UNIT-9

INTERNAL TRADE
INTRODUCTION

On the basis of geographical location of

buyers and sellers, trade can broadly be
classified into two categories
(i) Internal trade (ii) External trade.
Trade which takes place within a country is
called Internal trade. Trade between two
or more countries, on the other hand, is
called External trade.
 INTERNAL TRADE

Buying and selling of goods and services within the boundaries of a

nation are referred to as internal trade.

Whether the products are purchased from a neighborhood shop in a

locality or a central market or a departmental store or a mall or even
from any door to-door salesperson or from an exhibition, all these are
examples of internal trade as the goods are purchased from an
individual or establishment within a country.

No custom duty or import duty is levied on such trade as goods are part
of domestic production and are meant for domestic consumption.
Internal trade can be classified into two broad categories viz.,
(i) Wholesale trade and (ii) Retail trade

WHOLESALE TRADE:

It refers to buying and selling of goods and services in large quantities

for the purpose of resale or intermediate use.
Wholesalers serve as an important link between manufacturers and
retailers.
They generally take the title of the goods and bear the business risks
by purchasing and selling the goods in their own name.
They purchase in bulk and sell in small lots to retailers or industrial
users.
They undertake various activities such as grading of products, packing
into smaller lots, storage, transportation, promotion of goods,
collection of market information, collection of small and scattered
orders of retailers and distribution of supplies to them.
 Services of Wholesalers
Wholesalers provide various services to manufacturers as well as
retailers and provide immense help in the distribution of goods and
services.

Services to Manufacturers:

Facilitating large scale production: Wholesalers collect small orders

from a number of retailers and pass on the pool of such orders to the
manufacturers and make purchases in bulk quantities. This enables the
producers to undertake production on a large scale and take advantage of
the economies of scale.

Bearing risk: The wholesale merchants deal in goods in their own name,
take delivery of the goods and keep the goods purchased in large lots in
their warehouses. In the process, they bear variety of risks such as the
risk of fall in prices, theft, pilferage, spoilage, fire, etc.
Financial assistance: The wholesalers provide financial assistance to
the manufacturers in the sense that they generally make cash payment
for the goods purchased by them.

Expert advice: As the wholesalers are in direct contact with the

retailers, they are in a position to advice the manufacturers about various
aspects including customer’s tastes and preferences, market conditions,
competitive activities and the features preferred by the buyers.

Help in marketing function: wholesalers take care of the distribution

of goods ,this relieves the manufacturers from many of the marketing
activities and enable them to concentrate on the production activity.

Storage: Wholesalers take delivery of goods when these are produced in

factory and keep them in their warehouses. This reduces the burden of
manufacturers of providing for storage facilities for the finished
products.
 Services to Retailers
Availability of goods: The wholesalers make the products of various
manufacturers readily available to the retailers .This relieves the retailers
from the work of collecting goods from several producers and keeping
big inventory of the same.

Marketing support: The wholesalers provide support to the retailers by

advertising and organising other sales promotional activities to induce
customers to purchase the goods.

Grant of credit: The wholesalers generally extend credit facilities to

their regular customers. This enables the retailers to manage their
business with relatively small amount of working capital.

Specialised knowledge: wholesalers inform the retailers about the new

products, their uses, quality, prices, etc. They may also advise them on
the decor of the retail outlet, allocation of shelf space and demonstration
of certain products.
Risk sharing: Being able to purchase merchandise in smaller
quantities, retailers are in a position to avoid the risk of storage,
pilferage, reduction in prices and demand fluctuations in respect of
larger quantities of goods that they would have to purchase in case the
services of wholesalers are not available.
RETAIL TRADE
A retailer is a business enterprise that is engaged in the sale of
goods and services directly to the ultimate consumers.

Retailing is, that branch of business which is devoted to the

sale of goods and services to the ultimate consumers for their
personal and non-business use.
Services of Retailers:
Retailers serve as an important link between the producers and final
consumers in the distribution of products and services.

Services to Manufacturers and Wholesalers

Help in distribution of goods

A retailer’s most important service to the wholesalers and
manufacturers is to provide help in the distribution of their products by
making these available to the final consumers, who may be scattered
over a large geographic area. They thus provide place utility.

Personal selling: By undertaking personal selling efforts, the retailers

relieve the producers of this activity and greatly help them in the
process of actualising the sale of the products.
Enabling large-scale operations: the manufacturers and wholesalers are free from
the trouble of making individual sales to consumers in small quantities. This enables
them to operate on, at relatively large scale, and thereby fully concentrate on their
other activities.

Collecting market information: As retailers remain in direct and constant touch

with the buyers, they serve as an important source of collecting market information
about the tastes, preferences and attitudes of customers.

Helps in promotion: From time-to-time, manufacturers and distributors have to

carry on various promotional activities in order to increase the sale of their products.
Retailers participate in these activities in various ways and thereby, help in
promoting the sale of the products.
 SERVICES TO CONSUMERS

Regular availability of products: The most important service of a retailer to

consumers is to maintain regular availability of various products produced by different
manufacturers. This enables the buyers to buy products as and when needed.

New products information: By arranging for effective display of products and

through their personal selling efforts, retailers provide important information about the
arrival, special features, etc., of new products to the customers. This helps in buying
decision making process of the purchase of such goods.

Convenience in buying: Retailers generally buy goods in large quantities and sell
them in small quantities, as per the requirement. Also, they are situated near to the
residential areas and remain open for long hours. This offers great convenience to the
customers in buying products of their requirements.

