Internal Trade Handwritten Notes PDF

# Internal Trade ## What is trade? Trade refers to buying and selling of goods and services. ## What are the types of trade? There are two types of trade: 1. **Internal trade:** When buying and selling of goods and services within the geographical limits of a nation are referred to as internal...

# Internal Trade ## What is trade? Trade refers to buying and selling of goods and services. ## What are the types of trade? There are two types of trade: 1. **Internal trade:** When buying and selling of goods and services within the geographical limits of a nation are referred to as internal trade. 2. **External trade:** When buying and selling of goods and services beyond the geographical limits of a nation are referred to as external trades. ## What are the types of internal trade? 1. **Wholesale trade:** It refers to the buying or selling of goods and services in bulk quantities. Wholesaling is concerned with the activities of those persons or establishments which sell to retailers. ### Features of wholesale trade: 1. They act as a link between the manufacturer and the retailer. 2. They deal with large quantities of goods. 3. They are generally specialized in one line of product. For example, stationery, clothes, etc. 4. They invest large amounts of capital in maintaining stock of goods. 5. They generally sell goods in small lots to retailers and do not sell to the ultimate consumer. 6. Generally, their profit margin is low. 7. They are the first intermediary in the distribution chain. 2. **Retail trades:** It refers to the sale of goods in small lots to the final consumers. A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. A retailer buys goods in large quantities from the wholesaler and sells them in small quantities to the consumers. ### Features of retailers: 1. Retailer is the last link in the distributor's chain. 2. They sell goods or services directly to the consumer. 3. Retailers deal with a variety of goods. 4. They buy and sell in smaller quantities. 5. They are generally located in residential areas. 6. They maintain personal relations with the customers. 7. Retailers may contact the customers on telephones, internet, TV or through their retail shop. 8. They act as a middlemen between the wholesaler and customers. ## What are the services of a wholesaler? ### Services to manufacturers: 1. **Facilitating large-scale production and economies of scale:** Wholesalers receive small orders from a variety of traders and send a collection of such orders to the manufacturers. They then buy in bulk quantity from the manufacturer. This enables the producers to conduct large-scale production and benefit from economies of scale. 2. **Help in marketing function:** Wholesalers are in the position of distributing commodities to a number of retailers, who then sell these goods to a big number of customers spread across a large geographical area. This removes the producers of many marketing responsibilities and allows them to focus on production. 3. **Expert advice:** Because wholesalers have direct contact with retailers, they can advise producers on a variety of issues, including customer tastes and preferences, market conditions, competitive actions, and buyer preferences, helping them be a valuable source of market knowledge on these and related topics. 4. **Storage:** Wholesalers receive commodities when they are manufactured in factories and store them in their godowns/warehouses. This saves manufacturers of the responsibility of providing finished product storage facilities. This gives time utility. 5. **Financial assistance:** Wholesalers provide financial help to manufacturers by making cash payments for goods bought by them. As a result, producers do not need to invest their capital in stocks. They may also advance money to producers in exchange for large orders placed by them. 6. **Bearing risk:** Wholesale merchants trade in their own name, accept deliveries, and store products acquired in bulk amounts in their warehouses. They face a number of dangers during the process, including price drops, theft, pilferage, spoilage, fire, and so on. In that sense, they free the manufacturers of these dangers. 7. **Facilitate production continuity:** Wholesalers ensure the continuation of production activity throughout the year by purchasing items as they are created and holding them until they are wanted by retailers or customers in the market. ### Services to retailers: 1. **Availability of goods:** Retailers must keep an adequate supply of a variety of items on hand in order to provide variety to their customers. Wholesalers make various producers' products readily available to retailers. This relieves retailers of the burden of gathering goods from multiple sources and maintaining a large inventory of the same. 2. **Grant of credit:** In general, wholesalers provide credit to their frequent customers. This allows retailers to run their businesses with a modest amount of working capital. 