CHAPTER 10

INTERNAL TRADE

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

• describe the meaning and types of internal trade;

• specify the services of wholesalers to manufactures and retailers;

• explain the services of retailers;

• classify the types of retailers;

• explain the forms of small scale and large scale retailers; and

• state the role of Chambers of Commerce and industry in the

promotion of internal trade.

• officiate the implementation of GST

2019-20
234 BUSINESS STUDIES

Have you ever thought if there were no markets, how products of different
manufacturers would reach us? We are all aware of our general provisions store
round the corner which is selling items of our daily need. But is that enough?
When we need to buy items of a specialised nature, we like to look at bigger
markets or shops with variety. Our observation tells us that there are different
types of shops selling different items or specialised goods and depending on our
requirements we purchase from certain shops or markets. In rural areas, we
may have noticed people selling their goods on the streets, these goods may
range from vegetables to clothes. This is a completely different scene from what
we see in the urban areas. In our country, all kinds of markets co-exist in
harmony. With the advent of imported goods and multinational corporations, we
have shops selling these products too. In big towns and cities, there are many
retail shops selling particular branded products only. Another aspect of all this
is, how these products reach the shops from the manufacturers? There must be
some middlemen doing this job. Are they really useful or do prices increase
because of them?

10.1 INTRODUCTION country is called internal trade. Trade

between two or more countries, on the
Trade refers to buying and selling of
other hand, is called external trade. The
goods and services with the objective
present chapter discusses in detail the
of earning profit. Mankind has been
meaning and nature of internal trade
engaged in trading, in some form or
and explains its different types and the
t h e o t h e r, s i n c e e a r l y d a y s o f
role of chambers of commerce in
civilisation. The importance of trade
promoting internal trade.
in modern times has increased as new
products are being developed every
10.2 INTERNAL TRADE
day and are being made available for
consumption throughout the world. Buying and selling of goods and
No individual or country can claim to services within the boundaries of a
be self-sufficient in producing all the nation are referred to as internal trade.
goods and services required by it. Whether the products are purchased
Thus, each one is engaged in from a neighbourhood shop in a locality
producing what it is best suited to or a central market or a departmental
produce and exchanging the excess store or a mall or even from any door-
produce with others. to-door salesperson or from an
On the basis of geographical exhibition, all these are examples of
location of buyers and sellers, trade can internal trade as the goods are
broadly be classified into two categories purchased from an individual or
(i) Internal trade; and (ii) External trade. establishment within a country. No
Trade which takes place within a custom duty or import duty is levied

2019-20
INTERNAL TRADE 235

on such trade as goods are part of 10.3 W HOLESALE TRADE

domestic production and are meant for As discussed in the previous section,
domestic consumption. Generally, wholesale trade refers to buying and
payment has to be made in the legal selling of goods and services in large
tender of the country or any other quantities for the purpose of resale or
acceptable currency. intermediate use.
Internal trade can be classified into Wholesaling is concerned with the
two broad categories viz., (i) wholesale activities of those persons or
trade and (ii) retail trade. Generally, for establishments which sell to retailers
products, which are to be distributed to and other merchants, and/or to
a large number of buyers who are industrial, institutional and commercial
located over a wide geographical area, it users but who do not sell in significant
becomes very difficult for the producers amount to ultimate consumers.
to reach all the consumers or users Wholesalers serve as an important link
directly. For example, if vegetable oil or between manufacturers and retailers.
bathing soap or salt produced in a They enable the producers not only to
factory in any part of the country are to reach large number of buyers spread
reach millions of consumers throughout over a wide geographical area (through
the country, the help of wholesalers and retailers), but also to perform a variety
retailers becomes very important. of functions in the process of
distribution of goods and services. They
Purchase and sale of goods and services
generally take the title of the goods and
in large quantities for the purpose of
bear the business risks by purchasing
resale or intermediate use is referred to
and selling the goods in their own name.
as wholesale trade.
They purchase in bulk and sell in small
On the other hand, purchase and
lots to retailers or industrial users. They
sale of goods in relatively small undertake various activities such as
quantities, generally to the ultimate grading of products, packing into
consumers, is referred to as retail trade. smaller lots, storage, transportation,
Traders dealing in wholesale trade are promotion of goods, collection of market
called wholesale traders and those information, collection of small and
dealing in retail trade are called scattered orders of retailers and
retailers. Both retailers and wholesalers distribution of supplies to them. They
are important marketing intermediaries also relieve the retailers of maintaining
who perform very useful functions in large stock of articles and extend credit
the process of exchange of goods and facilities to them. Most of the functions
services between producers and users performed by wholesalers are such
or ultimate consumers. Internal trade which cannot be eliminated. If there are
aims at equitable distribution of goods no wholesalers, these functions shall
within a nation speedily and at have to be performed either by the
reasonable cost. manufacturers or the retailers.

2019-20
236 BUSINESS STUDIES

Services of Wholesalers block their capital in the stocks.

Sometimes they also advance money to
Wholesalers provide various services to
the producers for bulk orders placed
manufacturers as well as retailers and
by them.
provide immense help in the
(iv) Expert advice: As the wholesalers
distribution of goods and services. By
are in direct contact with the retailers,
making the products available at a place
they are in a position to advice the
where these are needed and at a time
manufacturers about various aspects
when these are needed for consumption including customer’s tastes and
or use, they provide both the time and preferences, market conditions,
place utility. The various services of competitive activities and the features
wholesalers to different sections are preferred by the buyers. They serve as
discussed below: an important source of market
information on these and related
10.3.1 Services to Manufacturers
aspects.
Major services offered by wholesalers to (v) Help in marketing function: The
the producers of goods and services are wholesalers take care of the
given as below: distribution of goods to a number of
(i) Facilitating large scale production: retailers who, in turn, sell these goods
Wholesalers collect small orders from a to a large number of customers spread
number of retailers and pass on the pool over a large geographical area. This
of such orders to the manufacturers and relieves the manufacturers from many
make purchases in bulk quantities. This of the marketing activities and enable
enables the producers to undertake them to concentrate on the production
production on a large scale and take activity.
advantage of the economies of scale. (vi) Facilitate production continuity:
(ii) Bearing risk: The wholesale The wholesalers facilitate continuity of
merchants deal in goods in their own production activity throughout the
name, take delivery of the goods and year by purchasing the goods as and
keep the goods purchased in large lots when these are produced and storing
in their warehouses. In the process, they them till the time these are demanded
bear variety of risks such as the risk of by retailers or consumers in the
fall in prices, theft, pilferage, spoilage, market.
fire, etc. To that extent, they relieve the (vii) Storage: Wholesalers take
manufacturers from bearing these risks. delivery of goods when these are
(iii) Financial assistance: The produced in factory and keep them in
wholesalers provide financial assistance their godowns/warehouses. This
to the manufacturers in the sense that reduces the burden of manufacturers
they generally make cash payment for of providing for storage facilities for the
the goods purchased by them. To that finished products. They thus provide
extent, the manufacturers need not time utility.

