Chapter – 10 Internal Trade

Trade means buying and selling of goods, which involves the exchange of commodities for money or
money’s worth.
Classification of Trade
1) Internal Trade: - Trade which takes place within a country is called internal trade. Internal
trade is further divided into two types

a) Wholesale Trade: - It means buying goods from manufacturer or producers and resell them
in small quintiles to the retailers.
b) Retail Trade: - It means selling goods in small quantities to the ultimate consumer.

2) External Trade: - Trade between two or more countries, is called external trade
Service of Wholesalers
There are 2 types of services provided by the wholesalers
1) Services to Manufacturer
2) Services to Retailers

1) Services to Manufactures
i) Facilitating large scale production – Bulk orders from wholesalers enable to produce in
large quantity.
ii) Bearing risk – They purchase the entire goods immediately on production.
iii) Storage – The burden of storing goods passed on to the wholesalers.
iv) Expert Advice – They can collect information about the tastes and fashion of
consumers and passes it on to producers.
v) Helps in Marketing - Wholesalers take care of distribution of goods, market
research, transportation, warehousing etc.
vi) Facilitates Continuity of Production - They purchase goods as when they are produced.
vii) Financial Assistance – Wholesalers purchase on cash basis and they may give advance
payment for bulk purchases.

2) Services To Retailers
i) Availability of goods - Wholesalers hold the inventory of goods as well as handle the
work of collecting goods from several producers thus relieving the retailers of the same.
ii) Marketing Support - Wholesalers are responsible for a variety of marketing duties as
well as providing support to retailers.
iii) Providing Credit Facilities -. As a result, the retailer can run their firm with a modest
quantity of working cash.
iv) Specialized Knowledge - Wholesalers specialize on a single product line and have a
good understanding of the market, which is further passed to the retailers.
v) Risk Sharing - Retailers can avoid the risk of stockpiling, obsolescence, and demand
fluctuations by purchasing small quantities.
Retail Trade
A retailer is a business enterprise that is engaged in the sale of goods and services directly to the
ultimate consumers.
Service of Retailers
1) Services To Manufacturer & Wholesalers
2) Services To Consumer
1) Services To Manufacturer & Wholesalers
i) Helps In Distribution - Provide help in the distribution of manufacturer's product by
making goods available to the final consumer who may be scattered over a large
geographic area.
ii) Personal Selling - Personal selling by retailers relieves the producer of this activity and
considerably assists them in the process of actualizing product sales.
iii) Large Scale Operations - Enable them to operate at a relatively large-scale level and
thereby fully concentrate on their other activities.
iv) Collecting Market Information - Retailers serve as an important source of collecting
market information which is useful in taking important marketing decisions.
v) Help In Sales Promotion - Retailers participate in marketing activities and promotes sales
of product for the wholesalers.

2) Services To Consumers
i) Regular availability of products - There is a continuous and regular availability of
various products produced by different manufacturers.
ii) New products information - The retailers provide new product information, features, etc
to the customers, thus directing their buying behaviour.
iii) Convenience in buying - The customers can buy goods in small quantities anywhere at
any time, as the retail stores are available in every residential area.
iv) Wide selection - The retailers maintain stock of a variety of products of different
manufacturers.
v) After Sale Services - Services such as home delivery, warranty etc is also a merit of
retail stores.
vi) Provide credit facilities - Provide credit facilities to their regular customers, thus leading
to high future sale prospects from the same customers.
Types of Retailers
On the basis of whether or not they have a fixed place of business, retailers are classified as
A. Itinerant Retailers
B. Fixed Shop Retailers
A. Itinerant Retailers - Itinerant retailers are traders who do not have a fixed place of business to
operate from. They keep on moving with their wares from street to street or place to place, in
search of customers.
Characteristics of Itinerant Retailers
• They have no fixed place of business.
• They provide greater customer service.
• They carry limited stock.
• It requires small amount of capital.
• They sell in consumer goods that are low priced goods like fruits, veggies, etc.
Types of Itinerant Traders
1) Hawkers & Peddlers - Hawkers are the traders who carry their products on carts or bicycles.
Peddlers carry their products on their back or head or in baskets or shoulder bags.
Features
● Generally dealing non-standardized and low value goods.
● Operates mainly on streets of residential areas, exhibition grounds, public places etc.
● Supply the goods at the door step of the consumers.

2) Market Traders - These traders sell their articles on fixed days in different market places.
Features

 They deal in one particular line of goods. E.g., toys, garments, crockery etc.
 Sell products on fixed days in the market.
 Dealing in Low priced goods.
 They move from one market to another

3) Street Traders - Street traders are the small retailers who are commonly found at places
where huge floating population gathers.
Features

 They sell consumer items of common use, such as stationery items, eatables, ready-made
garments, newspapers and magazines.
 They are different from market traders in the sense that they do not change their place of
business so frequently.

4) Cheap Jacks - They usually, hire small shops for a short period of time. Depending upon the
scope of sale they keep shifting from one locality to another.
Features

 They deal in consumer items.