3. **Risk sharing:** Wholesalers buy in bulk and sell in relatively small numbers to retailers. With the ability to purchase goods in smaller quantities, retailers can avoid the risks of storage, pilferage, obsolescence, price reductions, and demand fluctuations associated with larger quantities of goods that they would have to purchase if wholesalers' services were unavailable. 4. **Specialized knowledge:** Wholesalers specialize in a single product line and have a pulse on the market. They help shops by sharing their specialized knowledge. They inform shops about new items, their uses, quality, and pricing, among other things. They may also provide advice on the retail outlet's decor, product showcasing, etc. 5. **Publicity:** Wholesalers advertise the brand and goods kept in them. Such publicity helps the retailers also to increase the sale. 6. **Marketing support:** Wholesalers undertake multiple marketing activities and provide support to retailers. They use advertising and other sales promotion techniques to get customers to buy their products. Retailers profit because it helps them increase demand for different new products. 7. **Economies of scale:** Wholesalers buy goods in bulk quantities and get benefits in economies of scale. They pass their benefits to the retailer with low profit margin. ## What are the services of retailers? ### Services to consumers: 1. **Regular availability of products:** The most important service that a shop provides to customers is the consistent availability of diverse products manufactured by numerous producers. This allows buyers to purchase things as needed. 2. **Wide selection:** Retailers generally stock a wide range of products from many producers. This allows customers to choose from a large range of things. 3. **New products information:** By planning for effective product display and personal selling efforts, retailers provide important details to customers about the arrival, unique characteristics, and so on of new products. This is a key aspect in the purchasing decision-making process for such commodities. 4. **Demonstration and after-sales services:** Retailers demonstrate their products. And also retailers provide essential after-sales services such as replacement part supply, and customer assistance. This becomes an essential aspect in the purchasers’ decision to purchase the products again. 5. **Home delivery:** Some retailers provide home delivery service for the convenience of the customers. 6. **Convenience in buying:** Retailers generally purchase things in huge quantities and sell them in small quantities to meet the needs of their customers. Also, they are generally located near residential areas. This provides customers with a great deal of convenience when purchasing things that meet their needs. 7. **Credit facilities** Regular customers are occasionally given credit by retailers. This allows them to boost their consumption and, as a result, their standard of living. ### Services to manufacturers and wholesalers: 1. **Help in distribution of goods:** The most important service a retailer provides to wholesalers and manufacturers is to help in the distribution of their products by making them available to ultimate consumers who may be spread across a vast geographic area. As a result, they give location usefulness. 2. **Personal selling:** Most consumer goods require some amount of personal selling effort during the selling process. Retailers relieve producers of this work and significantly help them in the process of actualizing product sales by engaging in personal selling efforts. 3. **Enabling large-scale operations:** Manufacturers and wholesalers are relieved of the burden of making individual sales to consumers in small amounts as a result of retailer services. This allows them to function on an attractive large scale while remaining fully focused on their other operations. 4. **Helpful in promotion:** Retailers must engage in various promotional efforts from time to time in order to enhance the sale of their products. 5. **Collecting market information:** Because retailers keep direct and continuous contact with customers, they are a significant source of market knowledge regarding customer tastes, preferences, and attitudes. Such data is seen to be quite valuable when making important marketing decisions in a company. ## Classify the retailer. * **Size:** Retailer can be small as well as large in size. * **Product mix:** Retailers deal with different types of product. Some deal in one line product and some in a wide range of product. * **Pricing** Retailer adds their profit margin and fix the price of product. Some retailers sell their goods on discount whereas some sell at fixed price. * **Service level:** Some retailers provide after-sale service in addition to their customers, such as home delivery, credit facility, etc. Whereas some have self-service. * **Form of ownership:** Some retailers operate as a sole proprietorship whereas some operate in partnership firms. ## Explain the types of retailers. There are two types of retailers: 1. **Itinerant retailers:** Itinerant retailers are traders who do not have a set location from which to operate. They continue to move. In desire of consumers, they move their wares from street to street or place to place. ### Types of Itinerant retailers: * **Peddlers and hawkers:** They are tiny producers or small traders who travel from place to place selling their goods at the customers' doorsteps on a bicycle, a hand cart, a cycle-rickshaw, or on their heads. They generally sell non-standardized and cheap products such as toys, vegetables and fruits, fabrics, carpets, snacks, and ice creams, and so on. They are also found in residential streets, places of shows or meals, outside schools during the lunch hour. ### Features of peddlers and hawkers: 1. They move from street to street, in buses, trains, etc., in search of customers. 