2019-20
INTERNAL TRADE 237

10.3.2 Services to Retailers (v) Risk sharing: The wholesalers

purchase in bulk and sell in relatively
The important services offered by
small quantities to the retailers. Being
manufacturers to the retailers are
able to purchase merchandise in smaller
described as below:
quantities, retailers are in a position to
(i) Availability of goods: Retailers
avoid the risk of storage, pilferage,
have to maintain adequate stock of
obsolescence, reduction in prices and
varied commodities so that they can
demand fluctuations in respect of larger
offer variety to their customers. The
quantites of goods that they would have
wholesalers make the products of
to purchase in case the services of
various manufacturers readily
wholesalers are not available.
available to the retailers. This relieves
the retailers of the work of collecting
goods from several producers and 10.4 RETAIL TRADE
keeping big inventory of the same. A retailer is a business enterprise that
(ii) Marketing support: The whole- is engaged in the sale of goods and
salers perform various marketing services directly to the ultimate
functions and provide support to the consumers. The retailer normally buys
retailers. They undertake advertising goods in large quantities from the
and other sales promotional activities wholesalers and sells them in small
to induce customers to purchase the quantities to the ultimate consumers.
goods. The retailers are benefitted as it The retails represents the final stage
helps them in increasing the demand in the distribution where goods are
for various new products. transferred from the hands of the
(iii) Grant of credit: The wholesalers manufacturers or wholesalers to the
generally extend credit facilities to their final consumers or users. Retailing is,
regular customers. This enables the thus, that branch of business which is
retailers to manage their business with devoted to the sale of goods and
relatively small amount of working services to the ultimate consumers for
capital. their personal and non-business use.
(iv) Specialised knowledge: The There may be different ways of
wholesalers specialise in one line of selling the goods viz., personally, on
products and know the pulse of the telephone, or through vending
market. They pass on the benefit of machines. Also, the products may be
their specialised knowledge to the sold at different places, viz., in a store,
retailers. They inform the retailers at the customer’s house or any other
about the new products, their uses, place. Some of the common situations
quality, prices, etc. They may also that we encounter in our daily life, for
advise them on the decor of the retail example, are the sale of ball pens or
outlet, allocation of shelf space and some magic medicine or book of jokes
demonstration of certain products. in the roadways buses; the sale of

2019-20
238 BUSINESS STUDIES

cosmetics/detergent powder, on door-to- provide help in the distribution of their

door sales basis; and the sale of products by making these available to
vegetables by the road side by a small the final consumers, who may be
farmer. But as long as the goods are sold scattered over a large geographic area.
to ultimate consumers, these will be They thus provide place utility.
treated as cases of retail selling. Thus, (ii) Personal selling: In the process of
irrespective of ‘how’ the products are sold sale of most consumer goods, some
or ‘where’ the sale is made, if the sales amount of personal selling effort is
are made directly to the consumers, it necessary. By undertaking personal
will be considered as retailing. selling efforts, the retailers relieve the
A retailer performs different functions producers of this activity and greatly
in the distribution of goods and services. help them in the process of actualising
He/she purchases a variety of products the sale of the products.
from the wholesale distributors and
(iii) Enabling large-scale operations:
others, arranges for proper storage of
On account of retailer’s services, the
goods, sells the goods in small quantities, manufacturers and wholesalers are
bears business risks, grades the freed from the trouble of making
products, collects market information, individual sales to consumers in small
extends credit to the buyers and quantities. This enables them to
promotes the sale of products through operate on, at relatively large scale, and
displays, participation in various thereby fully concentrate on their other
schemes, etc. activities.
Services of Retailers (iv) Collecting market information:
As retailers remain in direct and constant
Retailers serve as an important link touch with the buyers, they serve as an
between the producers and final important source of collecting market
consumers in the distribution of information about the tastes, preferences
products and services. They provide and attitudes of customers. Such
useful services to the consumers, information is considered very useful in
wholesalers and manufacturers. Some taking important marketing decisions in
of the important services of retailers are an organisation.
described as below:
(v) Help in promotion: From
10.4.1 Services to Manufacturers time-to-time, manufacturers and
and Wholesalers distributors have to carry on various
promotional activities in order to
The invaluable services that the
increase the sale of their products. For
retailers render to the wholesalers and
example, they have to advertise their
producers are given as here under: products and offer short-term incentives
(i) Help in distribution of goods: A in the form of coupons, free gifts, sales
retailer’s most important service to the contests, and so on. Retailers participate
wholesalers and manufacturers is to in these activities in various ways and,

2019-20
INTERNAL TRADE 239

thereby, help in promoting the sale of and sell these in small quantities,
the products. according to the requirements of their
customers. Also, they are normally
10.4.2 Services to Consumers situated very near to the residential areas
and remain open for long hours. This
Some of the important services of
offers great convenience to the
retailers from the point of view of
customers in buying products of their
consumers are as follows :
requirements.
(i) Regular availability of products:
(iv) Wide selection: Retailers generally
The most important service of a retailer
keep stock of a variety of products of
to consumers is to maintain regular
different manufacturers. This enables the
availability of various products
consumers to make their choice out of a
produced by different manufacturers.
wide selection of goods.
This enables the buyers to buy
products as and when needed. (v) After-sales services: Retailers
provide important after-sales services
(ii) New products information: By
in the form of home delivery, supply of
arranging for effective display of
products and through their personal spare parts and attending to
selling efforts, retailers provide customers. This becomes an important
important information about the factor in the buyers’ decision for repeat
arrival, special features, etc., of new purchase of the products.
products to the customers. This serves (vi) Provide credit facilities: The
as an important factor in the buying retailers sometimes provide credit
decision making process of the facilities to their regular buyers. This
purchase of such goods. enables the latter to increase their level
(iii) Convenience in buying: Retailers of consumption and, thereby, their
generally buy goods in large quantities standard of living.
Terms of Trade
The following are the main terms used in the trade
1. Cash on delivery (COD):- It refers to a type of transaction in which payment for goods
or services is made at the time of delivery. If the buyer is unable to make payment
when the goods or services are delivered then it will be returned to the seller.
2. Free on Board or Free on Rail (FoB or FOR):- It rerers to a contract between
the seller and the buyer in which all the expenses up to the point of delivery to
a carrier (it may be a ship, rail, lorry, etc.) are to be borne by seller.
3. Cost, Insurance and Freight (CFF):- It is the price of goods which includes
not only the cost of goods but also the insurance and frieght charges payable
on goods upto destination port.
4. Errors and Omissions Excepted(E&OE):- It refers to that term which is used
in trade documents to say that mistakes and things that have been forgotten
should be taken into account.

