Understanding Trade: Internal Trade

• Trade involves buying and selling goods/services for profit.
• Trade has grown in importance with product development.
• Specialization leads to trade of surplus goods among individuals/countries.
• Humans are long-time participants in trade.

Types of Trade (Based on Geography)

• Internal trade occurs within a country.
• External trade occurs between two or more countries.

Internal Trade

• Internal trade involves buying/selling within a nation.
• It's also referred to as 'HOME TRADE,' 'INLAND TRADE,' or 'DOMESTIC TRADE.'
• Examples of internal trade scenarios include shopping at local stores, markets, malls, or through door-to-door sales.
• No customs or import duties apply due to domestic production/consumption.
• Transactions use the country's legal currency.

Types of internal trade

• Wholesale trade
• Retail trade

Wholesale Trade

• Wholesale trade involves buying/selling goods in large quantities for resale or intermediate use.
• Traders in this area are called wholesalers.
• Wholesalers distribute products to a broad network of buyers.
• An example is wholesalers distributing oil, soap and salt produced by factories across a nation.
• Wholesalers sell to retailers, industries, institutions, and commercial users, not directly to consumers.
• Wholesalers take ownership, assume risks, and aid in distribution.

Wholesale Services for Manufacturers

• Wholesalers offer crucial services in goods distribution by providing time and place utility

Wholesale Services - Facilitating Large-Scale Production

• Wholesalers collect small retailer orders and consolidate them into large orders for manufacturers.
• This enables manufacturers to produce on a large scale, gaining cost savings through mass production or economies of scale.

Wholesale Services - Bearing Risk

• Wholesalers assume handling risks, by dealing in goods in their own name which transfers ownership.
• Goods are stored in large quantities in warehouses.
• Wholesalers bear risks like price drops, theft, pilferage, spoilage, and fire.
• Handling these risks provides relief to manufacturers.

Wholesale Services - Financial Assistance

• Wholesalers support producers with cash payments, helping them avoid capital blocking, and by giving advances on bulk orders.

Wholesale Services - Expert Advice

• Wholesalers offer manufacturers advice on market trends, consumer tastes, competition, and preferred product features.
• Also serve as market information source

Wholesale Services - Help in Marketing Function

• Aids manufacturers with product distribution
• Distribute to many retailers across a wide geographical area
• This is relieving manufacturers, it enable them to focus on production

Wholesale Services - Facilitates Production Continuity

• Support manufacturer's continuous production buying and storing goods until retailers or consumers need them.
• This maintains consistent manufacturing.

Wholesale Services - Storage

• Wholesalers manage post-production storage by receiving goods from manufacturers and storing them to relieve manufacturers of storage needs.
• This provides time utility and ensures goods are available when needed.

Wholesale Services for Retailers

• Essential services include goods Availability & Marketing Support.

Wholesale Services - Availability of Goods

• Retailers require diverse products for customers.
• Wholesalers provide these from varied manufacturers.
• This save retailers from the difficulty of sourcing products and storing large quantities.

Wholesale Services - Marketing Support

• Wholesalers boost demand through advertising/promotions.
• Increased demand for new products benefits retailers by drawing customers.

Wholesale Services -Grant of Credit

• Credit facilities are offered to regular retailers
• This helps retailers operate with less capital.

Wholesale Services - Specialized Knowledge

• Wholesalers have specialized product knowledge, which they pass to retailers to provide expert advice.
• Information sharing is facilitated through advising on store layouts, shelf allocations and product demonstrations.

Wholesale Services - Risk Sharing

• Bulk Purchasing: wholesalers buy in bulk and sell in smaller quantities to share risk
• Retailers avoid risks of storage, pilferage, price drops, and demand fluctuations.

Retail Trade

• Retail trade involves selling goods in small quantities to final consumers.
• Retailers are the traders involved in retail trade, being the end of distribution chain.

Retail - Ways of Selling

• Goods can be sold personally, over the telephone, or through vending machines in various locations

Retail - Examples of Retail Selling

• Include selling pens in buses, door-to-door sales of cosmetics, and roadside vegetable sales.