2. They sell a variety of goods such as fruits, vegetables, toys, bangles, etc. 3. They deal with non-branded and local items. 4. They supply the goods at the doorstep of the customer. 5. They have no fixed prices. The prices are fixed according to the bargaining between customer and hawkers or peddlers. * **Periodic market trader:** Market traders are small retailers who open their shops on specific days or periods, such as every Sunday or alternating Sunday and so on. These sellers may specialize in one type of product, such as fabrics or ready-made clothing, toys, or tableware, or they may be general traders. They mostly target lower-income customers and sell low-cost consumer items of daily use. ### Features of periodic market traders: 1. They sell their goods in the weekly markets or monthly bazaars or annual fairs. 2. Generally, they display their goods on temporary structures made outside the shops which are closed for a weekly holiday. 3. They deal in low prices and low-quality goods. 4. They sell a large variety of goods which may include plastic products, utensils, ladies' bags, shoes, etc. 5. These traders also set up shops on the occasion of Diwali, Christmas, etc. * **Street traders:** Street traders are tiny shopkeepers who sell consumer goods such as stationery, eatables, ready-made clothing, newspapers, and magazines in areas where a large movable population arrives, such as outside railway stations and bus stops. They vary from market traders in that they do not regularly move their place of business. ### Features of Street traders: 1. They generally operate near public places such as railway stations, cinema halls, bus stands, temples, etc. 2. They deal in a variety of goods such as towels, handkerchiefs, things of daily use, mirrors, etc. 3. They deal in low-priced products of common use. 4. They are very popular. People find it convenient to pick up items on their way back from work. * **Cheap jacks:** Cheap jacks are tiny retailers who have temporary independent shops in a business area. They are constantly shifting their operations from one location to another based on the potential of the area. However, unlike hawkers or market sellers, they do not frequently shift locations. They sell consumer goods as well as services such as watches, shoes, and bucket repair. ### Features of cheap jacks: 1. They hire small shops or display goods in tents in residential colonies. 2. They shift from locality to locality depending upon the prospects of business. 3. They deal in low-priced, household articles. 4. They remain in one locality for a temporary period only. 2. **Fixed Shop Retailers:** Fixed shop businesses often have a physical presence in commercial areas or shopping malls, which allows them to attract local customers and benefit from foot traffic. Customers can visit these businesses at a fixed place to purchase, and get involved with the products or services they provide. They make investments in constructing a physical store layout, merchandising displays, and an in-store purchasing experience. Clothing, gadgets, home goods, books, and other items are available at these stores. They are classified into two categories: * **Small-scale fixed retailer shop:** These are the most common form of retail found in different localities to fulfill the needs of customers. ### There are different types of small-scale fixed retailer shops: * **General stores:** These stores offer a wide range of products needed to meet the day-to-day needs of customers in the surrounding areas. These businesses are open for a longer duration of time, are convenient, and frequently offer credit to certain of their regular customers. The most significant feature of such businesses is the convenience with which customers may purchase everyday necessities such as groceries, soft drinks, toiletries, stationery, and sweets. ### Features of general stores: 1. These stores deal in items of daily use like groceries, confectionery, stationery, soft drinks, etc. 2. They have a large variety in each line of product. 3. They provide free home delivery, credit facility and other services to their regular customers. 4. They create personal relationships with the customers and keep them happy and satisfied. 