2019-20
240 BUSINESS STUDIES

10.5 TYPES OF RETAILING TRADE (b) They normally deal in consumer

products of daily use such as
There are many types of retailers in
toiletry products, fruits and
India. For proper understanding, it
vegetables, and so on.
would be useful, to classify them into
(c) The emphasis of such traders is
certain common categories. Different on providing greater customer
classifications have been used by service by making the products
experts to categorise retailers into available at the very doorstep of
different types. For example, on the the customers.
basis of ‘size of business’, they may be (d) As they do not have any fixed
categorised into large, medium and business establishment to operate
small retailers. On the basis of ‘type of from, these retailers have to keep
ownership’, they may be categorised their limited inventory of
into ‘sole trader’, ‘partnership firm’, merchandise either at home or at
‘cooperative store’ and ‘company’. some other place.
Similarly, on the basis of ‘merchandise Some of the most common types of
handled’, the different classifications itinerant retailers operating in India are
may be ‘speciality store’, ‘supermarket’ as below:
and ‘departmental store’. Another (i) Peddlers and hawkers: Peddlers
common basis of classification is and hawkers are probably amongst
whether or not they have a fixed place the oldest form of retailers in the
of business. On this basis, there are market place who have not lost their
two categories of retailers: utility even during the modern times.
(a) Itinerant retailers, and They are small producers or petty
(b) Fixed shop retailers traders who carry the products on a
bicycle, a hand cart, a cycle-rickshaw
Both these types of retailers have
or on their heads, and move from place
been described in detail in the sections
to place to sell their merchandise at
that follow here after. the doorstep of the customers. They
generally deal in non-standardised
10.5.1 Itinerant Retailers and low-value products such as toys,
Itinerant retailers are traders who do vegetables and fruits, fabrics, carpets,
not have a fixed place of business to snacks and ice creams, etc. They are
operate from. They keep on moving with also found in streets of residential
their wares from street to street or place areas, places of exhibitions or meals,
to place, in search of customers. and outside schools, during a lunch
break.
Characteristics The main advantage of this form of
retailing is the provision of convenient
(a) They are small traders operating service to the consumers. However,
with limited resources. one should be careful in dealing with them,

2019-20
INTERNAL TRADE 241

as the products they deal in are not always 10.5.2 Fixed Shop Retailers
reliable in terms of quality and price.
This is the most common type of
(ii) Market traders: Market traders are
retailing in the market place. As is
the small retailers who open their shops evident from the name, these are retail
at different places on fixed days or shops who maintain permanent
dates, such as every Saturday or establishment to sell their merchandise.
alternate Saturdays, and so on. These They, therefore, do not move from
traders may be dealing in one place to place to serve their customers.
particular line of merchandise, say Some of the other characteristics of
fabrics or ready-made garments, toys, such traders are:
or crockery, or alternatively, they may
be general merchants. They are mainly Characteristics
catering to lower -income group of
(a) Compared with the itinerant traders,
customers and deal in low-priced
normally they have greater resources
consumer items of daily use.
and operate on a relatively large
(iii) Street traders (pavement scale. However, there are different size
vendors): Street traders are the small groups of fixed shop retailers,
retailers who are commonly found at varying from very small to very large.
places where huge floating population (b) These retailers may be dealing in
gathers, for example, near railway different products, including
stations and bus stands, and sell consumer durables as well as non-
consumer items of common use, such durables.
as stationery items, eatables, ready- (c) This category of retailers has greater
made garments, newspapers and credibility in the minds of
magazines. They are different from customers, and they are in a position
market traders in the sense that they to provide greater services to the
do not change their place of business customers such as home delivery,
so frequently. guarantees, repairs, credit facilities,
(iv) Cheap jacks: Cheap jacks are availability of spares, etc.
petty retailers who have independent
shops of a temporary nature in a Types
business locality. They keep on
The fixed-shop retailers can be
changing their business from one classified into two distinct types on the
locality to another, depending upon the basis of the size of their operations.
potentiality of the area. However, the These are:
change of place is not as frequent as in (a) small shop-keepers, and
the case of hawkers or market traders. (b) large retailers.
They deal in consumer items as well as The different types of retailers falling
services such as repair of watches, under the above two broad heads are
shoes, buckets etc. described as follows:

2019-20
242 BUSINESS STUDIES

Fixed Shop Small Retailers (iii) Street stall holders: These small
vendors are commonly found at street
(i) General stores: General stores are
crossings or other places where flow of
most commonly found in a local market
traffic is heavy. They attract floating
and residential areas. As the name
customers and deal mainly in goods of
indicates, these shops carry stock of a
cheap variety like hosiery products,
variety of products required to satisfy the toys, cigarettes, soft drinks, etc. They
day-to-day needs of the consumers get their supplies from local suppliers
residing in nearby localities. Such stores as well as wholesalers. The total area
remain open for long hours at convenient covered by a stall is very limited and,
timings and often provide credit facilities therefore, they handle goods on a very
to some of their regular customers. small scale. Their main advantage is in
The biggest advantage of such providing convenient service to the
stores is in terms of convenience to the customers in buying some of the items
customers in buying products of daily of their needs.
use such as grocery items, soft drinks, (iv) Second-hand goods shop: These
toiletry products, stationery and shops deal in second-hand or used
confectionery. As most of their goods, like books, clothes,
customers are residents of the automobiles, furniture and other
same locality, an important factor household goods. Generally persons
contributing to their success is the with modest means purchase goods
image of the owner and the rapport he from such shops. The goods are sold
has established with them. at lower prices. Such shops may also
(ii) Speciality shops: This type of retail stock rare objects of historical value
store is, of late, becoming very popular, and antique items which are sold at
particularly in urban areas. Instead of rather heavy prices to people who have
selling a variety of products of different special interest in such antique goods.
types, these retail stores specialise in The shops, selling second-hand
the sale of a specific line of products. goods may be located at street
For example, shops selling children’s crossings or in busy streets in the form
garments, men’s wear, ladies shoes, of a stall having very little structure —
toys and gifts, school uniforms, a table or a temporary platform to
college books or consumer electronic display the books or may have
goods, etc. These are some of the reasonably good infrastructure, as in
commonly found stores of this type in the case of those selling furniture or
the marketplace. used cars or scooters or motorcycles.
The speciality shops are generally
located in a central place where a large Fixed shop — Large stores
number of customers can be attracted, 1. Departmental stores
and they provide a wide choice to the A departmental store is a large
customers in the selection of goods. establishment offering a wide variety

2019-20
INTERNAL TRADE 243

of products, classified into well- (c) As the size of these stores is very
defined departments, aimed large, they are generally formed as
at satisfying practically every a joint stock company managed by
customer’s need under one roof. It a board of directors. There is a
has a number of departments, each managing director assisted by a
one confining its activities to one kind general manager and several
of product. For example, there may department managers.
be separate departments for (d) A departmental store combines
toiletries, medicines, furniture, both the functions of retailing
groceries, electronics, clothing and as well as warehousing.
dress material within a store. Thus, They purchase directly from
they satisfy diverse market segments manufacturers and operate
with a wide variety of goods and separate warehouses. That way they
services. It is not uncommon for a help in eliminating undesirable
department store in the United States middlemen between the producers
of America to carry ‘needle to an and the customers.
aeroplane’ or ‘all shopping under one (e) They have centralised purchasing
roof.’ Everything from ‘a pin arrangements. All the purchases in
to an elephant’ is the spirit behind a department store are made
a typical department store. centrally by the purchase
In India real departmental stores department of the store, whereas
have not yet come in a big way sales are decentralised in different
in the retailing business. However, departments.
some stores on this line in
India include ‘Akberally’ in Mumbai Advantages
and ‘Spencers’ in Chennai.
Some of the important features The major advantages of retailing
of a departmental store are through departmental stores may be
as follows: listed as follows:
(a) A modern departmental store may ( i ) Attract large number of
provide all facilities such as customers: As these stores are usually
restaurant, travel and information located at central places, they attract a
bureau, telephone booth, rest- large number of customers during the
rooms, etc. As such they try to best part of the day.
provide maximum service to higher (ii) Convenience in buying: By
class of customers for whom price offering large variety of goods under
is of secondary importance. one roof, the departmental stores
(b) These stores are generally located provide great convenience to customers
at a central place in the heart of a in buying almost all goods of their
city, which caters to a large number requirements at one place. As a result,
of customers. customers do not have to run from one