Retail Service - Providing service to Manufacturers and Wholesalers

• Retailers connect producers and consumers providing services for manufacturers, wholesalers, and consumers.

Retail - Help in Distribution of Goods

• Retailers enable final consumers across wide areas by making products accessible, this providing place utility.

Retail - Personal Selling

• Retailers personally sell to consumers, thus supporting sale process.

Retail - Enabling Large-Scale Operations

• Retailers handle sales to consumers, enabling manufacturers/wholesalers to focus on large-scale activities.

Retail - Collecting Market Information

• Gather key customer insights to aid manufacturers in making key marketing decisions.

Retail - Help in Promotion

• Aids manufacturers and distributors promoting products through promotions and incentives, increasing sales.

Retail Service - Providing service to Consumers

• Regular product availability is ensured for customer convenience.
• New product information is provided through displays and knowledge sharing.
• Convenience in buying is enhanced by selling in small quantities to meet needs of people.
• Wide Selection: Diverse products allow consumers to choose what they need.
• After-sales services includes support, home delivery & spare parts.
• Credit facilities are offered to increase consumption & standard of living.

Types of Retailing Trade

• In India, it is often classified based on size of business, ownership, or merchandise.

Retailing Trade - Size of Business

• Retailers are categorized into large, medium, and small retailers.

Retailing Trade - Type of Ownership

• Retailers may be sole traders, partnerships, cooperative stores, or companies.

Retailing Trade - Merchandise Handled

• Speciality stores, supermarkets and Departmental Stores can be be classified this way.

Retailing Trade - Fixed Place of Business

• Itinerant Retailers: Do not have a fixed business site, and move around to sell their merchandise.
• Fixed Shop Retailers: retailers have a permanent business site.

Itinerant Retailers

• Small traders without a fixed location, sell low-priced consumer items like fruits, vegetables, and snacks.
• Serve daily needs with limited capitals.

Itinerant Retailers - Characteristics

• Limited resources and inventory
• Focus on daily use item sales
• Provide customer convenience and bring products to people
• No fixed shop locations/stores
• Deal low cost goods
• Operate on a small scale
• Offer doorstep service

Types of Itinerant Retailers

• Peddlers and Hawkers
• Market Traders
• Street Traders
• Cheap Jacks

Itinerant Retailers - Peddlers and Hawkers

• Small traders selling goods on streets or areas
• Carry their goods around on bikes, carts, or heads.
• Sell non-standardized goods (fruits, clothes, toys etc)
• Examples: Fruit vendors, ice cream carts and toy hawkers.
• Advantage: Products are delivered to customer doorstep at low cost.
• Disadvantage: There is quality and warranty issues.

Itinerant Retailers - Market Traders

• These are small retailers who set up shops in weekly/periodic markets on specific days.
• Can be general or specialized merchants who caters to lower income consumer groups.
• Advantages: low prices, bulks purchasing for profit
• Disadvantage: Inconsistent product quality.

Itinerant Retailers - Street Traders

• These are vendors who set up stalls on high foot traffic areas such street stalls near stations and bus stop.
• Sell stationaries, newspapers, magazines and ready made garments.
• Difference from Market Traders: Street traders do not change their location frequently.
• Advantages: Provide immediate access to affordable goods in busy areas.
• Disadvantage: Product quality varies, and returns are often not available.

Itinerant Retailers - Cheap Jacks

• Small retailers setting up a temporary shop due to business locality
• They offer services such sell consumer products like clothes, kitchen items, and shoes and or repair services for watches, clothes, etc.
• Advantage: Provide affordable repairs in high demand areas
• Disadvantage: Limited warranty, variable product reliability.

Fixed Shop Retailers

• Fixed retailers have a permanent business offering good surface.
• These can be small or a larger-scale traders, offering good services to consumer.

Fixed Shop Retailers - Characteristics

• Permanent establishment in markets, malls, or residential hubs
• Larger scale versus itinerant retailers with greater resources
• Offer variety of products including daily used items.
• Trust and credibility is made through fixed locations.
• Additional services includes home delivery, guarantees, and repairs.