5. General stores located in posh areas also keep popular brands of products. * **Specialty stores:** These Retail stores specialized in the sale of a certain product line. These are some of the most frequent types of stores in the marketplace. Specialty stores are generally placed in a central location where a big number of clients can be drawn, and they offer a diverse assortment of goods to customers. Shops selling children's clothing, men's clothing, ladies' shoes, toys and gifts, school uniforms, college books, or consumer electrical items. ### Features of specialty stores: 1. These stores deal with one line of products. Examples, garments line, stationery line, textiles, medicines, shoes, etc. 2. These stores deal in a variety of goods in that line of product. For example, stores dealing in garments have ladies garments, children garments, gents garments, garments of all sizes, brands, etc. 3. They are generally situated in market places. 4. They provide customer services which vary from store to store depending upon the type of product. 5. They generally cater to the requirement of a particular category of customers. * **Street Shops:** These tiny sellers normally appear at street crossings or other locations where traffic flows. There is a lot of traffic. They attract floating customers and primarily trade in low-cost commodities such as hosiery, toys, soft beverages, etc. They receive their goods from both local sources and wholesalers. Because the entire area covered by a stall is quite limited, commodities are handled on a very small scale. Their main advantage is that they provide customers with a convenient service while purchasing some of their needs. ### Features of street shops: 1. These are temporary platforms used to display the goods for sale. 2. These shops have a limited space. 3. They deal in a wide variety of low-priced articles such as hosiery items, toys, magazines, etc. 4. These retailers display their goods on tables, stands, etc. 5. Recently, there is a trend of keeping better quality products on these corners. For example, they sell imported cosmetics, garments, watches, etc. * **Second-hand goods shop:** These stores sell secondhand or used products such as books, clothing, and automobiles, furniture and other household products. Such stores are usually visited by those of limited means. The goods are sold at a lesser cost. Such shops may also offer rare antiquities and antique things, which are sold at excessive costs to persons with a keen interest in such antiques. ### Features of Second-hand goods shop: 1. These shops sell used goods. 2. The goods are generally priced low because these are used goods. 3. They buy goods from private and public auctions. 4. These shops are mainly for the poor people, who cannot afford to buy new goods. 5. Sometimes, people from high income groups also visit these shops in search of antique items, rare books etc. * **Seconds Shops:** There are the shops to sell goods which are not produced according to the required specifications. These goods always have some defects in them. ### Features of Seconds Shops: 1. These shops deal in the products which have some manufacturing defects. 2. Goods sold in these shops are not used or second-hand. They are new defective goods. 3. Goods are sold at a heavily discounted price. 4. The price of the goods depends upon their defect. In some goods, the defects are not easily visible. 5. Many manufacturers have their own seconds shop to clear their defective stocks. 6. Sometimes, these shops are set up temporarily by taking premises, halls, banquets on hire. * **Large-scale fixed retailer shops** Large-scale retailers deal in a large stock of goods and purchase goods in bulk. ### Features of Large-scale fixed retailer shops: 1. They require a huge investment. 2. They have large size showrooms to sell goods. 3. They are generally located at a central place or in shopping centers. 4. A large number of customers visit these showrooms. * **Departmental stores:** A department store is a large organization that sells a wide range of products organized into multiple departments in order to meet nearly every customer's needs under one roof. It is divided into several departments, each of which focuses on a specific type of product. ### Features of departmental stores: 1. **Large size:** A department store is a huge retail showroom that requires a significant capital expenditure. 2. **Wide range:** A department store sells a wide range of things, from low-cost to high-priced items. Several types of commodities are accessible in several departments. 3. **Departmentally Organised:** The store is divided into departments. Goods for sale are categorized, and each department specialized in a specific product line. 4. **Central Purchase:** All departments' purchases are made centrally. Departmental managers provide a list of their requirements to the general manager, who purchases items for all departments. 5. **Central Location:** A department store is located in a central location or in shopping malls so that people from all over the city may readily access it. 6. **Service:** Customers can get a variety of services and amenities from department stores. 7. **Elimination of middlemen:** Department shops purchase huge quantities of items. They purchase the goods are obtained directly from manufacturers, so removing the middlemen. 