Chapter 9: Internal Trade
Learning Objectives (LO)
To Define: Understand the concept of internal trade, wholesale trade, and
retail trade.
To Classify: Identify types of internal trade, retailers, and retail trade.
To Differentiate: Distinguish between wholesale and retail trade, itinerant and
fixed retailers.
To Examine: Analyse the services provided by wholesalers and retailers to
manufacturers, consumers, and each other.
To Evaluate: Assess the advantages and limitations of various types of
retailers and retailing methods.
Pre-Test MCQs (5)
1. Internal trade refers to trade conducted:
a) Within a country
b) Between two countries
c) Only online
d) Only in metropolitan cities
2. Who is called a wholesaler?
a) Sells goods in small quantities to consumers
b) Sells goods in large quantities to retailers
c) Operates vending machines
d) Provides credit to consumers
3. Which of the following is an itinerant retailer?
a) Departmental store
b) Hawker
c) Supermarket
d) Single line store
4. A departmental store is an example of:
a) Small-scale retailer
b) Large-scale retailer
c) Itinerant retailer
d) Periodic market trader
1. Internal Trade
Definition: When buying and selling of goods and services takes place within
the geographical limits of a country, it is known as internal trade.
Main Features:
1. The buying and selling of goods and services takes place within a country.
2. Payments are made and received in the home country only.
3. There are no or very few formalities to be completed by traders.
2. Types of Internal Trade
Internal trade can be classified into two categories:
(i) Wholesale Trade
Trade in which goods are sold in large quantities.
The person who carries on wholesale trade is known as a wholesaler.
Services Provided by Wholesaler:
(a) To Manufacturer:
o Facilitating large-scale production
o Bearing risk
o Financial assistance
o Expert advice
o Help in marketing function
o Facilitate production continuity
o Storage
(b) To Retailer:
o Availability of goods
o Marketing support
o Grant of credit
o Specialized knowledge
o Risk sharing
(ii) Retail Trade
Sale of goods in small lots to final consumers.
Retailer buys goods from wholesaler and sells to consumer.
Services Provided by Retailer:
(a) To Consumers:
o Ready or quick supply
o Wide variety
o Guiding consumers
o Demonstration and after-sale services
o Home delivery
o Convenient location
o Credit facility
(b) To Wholesaler/Manufacturer:
o Ready market
o Providing information
o Risk-bearing
o Distribution of goods to distant places
3. Classification of Retailers
Retailers can be classified on the basis of:
1. Size
2. Product mix
3. Pricing
4. Service level
5. Form of ownership
4. Types of Retail Trade
Based on size, product mix, pricing, and service level:
1. Itinerant Retailers
2. Fixed Shop Retailers
4.1 Itinerant Retailers
Retailers with no fixed place of sale; they move from place to place in search of
customers.
Types of Itinerants
1. Hawkers and Peddlers
o Move street to street in search of customers.
o Sell a variety of goods like fruits, vegetables, toys.
o Deal in non-branded and local items.
o Supply goods at the customer’s doorstep.
2. Periodic Market Traders
o Sell goods on fixed days in different marketplaces (weekly markets).
o Deal in low-priced and low-quality goods.
o Set up shops during festive occasions like Diwali, Christmas.
3. Street Traders
o Display articles on busy streets, pavements, bus stands.
o Operate near public places such as railway stations.
o Deal in a variety of goods like towels, daily-use items, mirrors.
4. Cheap Jacks
o Display goods in hired shops or tents temporarily.
o Shift locations depending on business prospects.
o Deal in low-price household articles.
6. Fixed Retailers
Retailers with a fixed place of sale are fixed shop retailers.
Categories
1. Small-Scale Fixed Retail Shops
o General Stores: Large variety in each product line, provide home
delivery and credit facility.
o Single Line Stores: Deal with one line of products but variety within that
line.
o Specialty Stores: Specialized in one product line; keep all brands of that
product.
o Street Shops / Street Stalls: Limited space, goods displayed on
tables/stands.
o Second-Hand Goods Shops: Sell used articles like books at low prices.
o Seconds Shops: Sell goods with manufacturing defects at discounted
prices.