 Also provide services like repairing watches, shoes, etc.
 Move from one area to another depending on sales potential.
 They also sell goods in temporary sheds during festivals.

B. Fixed Shop Retailers - These retailers are those who carry on business by maintaining a fixed
place of business to sell their goods. They do not move from one place to another.

Features

 They have a lot of goods compared to Itinerant Traders

 They deal consumer goods, both durables and non-durables.
 They have greater credibility in the minds of customers.
 They provide services like home delivery, guarantees, repairs, credit facilities, availability of
spares, etc.
Depending upon the size of operations, they can be of two types.
1) Small Scale Retailers
2) Large Scale Retailers

1) Small Scale Retailers - They are running their business on a small scale and deal in a limited
line of goods.
Types of Small-Scale Retailers
1) General Stores - These shops carry stock of a variety of products required to satisfy the day-
to-day needs of the consumer like grocery items, soft drinks, toiletry products, stationery and
confectionery.
Features

 Open for long hours based on the convenience of consumers.

 Provide home delivery and
 credit facilities to regular customers.
 Located near residential area.

2) Specialty Shops - They are specialized in a single product of a certain line. Also known as
Single Line Stores. E.g., kids wear shop, computer shop, Footwear, bookshop etc.
Features

 Specialize in one product only.

 Located in central places where a large number of consumers can be attracted.
 Keep all brands of a particular product.

3) Street Stall Holders - They are generally located at street crossings or in the main street.
They usually display their goods on a table, stand or by fixing a shelf on the wall.
Features

 Deal in cheaper goods. E.g., toys, soft drinks, garments, etc.

 They mainly attract floating customers.
 The stall is housed in very small area.
 Found in high customer traffic area.

4) Second Hand Goods Shop - They are dealing in second hand goods such as books, furniture,
clothes, used cars and other household items.
Features
 Usually found in busy streets.
 Helpful for low-income group.
 They often sell antique items and rare object of historical value which are sold at a higher
price.

2) Large Scale Retailers - Large scale retailing may be defined as retail trade involving
operations on a large scale and sale of goods in small quantities.
Types of Large-Scale Retailers
1) Departmental Stores - It is a large-scale retail shop selling a wide variety of goods in
different departments under one roof and one management. Each department deals in separate
line of goods like stationery, books, furniture, clothing, footwear etc.
Features

 Additional facilities like restaurant, restroom, play area etc.

 Usually located in central place of a big city.
 Generally formed as joint stock companies.
 Elimination of middlemen – They are making their purchases directly from the producers.
 Centralized purchases and decentralized selling.
Merits

 Central location attracts more and more customers.

 Shopping convenience.
 Consumer services.
 Economies of large-scale operation
 Promotion of sales
Limitations

 Lack of personal attention.

 High Operating Cost.
 High possibility of loss.
 Inconvenient Location.

2) Chain Stores or Multiple Shops - It is a system of branch shops operated under a centralized
management and dealing in similar line of goods. Branches of the shop are located throughout
the nation.
Features

 Convenient location for consumers.

 Centralized buying and decentralized selling.
 Centralized management and unified system of control.
 Follows cash and carry principle.
 Uniformity in shop’s design and lay-out.
 Proper inspection from head office ensures the smooth functioning.

Merits
 Economies of large scale buying.
 Elimination of middlemen – Direct bulk purchase from producers.
 No bad debts – They follow cash and carry system.
 Diffusion of risk – Loss in one shop may be compensated by the profits in other shops.
 Low cost – Low cost of operation because of economies of scale.
 Flexibility – Unprofitable branches can be shifted to somewhere else.
Limitations

 Limited choice – they deal in one or two lines of goods.

 Lack of initiative and motivation.
  No personal contact.
 Risk due to change in taste and fashion lead to great loss.

3) Mail Order Houses - It is a form of retailing where the business transactions are done through
post or by mail. There is not direct personal contact between the buyer and the seller. Under
this system, receipt of orders, delivery of goods and payment etc. are done through the mail.
Suitability of Goods

 Graded and standardized goods.

 Easily transported at low cost. E.g., light in weight.
 Goods having ready demand in the market.
 They should be available in large quantity throughout the year
 Goods which are having least competition in the market.
 Goods which are not available in the local market.
 Goods that can be described through pictures.
Merits

 Limited capital – It does not require huge buildings, furniture etc.

 Elimination of middlemen – Hence the cost of operation is minimized.
 No bad debt – No credit facilities are allowed to customers.
 Wide reach - The area of operation is not limited.
 Convenience in buying – i.e., delivery of goods is made at the door steps.
Limitations

 No personal contact – Customers do not have a chance to examine the products.

 High promotion cost – Heavy expenses on advertising.
 No after-sales service.
 No credit facilities.
 Delay in delivery.
 Possibility of abuse.
 High dependence on postal services.
Goods & Service Tax (GST)
GST is a destination-based single tax on the supply of goods and services from the manufacturer to
the consumer, and has replaced multiple indirect taxes levied by the Central and the State
governments, thereby, converting the country into a unified market.
Key Features of GST
1) The territorial spread of GST is the whole country.

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 (Special Economic Zone) 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).