8. **Advertising:** Department stores advertise widely in order to attract customers from far and wide. * **Multiple Shops or Chain Stores:** Chain stores or multiple shops are retail networks owned and controlled by manufacturers or intermediaries. A lot of businesses with similar characteristics are developed in localities distributed around the country under this type of organization. These various stores often sell standardized and branded consumer goods with a high turnover of sales. These stores are run by the same company and have the same marketing tactics, as well as identical goods and displays. ### Features of Multiple Shops or Chain Stores: 1. **Large size:** On a large scale, chain stores operate. Setting up identical shops in different parts of the city requires a significant investment. 2. **Specialised in one line:** In general, chain retailers specialise in one product line and only provide a limited selection of that line at all of their locations. 3. **Centralised sale:** To maintain consistency in products supplied at different retail showrooms, the central office purchases goods for all chain outlets. 4. **Decentralised Sale: ** Because chain businesses are distributed throughout the city and country, each has its own independent sales force. 5. **Quality: ** Chain stores sell standardized and branded goods. Quality is guaranteed. 6. **Elimination of middlemen: ** Chain stores are typically owned by producers who offer their products directly to consumers, eliminating the need for middlemen. 7. **Uniform Price:** The pricing of products charged by chain stores situated throughout the city are the same, and the goods are sold at a fixed price. 8. **Cash transactions:** Credit is not granted in chain stores. Goods are sold only in cash. * **Mail order:** Mail order houses are retail shops that sell their products via mail. In this sort of business, there is usually no direct personal contact between buyers and sellers. Potential customers are approached for orders by adverts in newspapers or magazines, circulars, catalogues, samples and bills, and price lists mailed to them. The advertisement contains all necessary information about the products, such as the price, features, delivery terms, payment terms, and so on. When the orders arrive, they are carefully inspected in relation to the requirements requested by the purchasers and are fulfilled through the post office. ### Features of mail order: 1. The mail order house maintains a detailed mailing list containing names and addresses of potential customers. 2. The seller sends circulars, catalogs, etc. to customers by post. 3. The customers also place order by selecting the goods from the catalogue by post. 4. Generally only standardized items are bought and sold through mail order houses as inspection of goods is not possible. 5. Payment is received through V.P.P. or registered post. * **Automatic Vending Machines:** Coin-operated vending machines are handy for selling a variety of things such as beverages. Many countries sell platform tickets, milk, soft drinks, sweets, newspapers, and other items. Aside from the things described here, the most recent field in which this approach is becoming popular in many parts of our country. Vending machines can be helpful in a variety of situations. Selling pre-packed brands of cheap-priced products which have high turnover and which are uniform in size and weight. However, the initial cost of installing a vending machine and ongoing maintenance and repair costs are rather significant. Also, consumers are unable to feel or view the product before purchasing and are unable to return undesirable goods. ## What is Goods and Service Tax? Goods and Services Tax is value-added tax paid in many nations throughout the world on the sale of products and services. The GST system alternatives several indirect taxes, such as sales tax, service tax, and excise duty, with a single tax, which simplifies the taxation process. GST's major goal is to provide a unified tax structure that prevents the cascading impact of taxes (taxes on taxes) and supports a common market within a country. It helps in the simplification of the taxation process, the reduction of monitoring duties for enterprises, and the prevention of tax evasion. ### Features of GST: 1. The territorial spread of GST in the whole country 2. GST is applicable on the supply of goods or services as against the present concept of tax. 3. It is based on the principle of destination-based consumption tax against the present bo principles of origin-based taxation. 4. Import of goods and services is treated as interstate supplies and would be subject to IGST in addition to the applicable customs duties. 5. CGST (Central GST), SGST (State GST) and IGST (Interstate GST) are levied at rates mutually agreed upon by the centre and states under the guidance of GST council. 6. There are four tax slabs namely 5 percent, 12 percent, 18 percent, and 28 percent for all goods or services. 7. There is no tax on export and supplies to SEZ.