2. Large-Scale Fixed Retail Shops
o Deal in large stock of goods; purchase in bulk.
o Require huge investment and large showrooms.
o Types:
Departmental Stores
Multiple Shops / Chain Stores
Mail-Order Retailing
Consumer Co-operative Stores
Supermarkets
Franchise
2.1 Departmental Stores: Large retail showroom with multiple
departments; each specializes in a product line.
Advantages:
Convenient shopping
Central location
Economies of scale
Elimination of middleman
Limitations:
High operating cost
Lack of personal attention
High prices
Not in residential colonies
Huge capital required
2.2 Multiple Shops / Chain Stores: Multiple Shops Multiple shops refer to a
number of identical retail shops located in different parts of the city.
Advantages:
Economies of scale
Standardized products
Public confidence
Division of risk
No bad debts
Limitations:
Limited variety
Lack of personal touch
Inflexibility
Divided attention
No additional facilities
Basis Departmental Store Chain Store (Multiple Shops)
Definition A large retail showroom under one A group of identical retail shops located
roof with several departments, each in different areas, managed centrally.
specializing in a product line.
Ownership Single ownership or single Single ownership/company operating
company multiple outlets
Product Wide variety of products under one Standardized products across all outlets
Range roof
Location Usually in central, busy areas Spread across multiple locations for
wider reach
Advantages Convenient shopping, economies of Economies of scale, public confidence,
scale, elimination of middleman division of risk, standardized products
Limitations High operating cost, lack of Limited variety, lack of personal touch,
personal attention, requires huge divided attention, inflexibility
capital
2.3 Mail-Order Retailing: In mail order retailing seller contact the
potential buyers through advertisements and mail publicity
Advantages:
Limited capital
Convenience
Wider market
Elimination of middleman
No bad debts
Limitations:
No personal contact
No inspection
Limited variety
Postal delay
Heavy advertising cost
2.4 Consumer Co-operative Stores
Voluntary association of persons buying and selling in common.
Advantages:
Reasonable prices
Low operating cost
Cash sales
Economies of scale
Government benefits
Limitations:
Limited capital
Inefficient management
Lack of incentives
Lack of storage facilities
2.5. Supermarkets: Super market are organised by co-operative societies as
well as by private traders
Advantages:
Wide choice
Low prices
Convenience in shopping
No bad debts
Limitations:
No credit
Lack of personal touch
High cost
Mishandling of goods
Limited scope
2.6. Vending Machines
Machine-operated by coins or tokens; dispense specific quantity of
goods.
Advantages:
Round-the-clock availability
Fresh supply
No salesperson needed
Limitations:
High initial investment
Regular maintenance required
Exact coins/tokens needed
3. Terms of Trade
1. Cash on Delivery (COD): Payment made at the time of delivery.
2. Free on Board / Free on Rail (FOB / FOR): Seller bears expenses up to
delivery to carrier.
3. Cost, Insurance, and Freight (CIF / CFF): Price includes cost, insurance, and
freight.
4. E&OE (Errors and Omissions Excepted): Used to limit legal liability for
mistakes in trade documents.
4. Goods and Service Tax (GST)
The GST is a destination-based single tax that is applied to the manufacturer's
supply of goods and services to the consumer, effectively replacing many
indirect taxes and transforming the nation into a single market.
Advantages:
Reduction in overall tax burden
No hidden taxes
Development of a harmonised national market
Higher disposable income in hand, education and essential needs
Customers have a wider choice
Increased economic activity
More employment opportunities
Post-Test MCQs
1. Which of the following services is provided by a wholesaler to a
retailer?
a) Ready market
b) Credit facility
c) Demonstration of products
d) Home delivery
2. Which type of retailer moves from place to place without a fixed shop?
a) Fixed shop retailer
b) Itinerant retailer
c) Specialty store
d) Departmental store
3. Which of the following is an advantage of a consumer co-operative
store?
a) High operating cost
b) Cash sales
c) Inefficient management
d) Lack of storage
4. Mail-order retailing is best suited for:
a) Limited capital and wider market
b) Quick home delivery
c) Large-scale inventory
d) Second-hand goods