2019-20
244 BUSINESS STUDIES

place to another to complete their (iii) High possibility of loss: As a

shopping. result of high operating costs and large-
(iii) Attractive services: A scale operations, the chances of
departmental store aims at providing incurring losses in a departmental store
maximum services to the customers. are high. For example, if there is any
Some of the services offered by it change in the tastes of customers or
include home delivery of goods, latest fashions, it necessitates selling of
execution of telephone orders, grant of such out-of-fashion articles in
credit facilities and provision for clearance sale, to reduce the huge
restrooms, telephone booths, inventory of goods built up.
restaurants, saloons, etc. (iv) Inconvenient location: As a
(iv) Economy of large-scale departmental store is generally situated
operations: As these stores are at a central location, it is not convenient
organised at a very large scale, the for the purchase of goods that are
benefits of large scale operations, needed at short notice.
particularly, in respect of purchase of In spite of some of these limitations
goods are available to them. the departmental stores have been
popular in some of the western
(v) Promotion of sales: The
countries of the world because of their
departmental stores are in a position
benefits to a certain class of customers.
to spend considerable amount of
2. Chain Stores or Multiple Shops:
money on advertising and other
Chain stores or multiple shops
promotional activities, which help in
are networks of retail shops that
boosting their sales.
are owned and operated by
manufacturers or intermediaries.
Limitations
Under this type of arrangement, a
However, there are certain limitations number of shops with similar
of this type of retailing. These are appearance are established in
described as follows: localities, spread over different parts of
(i) Lack of personal attention: the country. These different shops
Because of the large-scale operations, normally deal in standardised and
it is very difficult to provide adequate branded consumer products, which
personal attention to the customers in have rapid sales turnover. These shops
these stores. are run by the same organisation and
(ii) High operating cost: As these have identical merchandising
stores give more emphasis on providing strategies, with identical products and
services, their operating costs tend to displays. Some of the important
be on the higher side. These costs, in features of such shops may be
turn, make the prices of the goods high. described as follows:
They are, therefore, not attractive to the (a) These shops are located in fairly
lower income group of people. populous localities, where

2019-20
INTERNAL TRADE 245

sufficient number of customers The chain operation is most

can be approached. The idea is to effective in handling high-volume
serve the customers at a point merchandise, whose sales are relatively
which is nearest to their residence constant throughout the year. In India,
or work place, rather than Bata Shoe stores are typical examples
attracting them to a central place. of such shops. Similar type of retail
(b) The manufacturing/procurement outlets are coming up in other products
of merchandise for all the retail also. For example, the exclusive
units is centralised at the head showrooms of D.C.M., Raymonds and
office, from where the goods are the fast food chains of Nirula’s and
despatched to each of these shops McDonalds.
according to their requirements.
This results in savings in the cost Advantages
of operation of these stores.
Multiple shops are offering various
(c) Each retail shop is under the direct
advantages to the consumers, which
supervision of a Branch Manager,
are described as follows:
who is held responsible for its day-
(i) Economies of scale: As there is
to-day management. The Branch
central procurement, the multiple-
Manager sends daily reports to the
shop organisation enjoys the
head office in respect of the sales,
economies of scale.
cash deposits, and the require-
(ii) Elimination of middlemen: By
ments of the stock.
selling directly to the consumers, the
(d) All the branches are controlled by
multiple-shop organisation is able to
the head office, which is concerned
eliminate unnecessary middlemen in
with formulating the policies and
the sale of goods and services.
getting them implemented.
(iii) No bad debts: Since all the sales
(e) The prices of goods in such shops in these shops are made on cash basis,
are fixed and all sales are made on
there are no losses on account of bad
cash basis. The cash realised from
debts.
the sales of merchandise is
(iv) Transfer of goods: The goods not
deposited daily into a local bank
account on behalf of the head in demand in a particular locality may
office, and a report is sent to the be transferred to another locality where
head office in this regard. it is in demand. This reduces the
(f) The head office normally appoints chances of dead stock in these shops.
inspectors, who are concerned with (v) Diffusion of risk: The losses
day-to-day supervision of the incurred by one shop may be covered
shops, in respect of quality of by profits in other shops, reducing the
customer service provided, total risk of an organisation.
adherence to the policies of the (vi) Low cost: Because of centralised
head office, and so on. purchasing, elimination of middlemen,

2019-20
246 BUSINESS STUDIES

centralised promotion of sales and handled by multiple shops change

increased sales, the multiple shops rapidly, the management may have
have lower cost of business. to sustain huge losses because of
(vii) Flexibility: Under this system, if large stocks lying unsold at the
a shop is not operating at a profit, the central depot.
management may decide to close it or
shift it to some other place without Difference between Departmental
really affecting the profitability of the stores and Multiple shops
organisation as a whole.
Although both these types of retail
organisations are large establishments,
Limitations
there are certain differences
(i) Limited selection of goods: Some between the two. Such differences are
of the multiple shops deal only in given here below:
limited range of products. This is (i) Location: A departmental store is
especially the problem with the chain located at a central place, where a large
stores which are owned and operated number of customers can be attracted
by manufacterers, and as such mostly to it. However, the multiple stores are
sell the products produced by the located at a number of places for
themselves. They do not sell products approaching a large number of
of other manufacturers. In that way the customers. Thus, central location is
consumers get only a limited choice not necessary for a multiple shop.
of goods. This, however is not the case (ii) Range of products: Departmental
with retailer owned chain stores such stores aim at satisfying all the needs
as Big Apple or Reliance Retail which of customers under one roof. As such,
sell products of a large number of they have to carry a variety of products
manufacturers. of dif ferent types. However, the
(ii) Lack of initiative: The personnel multiple stores generally aim to satisfy
managing the multiple shops have to the requirements of customers relating
obey the instructions received from the to a specified range of their products
head office. This makes them habitual only.
of looking up to the head office for (iii) Services offered: The departmental
guidance on all matters, and takes away stores lay great emphasis on providing
the initiative from them to use their maximum service to their customers.
creative skills to satisfy the customers. Some of the services, provided by them
(iii) Lack of personal touch: Lack of include alteration of garments,
initiative in the employees sometimes restaurant and so on. As against this,
leads to indifference and lack of the multiple shops provide very limited
personal touch in them. service confined to guarantees and
(iv) Difficult to change demand: If repairs if the sold out goods turn out
the demand for the merchandise to be defective.

