units and kind of products sold

Wholesale trade Defined as the resale (sale without transformation) of new and used goods to: Retailers Business-to-business trade (industrial, commercial, institutional or professional users) Other wholesalers Acting as an agent or broker in buying merchandise for, or selling merchandise to, such persons or companies Types of wholesale trade businesses Wholesalers who take title to the goods sold Merchandise and commodity brokers Commission merchants and agents

Retail trade Defined as the resale (sale without transformation) of new and used goods mainly to the general public for personal or household consumption or utilization, by: Shops Department stores Stalls E-commerce retailers and mail-order houses Hawkers and peddlers Consumer cooperatives Types of retail trade businesses Retailers who take title to the goods sold Commission agents Retail auctioning houses

Distributive trade and other classifications (1) CPC, Ver.2 Basic statistical tool for establishing DTS by product Distributive trade services are classified in divisions 61 and 62 of CPC, Ver.2 on the basis of two criteria Type of provided service Type of traded goods Correspondence table between CPC, Ver.2 and ISIC, Rev.4 – to be included in the Distributive Trade Statistics: Compilers Manual COICOP Relates to the purpose (or function) of the use of the commodities sold Retail trade data at detailed COICOP level facilitate the compilation of private household consumption expenditure in NA

Distributive trade and other classifications (2) Groupings of distributive trade data by product Food, beverages and tobacco Clothing and footwear Household appliances, articles and equipment Of which: Furniture Machinery, equipment and supplies Of which: Information processing equipment Of which: Motor vehicles and associated goods Personal and other goods Construction materials Other

Recommendations for the scope of Distributive trade The scope of distributive trade is to be defined in terms of ISIC, Rev.4 Countries which do not use ISIC, Rev.4 are encouraged to develop their national activity classifications to be compatible with ISIC, and implement them in all national compilations for the purposes of international comparability Countries should at the minimum develop clear and precise concordances between distributive trade classes in their national classification and in ISIC, Rev.4 Countries are encouraged to draw up their own lists for the reporting of DTS by type of product based on: Product classifications used in their trade surveys Need to comply with the international standards The lists for retail trade are desirable to be more detailed than those for wholesale trade since they are useful in describing the flow of goods to households for national accounts purposes

Boundary issues (1) Boundary between wholesaling and manufacturing Outsourcing of production - when the principal unit (i.e. principal) contracts another productive unit (i.e. the contractor) to carry out specific aspects of the production activity of the principal, in whole or in part in the production of a good or a service Activity classification of the contractor – straightforward, does not change with the outsourcing Activity classification of the principal - affected by the nature and extent of the outsourcing, requires conventions for a consistent treatment

Boundary issues (2) Types of outsourcing 1. Outsourcing of support functions - the principal (wholesaler or retailer) carries out the resale of goods and services, but outsources certain support functions, such as accounting or computer services, to the contractor Principal remains classified to the respective ISIC class of section G that represents the core production process Contractor is classified to the specific support activity it is carrying out, e.g. ISIC class 6920 or Outsourcing parts of the production process - the principal (manufacturer) outsources a part of the production process, but not the whole process, to the contractor as the principal owns the material inputs to be transformed by the contractor and thereby has ownership over the final outputs Principal is classified in the appropriate manufacturing class of ISIC as if it were carrying out the complete production process Contractor is classified according to the portion of the production process he is undertaking

Boundary issues (3) Types of outsourcing (cont.) 3. Outsourcing of complete production process Outsourcing of service producing activities, including construction Both the principal and the contractor are classified as if they were carrying out the complete service activity support functions Outsourcing of manufacturing activities to contractor, when the principal does not physically transform the goods at the location of its unit Principal owns the material inputs and thereby has economic ownership of the outputs, but has the production done by others - he is classified to section C (manufacturing) of ISIC, Rev.4 Principal has the production done by others, but does not own the material inputs - should be classified to section G (distributive trade) of ISIC, Rev.4 Contractor is classified always to section C (manufacturing) of ISIC, Rev.4

Boundary issues (4) Boundary between retail trade and financial services Units offering purchases on credits (consumer credit lines) to customers Two separate units should be identified when the originator and holder of a consumer credit is a retail trade unit that has a separate establishment dealing with consumer credits Unit providing consumer credits should be statistically observable (i.e., separate accounts of its activity are available) Both units will be classified in their own rights – non-financial (trade unit) and financial (consumer credit unit) One unit should be defined if the unit providing consumer credits is not statistically observable separately Unit providing consumer credits should be treated as an ancillary activity and will not affect classification of that unit in distributive trade

Thank You