Wide selection: Retailers generally keep stock of a variety of products of different

manufacturers. This enables the consumers to make their choice out of a wide selection
of goods.
After-sales services: Retailers provide important after-sales services in the form of
home delivery, supply of spare parts and attending to customers. This becomes an
important factor in the buyers’ decision for repeat purchase of the products.

Provide credit facilities: The retailers sometimes provide credit facilities to their
regular buyers. This enables the latter to increase their level of consumption and,
thereby, their standard of living
 Types of retailers

Itinerant retailers Fixed shop retailers

• Hawkers and peddlers Small retailers Large retailers
• Market traders General stores Departmental stores
• Street traders/pavement vendors Specialty shops Chain stores/Multiple
• Cheap jacks Street stall holders Mail order houses
Second hand goods shop
 ITINERANT RETAILERS

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.

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.

Street trades: Street traders are the small retailers who are commonly found at places
where huge floating population gathers.

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 SMALL SHOPS/SCALE RETAILERS

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.

Specialty shops: Specialty shops specialize 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.

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.

Secondhand 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.

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.
LARGE SCALE RETAILERS
i. Departmental stores
ii. Chain stores
iii. Mail order house

DEPARTMENTAL STORES

A departmental store is a large establishment offering a wide variety of products,

classified into well-defined departments, aimed at satisfying every customer’s need
under one roof.

It has a number of departments, each one confining its activities to one kind of product.

For example, there may be separate departments for toiletries, furniture, groceries,
electronics, clothing and dress material within a store.

Spencers, Central, Pantaloons, Reliance retail, Big bazaar, Lulu etc., are the examples
of departmental stores.

Everything from ‘a pin to an elephant’ is the spirit behind a typical department store
 FEATURES OF DEPARTMENTAL STORES

A modern departmental store may provide all facilities such as restaurant, travel and
information bureau, telephone booth, restrooms, etc.

These stores are generally located at a central place in the heart of a city, which caters
to many customers.

As the size of these stores is very large, they are generally formed as a joint stock
company managed by a board of directors. There is a managing director assisted by a
general manager and several department managers.

A departmental store combines both the functions of retailing as well as warehousing.

They purchase directly from manufacturers and operate separate warehouses. That way
they help in eliminating undesirable middlemen between the producers and the
customers.

They have centralized purchasing arrangements. All the purchases in a department

store are made centrally by the purchase department of the store, whereas sales are
decentralized in different departments
 CHAIN STORES/MULTIPLE SHOPS

Chain stores or multiple shops are networks of retail shops that are
owned and operated by manufacturers or intermediaries.

Under this type of arrangement, a number of shops with similar

appearance are established in localities, spread over different parts of the
country.

These different shops normally deal in standardized and branded

consumer products, which have rapid sales turnover.

These shops are run by the same organization and have identical
merchandising strategies, with identical products and displays.

Example: Mc Donald's, Raymond's, Malabar gold, Albaik etc

 FEATURES OF CHAIN STORES

These shops are located in fairly populous localities, where enough customers can be
approached.

The idea is to serve the customers at a point which is nearest to their residence or workplace,
rather than attracting them to a central place.

The manufacturing/procurement of merchandise for all the retail units is centralized at the head
office, from where the goods are dispatched to each of these shops according to their
requirements. This results in savings in the cost of operation of these stores.

Each retail shop is under the direct supervision of a Branch Manager, who is held responsible for
its day-to-day management. The Branch Manager sends daily reports to the head office in
respect of the sales, cash deposits, and the requirements of the stock.

All the branches are controlled by the head office, which is concerned with formulating the
policies and getting them implemented.

The prices of goods in such shops are fixed and all sales are made on cash basis.

The head office normally appoints inspectors, who are concerned with day-to-day supervision of
the shops, in respect of quality of customer service provided, adherence to the policies of the
head office, and so on
 MAIL ORDER HOUSES
Mail order houses are the retail outlets that sell their merchandise through mail. There is
generally no direct personal contact between the buyers and the sellers in this type of trading.

FEATURES:
For obtaining orders, potential customers are approached through advertisements in newspapers
or magazines, circulars, catalogues, samples and bills, and price list is sent to them by post.

All the relevant information about the products such as the price, features, delivery terms, terms
of payment, etc., are described in the advertisement.

Payment can be made in advance by the customer after which the product ordered will be
delivered or the goods may be sent through a bank, which is instructed to deliver the articles to
the customers. In this arrangement there is no risk of bad debt, as the goods are handed over to
the buyers only after he makes full payment.

It does not require a huge capital investment and so can be started on a small scale .

The biggest advantage of mail-order business from the point of view of consumers is that
unnecessary middlemen between the buyers and sellers are eliminated. This may result in lot of
savings both to the buyers as well as to the sellers.

It does not provide credit facilities to the buyers.

 GOODS AND SERVICES TAX

The government of India follows the motto ‘ One nation One tax’ to have
a unified market in order to ensure the smooth flow of goods across the
country. The tax came into effect from 1 July 2017

FEATURES:

• The territorial spread of GST is the whole country, including Jammu

and Kashmir.

• 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.

• It is based on the principle of destination-based consumption tax

against the present principle of origin-based taxation.
• Import of goods and services is treated as inter-State supplies and
would be subject to IGST in addition to the applicable customs
duties.

• CGST, SGST and IGST are levied at rates mutually agreed upon by
the Centre and the States under the aegis of the GST Council.

• There are four tax slabs namely 5 per cent, 12 per cent, 18 per cent
and 28 per cent for all goods or services.

• 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)