2019-20
INTERNAL TRADE 247

(iv) Pricing: The multiple shop chains in newspapers or magazines, circulars,

sell goods at fixed prices and maintain catalogues, samples and bills, and price
uniform pricing policies for all the lists sent to them by post. All the relevant
shops. The departmental stores, information about the products such as
however, do not have uniform pricing the price, features, delivery terms, terms
policy for all the departments; rather of payment, etc., are described in the
they have to occasionally offer advertisement. On receiving the orders,
discounts on certain products and the items are carefully scrutinised with
varieties to clear their stock. respect to the specifications asked for
(v) Class of customers: The depart- by the buyers and are complied with
mental stores cater to the needs of through the post office.
relatively high income group of There can be different alternatives for
customers who care more for the receiving payments. First, the customers
services provided rather than the prices may be asked to make full payment in
of the product. The multiple shops, on advance. Second, the goods may be sent
by Value Payable Post (VPP). Under this
the other hand, cater to different
arrangement, the goods are sent through
types of customers, including those
post and are delivered to the customers
belonging to the lower income groups,
only on making full payment for the
who are interested in buying quality same. Third, the goods may be sent
goods at reasonable prices. through a bank, which is instructed to
(vi) Credit facilities: All sales in the deliver the articles to the customers. In
multiple shops are made strictly on cash this arrangement there is no risk of bad
basis. In contrast, the departmental debt, as the goods are handed over to
stores may provide credit facilities to the buyers only after he makes full
some of their regular customers. payment. However, there is a need to
(vii) Flexibility: As the departmental ensure the buyers that the goods
stores deal in a wide variety of despatched are in accordance with their
products, they have certain flexibility specifications.
in respect of the line of goods marketed. This type of business is not suitable
However, there is not much scope for for all types of products. For example,
flexibility in the chain stores, which deal goods that are perishable in nature or
only in limited line of products. are bulky and cannot be easily handled,
are not recommended for mail-house
Mail Order Houses trading. Only the goods that can be
Mail order houses are the retail outlets (i) graded and standardised, (ii) easily
that sell their merchandise through transported at low cost, (iii) have ready
mail. There is generally no direct demand in the market, (iv) are available
personal contact between the buyers in large quantity throughout the year,
and the sellers in this type of trading. (v) involve least possible competition in
For obtaining orders, potential customers the market and (vi) can be described
are approached through advertisements through pictures etc., are suitable for

2019-20
248 BUSINESS STUDIES

this type of trading. Another important Limitations

point in this regard is that mail house
(i) Lack of personal contact: As there
business cannot be successfully carried
is no personal contact between the
out unless education is wide spread.
buyers and the sellers under the
It is so because only the literate
system of mail order selling, there
people can be reached through
are greater possibilities of mis-
advertisements and other forms of
understanding and mistrust between
written communication.
the two. The buyers are not in a position
to examine the products before buying
Advantages
and the sellers cannot pay personal
(i) Limited capital requirement: Mail attention to the likes and dislikes of the
order business does not require heavy buyers and cannot clear all their doubts
expenditure on building and other through catalogues and advertisements.
infrastructural facilities. Therefore, it (ii) High promotion cost: The mail
can be started with relatively low order business has to rely heavily on
amount of capital. advertisements and other methods of
(ii) Elimination of middle men: The promotion in order to inform and
biggest advantage of mail-order persuade the potential buyers to buy
business from the point of view of their products. As a result, there is
consumers is that unnecessary heavy expenditure on promotion of the
middlemen between the buyers and products.
sellers are eliminated. This may result (iii) No after sales service: In mail
in lot of savings both to the buyers as order selling, the buyers and sellers
well as to the sellers. may be located very far away from each
(iii) Absence of bad debt: Since the other and there is no personal contact
mail order houses do not extend credit between the two. As a result, there is
facilities to the customers, there are absence of after sales services which is
no chances of any bad debt on account so important for the satisfaction of the
of non payment of cash by the customers.
customers. (iv) No credit facilities: The mail order
(iv) Wide reach: Under this system the houses do not provide credit facilities
goods can be sent to all the places to the buyers. Thus, customers with
having postal services. This opens wide limited means may not be interested in
scope for business as a large number this type of trading.
of people throughout the country can (v) Delayed delivery: There is no
be served through mail. immediate delivery of goods to the
(v) Convenience: Under this system customers, as receipt and execution of
goods are delivered at the doorstep of order through mail takes its own time.
the customers. This results in great (vi) Possibility of abuse: This type of
convenience to the customers in buying business provides greater possibility of
these products. abuse to dishonest traders to cheat the

2019-20
INTERNAL TRADE 249

customers by making false claims raised by issue of shares to members.

about the products or not honouring The management of the store is
the commitments made through hand democratic and entrusted to an
bills or advertisements. elected managing committee where
(vii) High dependence on postal one man one vote is the rule. The
services: The success of mail order liability of the members of a
business depends heavily on the cooperative store is generally limited
availability of efficient postal services at to the extent of the capital contributed
a place. But in a vast country like ours, by them. To ensure fair management
where many places are still without of funds, the accounts of the stores
postal facilities, this type of business are audited by the Registrar of
has limited prospects. Cooperative Societies or a person
authorised by him/her.
Consumer Cooperative Store
Advantages
A consumer cooperative store is an
organisation owned, managed and The major advantages of a consumer
controlled by consumers themselves. cooperative store are as follows:
The objective of such stores is to reduce (i) Ease information: It is easy to form
the number of middlemen who increase a consumer cooperative society. Any
the cost of produce, and thereby ten people can come together to form a
provide service to the members. voluntary association and get
The cooperative stores generally themselves registered with the Registrar
buy in large quantity, directly from of Cooperative Societies by completing
manufacturers or wholesalers and sell certain formalities.
them to the consumers at reasonable (ii) Limited liability: The liability of
prices. Since the middleman are the members in a cooperative store is
eliminated or reduced, the members get limited to the extent of the capital
products of good quality at cheaper contributed by them. Over and above
rates. The profits earned by consumer that amount, they are not liable
cooperative stores during a year are personally to pay for the debts of
utilised for declaring bonus to society, in case the liabilities are
members and for strengthening the greater than its assets.
general reserves and general welfare (iii) Democratic management:
funds or similar funds for social and Cooperative societies are democratically
educational benefits of the members. managed through management
To start a consumer cooperative committees which are elected by the
store, at least 10 people have to come members. Each member has one vote,
together and form a voluntary irrespective of the number of shares
association and get it registered held by him/her.
under the Cooperative Societies Act. (iv) Lower prices: A cooperative store
The capital of a cooperative store is purchases goods directly from the

2019-20
250 BUSINESS STUDIES

manufacturers or wholesalers and Super Markets

sells them to members and others.
A super market is a large retailing
Elimination of middlemen results in
business unit selling wide variety of
lower prices for the consumer goods to consumer goods on the basis of low price
the members. appeal, wide variety and assortment,
(v) C a s h s a l e s : The consumer self-service and heavy emphasis on
cooperative stores normally sell goods on merchandising appeal. The goods traded
cash basis. As a result, the requirement are generally food products and other low
for working capital is reduced. priced, branded and widely used
(vi) Convenient location: The consumer products such as grocery,
consumer cooperative stores are utensils, clothes, electronic appliances,
generally opened at convenient public household goods, and medicines. Super
places where the members and others markets are generally situated at the
can easily buy the products as per their main shopping centres. Goods are kept
requirements. on racks with clearly labelled price and
quality tags in such stores. The
Limitations customers move into the store to pick up
The limitations of consumer cooperative goods of their requirements, bring them
stores are given as below: to the cash counter, make payment and
(i) Lack of initiative: As the cooperative take home the delivery.
stores are managed by people who work Super markets are organised on
on honorary basis, there is a lack of departmental basis where customers
sufficient initiative and motivation can buy various types of goods under
amongst them to work more effectively. one roof. However, as compared to
(ii) Shortage of funds: The primary departmental stores, these markets do
source of funds for a cooperative store not offer certain services such as free
is the money raised from members by home delivery, credit facilities, etc., and
issue of shares. The stores generally face also do not appoint sales persons to
shortage of funds as membership is convince customers about the quality
limited. This comes in the way of growth of products. Some of the important
and expansion of the cooperative stores. characteristics of a super market are
(iii) Lack of patronage: The members as follows:
of the cooperative stores generally do (i) A super market generally carries
not patronise them regularly. As a a complete line of food items and
result of this, the stores are not able to groceries, in addition to non-food
operate successfully. convenience goods.
(iv) Lack of business training: The (ii) The buyers can purchase different
people entrusted with the management products as per their requirements
of cooperative stores lack expertise as under one roof in such markets.
they are not trained in running the (iii) A super market operates on the
stores efficiently. principle of self-service. The