Types of Fixed Shop Retailers

• Small Shopkeepers
• Large Retailers

Fixed Shop - Small Retailers

• These are shopkeepers who operate permanent shops on a small scale, catering to customer’s needs.

Fixed Shop Small Retailers - General Stores

• Meaning: These sells daily use product such as groceries and are found in Neighborhoods.
• Meaning: These sells daily use product such as groceries and are found in Neighborhoods.
• Goods Sold: Grocery, soft drinks, toiletries, stationaries, and confectionery.
• Have various characteristics such as staying open long hours, providing credit, and neighborly relations.
• Examples in India: Kirana and local grocery stores

Fixed Shop Small Retailers - Speciality Shops

• Sell just one type of product e.g. kidswear, shoes, books, gifts, or electronic items.
• There provide high-quality branded product.
• Expertise advice is provided.
• Examples include woodland and Bata stores, Archies and Hallmark and Croma and Reliance Digital.

Fixed Shop Small Retailers - Street Stall Holders

• Set up shop along busy streets.
• Sell hosiery Items, toys, cigarettes and drinks.
• Attract people passing by.
• Examples are found on railway platforms, near markets and malls and outside offices.

Fixed Shop Small Retailers - Second-Hand Goods Shops

• Sell used/second-hand books, clothes, automobiles, and furniture
• Offer lower prices, cater to those with limited funds, sell antiques.
• Examples exist in various markets in India.

Fixed Shop - Large Stores

• Defined as a very large-scale that provide a larger variety of goods and service under one roof
• Provide better customer service and more facilities.

Types of Fixed Shop Large Retailers

• Departmental Stores
• Chain Stores or Multiple Shops

Departmental Stores

• This offers wide variety in different categories
• Departmental Stores provides all services under one roof.
• Modern stores feature travel services alongside restaurants.
• Departmental store examples: Akbarally's, Spencer's, Shoppers Stop and Lifestyle

Departmental Stores - Features

• Central location for people to easily reach/access.
• Supply great variety of goods
• Operates generally as a joint stock company.
• Has a Centralised Purchasing department.
• Eliminates middlemen through direct purchase.
• Provide restaurant and other bureau services.

Chain Stores

• Multiple retail outlets under same ownership, following same business model with similar offerings
• Located around local areas
• Focus especially on branded consumer goods with large sales volumes and steady demand

Chain Stores - Characteristics

• They eliminates middlemen
• Operate on a large scale
• Located in populous region
• Centralised purchasing by head office
• The control is centralised as well
• Specialised in one line of goods
• Have uniform prices
• Sells for cash only

Mail Order Houses

• Retail via mail/postal services, no face-to-face contact.
• Uses ads, catalogs, circulars, price lists.

Mail Order Houses - Methods of Receiving Payments

• Advance Payment before shipping.
• Value Payable Post (VPP): payment upon delivery.
• Bank collection: delivery of goods via bank after payment.

Mail Order Houses - Suitable Products Characteristics

• Standardized and graded (clothing, books)
• Easy, low-cost shipping/
• Steady demand
• Abundant year-round availability
• Minimal competition, niche items
• Easy to picture and describe

Mail Order Houses - Unsuitable Products

• Highly perishable
• Bulky items

Mail Order Houses - Importance of Literacy

• Relies on written promotions.
• Successful in literate areas where products are understood.
• Successful in literate areas.

Mail Order Houses - Examples

• Online bookstores.
• Indian Post VPP.

Goods and Services Tax (GST)

• A unified indirect tax across India applied to goods.
• In effect since July 1, 2017, based on "One tax for a nation."
• It Consolidates indirect taxes.
• Destination-based tax levied at consumption point

GST - Key Features

• The law covers the whole country.
• It Applies to goods/services supply rather than manufacturing.
• Tax is collected on place of consumption not region of origin.
• Imports are treated interstate supplies, subject to IGST.
• CGST, SGST, and IGST have mutually agreed rates.
• There are four tax slabs: 5%, 12%, 18%, 28%.
• Exports and SEZ supplies are zero-rated.
• Payments can be done via internet banking or card.