2019-20
INTERNAL TRADE 251

distribution cost is, therefore, Limitations

lower.
The major limitations of super markets
(iv) The prices of the products are
are as follows:
generally lower than other types
(i) No credit: Super markets sell
of retail stores because of bulk
their products on cash basis only. No
purchasing, lower operational
credit facilities are made available to
cost, and low profit margins.
the buyers. This restricts the
(v) The goods are sold on cash basis
purchasing power of buyers from
only.
such markets.
(vi) The super markets are generally (ii) No personal attention: Super
located at central locations to markets work on the principle of self-
secure high turnover. service. The customers, therefore, do
Advantages not get any personal attention. As a
The following are the merits of super result, such commodities that require
markets: personal attention by sales people
(i) One roof, low cost: Super markets cannot be handled effectively in super
markets.
offer a wide variety of products at low
(iii) Mishandling of goods: Some
cost under one roof. These outlets are,
customers handle the goods kept in the
therefore, not only convenient but also
shelf carelessly. This may raise costs
economical to the buyers for making
in super markets.
their purchases.
(iv) High overhead expenses: Super
(ii) Central location: The super market incur high overhead expenses.
markets are generally located in the As a result these have not been able to
heart of the city. As a result, these are create low price appeal among the
easily accessible to large number of customers.
people staying in the surrounding (v) Huge capital requirement:
localities. Establishing and running a super
(iii) Wide selection: Super markets market requires huge investment. The
keep a wide variety of goods of different turnover of a store should be high so
designs, colour, etc., which enables the that the overheads are kept under
buyers to make better selection. reasonable level. This can be possible
(iv) No bad debts: As generally the in bigger towns but not in small towns.
sales are made on cash basis, there are
no bad debts in super markets. Vending Machines
(v) Benefits of being large scale:
A super market is a large scale Vending machines are the newest
retailing store. It enjoys all the revolution in marketing methods.
benefits of large scale buying and Coin operated vending machines are
selling because of which its operating proving useful in selling several
costs are lower. products such as hot beverages,

2019-20
252 BUSINESS STUDIES

platform tickets, milk, soft drinks, ensure the smooth flow of goods across
chocolates, newspaper, etc., in many the country implemented the Goods
countries. Apart from some of the and Services Tax (GST) from July 1,
products mentioned here, the latest 2017. The move also aims to make life
area in which this concept is getting easier for manufacturers, producers,
popular in many parts of our country investors and consumers. This system
(particularly in the urban areas) is is regared as the most revolutionising
the case of Automated Teller Machines tax reform in the Indian taxation
(ATM) in the banking service. As the history. Tax apart from being a source
name suggests, these machines have of revenue for growth also plays a key
altogether changed the concept of role in making the State accountable
banking and made it possible to to its taxpayers. Effective taxation
withdraw money at any time without ensures that public funds are
visiting any branch of a bank. effectively employed in fulfilling social
Vending machines can be useful for objectives for sustainable development.
selling pre-packed brands of low priced GST is a destination-based single
products which have high turnover tax on the supply of goods and services
from the manufacturer to the consumer,
and which are uniform in size and
and has replaced multiple indirect
weight. However, the initial cost of
taxes levied by the Central and the
installing a vending machine and the
State governments, thereby, converting
expenditure on regular maintenance
the country into a unified market.
and repair are quite high. Also
Among other benefits, GST is expected
consumers cannot feel or see the
to improve the ease of doing business
product before buying and do not
in tax compliance, reduce the tax
have the opportunity of returning
burden by eliminating tax-on-tax,
unwanted goods. Apart from that,
improve tax administration, mitigate
special packs have to be developed for tax evasion, broaden the organised
the machines. The machines have to segment of the economy and boost tax
be made reliable in their operations. revenues. The GST has replaced 17
In spite of these limitations, with the indirect taxes (8 Central + 9 State levels)
growth in the economy, vending and 23 cesses of the Centre and the
machines have a promising future in States, eliminating the need for filing
retail sales of high turnover and low multiple returns and assessments and
priced consumer products. rationalising the tax treatment of goods
and services along the supply chain
Goods and Services Tax from producers to consumers. GST
The Government of India, following the comprises Central GST (CGST) and the
credo of ‘One Nation and One Tax’, and State GST (SGST), subsuming levies
wanting a unified market in order to previously charged by the Central and

2019-20
INTERNAL TRADE 253

the State governments respectively. making GST a destination-based

GST (CGST + SGST) is charged at each consumption tax. The provision of
stage of value addition and the supplier availing input credit at each stage of
off-sets the levy on inputs in the value chain helps in avoiding the
previous stages of value chain through cascading effect (tax on tax) under GST,
the tax credit mechanism. The last which is expected to reduce prices of
dealer in the supply chain passes on commodities and benefit the
the added GST to the consumer, consumers. (refer page 253)

Some Facts about GST

1. GST aims to subsume a plethora of taxes into one single tax across
the country and make goods uniformly priced across India, albeit
some goods become costly and some become cheaper.
2. With the implementation of GST, luxury goods have become costlier,
while items of mass consumption have become cheaper.
3. GST is not taxation at source. It is a destination tax or rather it’s a
consumption tax. A product is manufactured in Tamil Nadu and
travels through the country before it reaches Delhi, where the buyer
or consumer pays tax for it. Both the Centre and the State have
their share in this tax.
4. The Indian GST will have a mechanism of matching of invoices.
Input tax credit of purchased goods and services will only be
available if the taxable supplies received by the supplies received
by the supplier. The Goods and Services Tax network is a
self-regulating mechanism, which not only checks tax frauds and
tax evasion, but also brings in more and more businesses into the
formal economy.
5. Anti-profiteering measure is one of the key features of the recently
implemented Goods and Services Tax law. These measures prevent
entities from making excessive profits. Since the GST, along with
the input tax credit, is eventually expected to bring down prices, a
National Anti-profiteering Authority (NAA) is to be set up to ensure
that the benefits accrued to entities due to reduction in costs is
passed on to the consumers. Also, entities that hike rates
inordinately, citing GST as the reason, will be checked by this body.

2019-20
254 BUSINESS STUDIES

How will GST Benefit and Empower Citizens

n Reduction in overall tax burden
n No hidden taxes
n Development of a harmonised national market for goods and services
n Higher disposable income in hand, education and essential needs
n Customers to have wider choice
n Increased economic activity
n More employment opportunities

Key Features of GST:

1. The territorial spread of GST is the whole country, including Jammu
and Kashmir.
2. GST is applicable on the ‘supply’ of goods or services as against the
present concept of tax on the manufacture or sale of goods or on the
provision of services.
3. It is based on the principle of destination-based consumption tax against
the present principle of origin-based taxation.
4. Import of goods and services is treated as inter-State supplies and would
be subject to IGST in addition to the applicable customs duties.
5. CGST, SGST and IGST are levied at rates mutually agreed upon by the
Centre and the States under the aegis of the GST Council.
6. There are four tax slabs namely 5 per cent, 12 per cent, 18 per cent and
28 per cent for all goods or services.
7. Exports and supplies to SEZ are zero-rated.
8. There are various modes of payment of tax available to the taxpayer,
including Internet banking, debit/credit card and National Electronic
Funds Transfer (NEFT)/Real Time Gross Settlement (RTGS).

GST Council – Constitution

n Chairperson: Finance Minister
n Vice Chairperson is to be chosen amongst the Ministers of State
Government
n Members: MoS (Finance) and all Ministers of Finance/Taxation of
each State
n Quorum is 50% of total members
n States have two-third weightage and Centre has one-third weightage
n Decision is taken by 75% majority
n The Council shall make recommendations on everything related to
GST including, rules and rates, etc.

2019-20
INTERNAL TRADE 255

The CGST/SGST
is payable on all
intra-state
supply of goods
or services or
both

IGST is payable
on all inter-state
GST supply of goods
and services

Tax liability
arises when the
taxable person
crosses
exemption limit
i.e., ` 20 lakh

10.6 R O L E O F C O M M E R C E A N D chambers act as the national guardians

INDUSTRY ASSOCIATIONS IS IN of trade, commerce and industry.
These associations have been
PROMOTION OF INTERNAL
playing a catalytic role in strengthening
TRADE
internal trade to make it an important
Associations of business and part of overall economic activity.The
industrial houses are formed to Chambers of Commerce and Industry
promote and protect their common interact with the government at different
interest and goals. Many such levels to reorient or put in place policies
associations have been formed and are which reduce hindrances, increase
present in the country such as interstate movement of goods,
Associated Chamber of Commerce and introduce transparency and remove
Industry (ASSOCHAM), Confederation multiple layers of inspection and
of Indian Industry (CII) and Federation bureaucratic hurdles. Besides, the
of Indian Chambers of Commerce and chambers also aim at erecting sound
Industry (FICCI). These associations or infrastructure and simplifying and

2019-20
256 BUSINESS STUDIES

harmonising the tax structures. The being levied in place of the sales tax
interventions are mainly in the to remove the cascading effect of the
following areas: sales tax.
(i) Interstate movement of goods: (iv) Marketing of agro products and
The Chambers of Commerce and related issues: The associations of
Industry help in many activities agriculturists and other federations
concerning inter state movement of play an important role in the
goods which include registration of marketing of agro products.
vehicles, surface transport policies, Streamlining of local subsidies and
construction of highways and roads. marketing policies of organisations
For example, the construction of selling agro products are some of the
golden quadrilateral corridor areas where the Chambers of
announced by the Prime Minister of Commerce and Industry can really
India in one of the Annual General intervene and interact with concerned
Meetings of the Federation of Indian agencies like farming cooperatives.
Chambers of Commerce and (v) Weights a n d Measures and
Industry (FICCI) will facilitate prevention of duplication brands:
internal trade. Laws relating to weights and
(ii) Octroi and other local levies: measures and protection of brands
Octroi and local taxes are the important are necessary to protect the interest of
sources of revenue of the local the consumers as well as the traders.
government. These are collected on the These need to be enforced strictly. The
goods and from people entering the Chambers of Commerce and Industry
state or the municipal limits. The interact with the government to
Chambers of Commerce try to ensure formulate such laws and take action
that their imposition is not at the cost against those who violate rules and
of smooth transportation and local regulations.
trade. (vi) Excise duty: Central excise is the
(iii) Harmonisation of sales tax chief source of the government
structure and Value Added Tax: revenue levied across states by the
The Chambers of Commerce and central government. The excise policy
Industry play an important role in plays an important role in pricing
interacting with the government to mechanism. The trade associations
harmonise the sales tax structure in need to interact with the government
different states. The sales tax is an to ensure streamlining of excise
important part of the state revenue. A duties.
rational structure of the sales tax and (vii) Promoting sound infrastructure:
its uniform rates across states, are A sound infrastructure like road, port,
important for promoting a balance in electricity, railways etc., play a catalytic
trade. As per the new policy of the role in promoting trade. The Chambers
government, the Value Added Tax is of Commerce and Industry hold

2019-20
INTERNAL TRADE 257

discussions with government agencies maximising production and generating

for investments into these projects. employment. The Chambers of
Commerce and Industry and the
(viii) Labour legislation: A simple
government are constantly interacting
and flexible labour legislation is on issues like labour laws,
helpful in running industries, retrenchment etc. with the government.

Key Terms
Internal trade Wholesalers Market traders
Wholesale trade Retailers Cheap jacks
Retail trade Internal retailers Speciality stores
Departmental stores Chain stores Vending machines
Super markets Chambers of Commerce

SUMMARY

Trade refers to buying and selling of goods and services with the objective of
earning profit on the basis of geographical location of buyers and sellers. It
can be classified into two categories (i) internal trade; and (ii) external trade.
Internal trade: Buying and selling of goods and services within the
boundaries of a nation are referred to as internal trade. No custom duties or
import duties are levied on such trade as goods are part of domestic production
and are meant for domestic consumption. Internal trade can be categorised
into two broad categories (i) wholesale trade; and (ii) retailing trade.
Wholesale trade: Purchase and sale of goods and services in large quantities
for the purposes of resale or intermediate use is referred to as wholesale
trade. Wholesalers perform a number of functions in the process of
distribution of goods and services and provide valuable services to
manufacturers and retailers.
Services of wholesalers: Wholesalers are an important link between
manufacturers and retailers. They add value by creating time and place utility.
Services of manufacturers: The services provided by wholesalers to
manufacturers include (i) facilitating large scale production; (ii) bearing
risk; (iii) providing financial assistance; (iv) expert advice; (v) help in
marketing function; (vi) facilitating continuity; and (vii) storage.
Services to retailers: The services provided by wholesalers to retailers
include (i) availability of goods (ii) marketing support (iii) grant of credit (iv)
specialised knowledge (v) risk sharing

2019-20
258 BUSINESS STUDIES

Retail trade: A retailer is a business enterprise that is engaged in the sale

of goods and services directly to the ultimate consumers.
Services of retailers: Retailers are an important link between the producers
and final consumers. They provide useful service to consumers wholesalers
and manufacturers in the distribution of products and services.
Services to manufacturers/wholesalers: Different services provided by
retailers to wholesalers and manufacturers include (i) helping distribution
of goods; (ii) personal selling; (iii) enabling large scale operations; (iv) collecting
market information; and (v) help in promotion of goods and services.
Services to consumers: The different services provided by retailers to
consumers include (i) regular availability of products (ii) new product
information (iii) convenience of buying (iv) trade selection (v) after sales
services and (vi) providing credit facilities.
Types of retail trade: Retail trade can be classified into different types
according to their size, type of ownership, on the basis of merchandise
handled and whether they have fixed place of business or not. Retailers
can be categorised as (i) itinerant retailers; and (ii) fixed shop retailers.
Itinerant retailers: Itinerant retailers are traders who don’t have a fixed place
of business to operate from. They are small traders operating with limited
resources who keep on moving with their wares from street to street or place to
place in search of customers. The major types of such retailers are:
(i) Peddlers and hawkers: They are small producers or petty traders who
carry the products on a bicycle or handcart or on their heads and move
from place to place, to sell their goods at the doorstep of the customers.
(ii) Market traders: Market traders are small retailers who open their shops
at different places on fixed days/dates, catering mainly to lower income group
of customers and dealing in low priced consumer items of daily use.
(iii) Street trades: Street traders are the small retailers who are commonly
found at places where huge floating population gathers.
(iv) Cheap jacks: Cheap jacks are those petty retailers who have independent
shops of a temporary nature in a business location. They deal in consumer
items and provide services to consumers in terms of making the products
available where needed.
Fixed shop retailers: On the basis of size of operations, (fixed shop retailers
can be classified as a) small shopkeepers and (b) large retailers.
Fixed shop small retailers
(i) General stores: General stores carry stock of a variety of products such as
grocery items, soft drinks, toiletry products, confectionery, and stationery,
needed to satisfy day-to-day needs of consumers, residing in nearby localities.

2019-20
INTERNAL TRADE 259

(ii) Speciality shops: Speciality shops specialise in the sale of specific line
of products such as children’s garments, men’s wear, ladies shoes, school
uniform, college books or consumer electronic goods, etc.,
(iii) Street stall holders: These small vendors are commonly found at
street crossing or other places where flow of traffic is heavy and deal
mainly in goods of cheap variety like hosiery products, toys, cigarettes,
soft drinks, etc.
(iv) Second hand goods shop: These shops deals in second hand or used
goods of different kinds like furniture, books, clothes and other household
articles which are sold at lower prices.
(v) Single line stores: Single line stores deal in a single product line such as
ready made garments, watches, shoes etc., and keep variety of items of the
same line and are situated at central location.
Fixed shop large stores: In fixed shop large stores, the volume and variety
of goods stocked is large.
Departmental stores: A departmental store is a large establishment offering
a wide variety of products, classified into well-designed departments, aimed
at satisfying practically every customer’s need under one roof.
Advantages: (a) attracts large number of customers (b) convenience in
buying (c) attractive services (d) economy of large scale operation
(e) promotion of sales.
Limitations: (a) lacks personal attention (b) high operating cost (c) high
possibility of loss (d) inconvenient location.
Chain stores or multiple shops: These shops are networks of retail shops
that are owned and operated by manufacturers or intermediaries dealing
in standardised and branded consumer products having rapid sales
turnover.
Advantages: (a) economies of scale (b) elimination of middlemen
(c) no bad debts (d) transfer of goods (e) diffusion of risk (e) low cost
(f) flexibility.
Limitations: (a) limited selection of goods (b) lack of initiative (c) lack of
personal touch (d) difficult to change demand.
Difference between Departmental Stores and Multiple Shops: (a) location
(b) range of products (c) services offered (d) pricing (e) class of customers
(f) credit facilities (g) flexibility.
Mail order houses: Mail order houses are retail outlets that sell their
merchandise through mail, without any direct personal contact with
the buyers.

2019-20
260 BUSINESS STUDIES

Advantages: (a) limited capital requirements (b) elimination of middlemen,

(c) absence of bad debts (d) wide reach (e) convenience.
Limitations: (a) lack of personal contact, (b) high promotion cost (c) no after
sales services (d) no credit facilities (e) delayed delivery (f) possibility of
abuse (g) high dependence on postal services.
Consumer cooperative stores: A consumer cooperative store is an
organisation owned managed and controlled by consumers themselves
formed with the objective of reducing the number of middlemen and thereby
providing services to members.
Advantages: (i) ease in formation (ii) limited liability (iii) democratic
management (iv) lower prices (v) cash sales (vi) convenient location.
Limitations: (i) lack of initiative (ii)shortage of funds (iii) lack of patronage
(iv) lack of business training.
Super markets: A super market is a large retailing business unit selling
wide variety of consumer goods on the basis of low margin appeal, wide
variety and assortment and heavy emphasis on merchandising appeal.
Advantages: (i) one roof, low cost (ii) central location (iii) wide selection (iv)
no bad debts (v) benefits of large scale.
Limitations: (a) no credit (b) no personal attention (c) mishandling of goods
(d) high over head expenses (e) huge capital requirements.
Vending Machines: Vending machines are proving useful in selling
pre-packed brands of low priced products which have high turnover and
which are uniform in size and weight.

EXERCISES

Short Answer Questions

1. What is meant by internal trade?
2. Specify the characteristics of fixed shop retailers.
3. What purpose is served by wholesalers providing warehousing facilities?
4. How does market information provided by the wholesalers benefit the
manufacturers?
5. How does the wholesaler help the manufacturer in availing the economies
of scale?
6. Distinguish between single line stores and speciality stores. Can you
identify such stores in your locality?

2019-20
INTERNAL TRADE 261

7. How would you differentiate between street traders and street shops?
8. Explain the services offered by wholesalers to manufacturers.
9. What are the services offered by retailers to wholesalers and consumers?

Long Answer Questions

1. Itinerant traders have been an integral part of internal trade in India.
Analyse the reasons for their survival in spite of competition from large
scale retailers.
2. Discuss the features of a departmental store. How are they different from
multiple shops or chain stores.
3. Why are consumer cooperative stores considered to be less expensive?
What are its relative advantages over other large scale retailers?
4. Imagine life without your local market. What difficulties would a consumer
face if there is no retail shop?
5. Explain the usefulness of mail orders houses. What type of products are
generally handled by them? Specify.

Projects/Assignments
1. Identify various fixed shop retailers in your locality and classify them
according to the different types you have studied.
2. Do you know any retailers selling second-hand goods in your area? Find
out the category of the product that they deal in? Which products are
suitable for resale? List some of your findings. What conclusions do you
draw?
3. Do you observe any difference in the retail business of yesterday and the
times to come. Prepare a brief write-up and discuss it in class.
4. From you own experience, compare the features of two retail stores
selling the same product. For example, the same products being sold at
a small scale retailer like a general store and in a big store like a
departmental store. What similarities and differences can you identify
in terms of price, service, variety, convenience, etc.

5. The GST has been rolled out by the Government of India on July, 01,
2017. Different goods and services are classified under GST rates viz.,
0%, 5%, 12%, 18% and 28%. Collect the information on GST from
newspapers, media news, Internet and business magazines and classify
the given goods and services five GST rates :

2019-20
262 BUSINESS STUDIES

Activity: Classification of GST Rates of different Goods and Services

Items No tax (0%) 5% 12% 18% 28%
Jute
Newspaper
Coffee/Tea
Shampoo
Washing Machine
Motorcycles
Vegetables
Milk
Curd
Salt
Spices
Kerosene
Kites
Apparel
above Rs 1000
Cheese
Ghee
Fruit Juices
Bhujia
Ayurvedic Medicines
Sewing Machine
Cell Phones
Ketchup & Sauces
Exercise Books
Notebooks
Spectacles
Non-AC
Fertilisers
Biscuits
Pasta
Pastries and cakes
Jams
Mineral Water
Steel
Products
Camera
Speakers and
monitors
Aluminum Foil
CCTV
Telecom Services
Branded Garments

2019-20