NCERT Class 11 Business Studies Chapter 10: Internal Trade PDF

CHAPTER 10 INTERNAL TRADE LEARNING OBJECTIVES After studying this chapter, you should be able to: describe the meaning and types of internal trade; specify the services of wholesalers to manufactures and retailers; explain the services of r...

CHAPTER 10 INTERNAL TRADE LEARNING OBJECTIVES After studying this chapter, you should be able to: describe the meaning and types of internal trade; specify the services of wholesalers to manufactures and retailers; explain the services of retailers; classify the types of retailers; explain the forms of small scale and large scale retailers; and state the role of Chambers of Commerce and industry in the promotion of internal trade. officiate the implementation of GST 2019-20 234 BUSINESS STUDIES Have you ever thought if there were no markets, how products of different manufacturers would reach us? We are all aware of our general provisions store round the corner which is selling items of our daily need. But is that enough? When we need to buy items of a specialised nature, we like to look at bigger markets or shops with variety. Our observation tells us that there are different types of shops selling different items or specialised goods and depending on our requirements we purchase from certain shops or markets. In rural areas, we may have noticed people selling their goods on the streets, these goods may range from vegetables to clothes. This is a completely different scene from what we see in the urban areas. In our country, all kinds of markets co-exist in harmony. With the advent of imported goods and multinational corporations, we have shops selling these products too. In big towns and cities, there are many retail shops selling particular branded products only. Another aspect of all this is, how these products reach the shops from the manufacturers? There must be some middlemen doing this job. Are they really useful or do prices increase because of them? 10.1 INTRODUCTION country is called internal trade. Trade between two or more countries, on the Trade refers to buying and selling of other hand, is called external trade. The goods and services with the objective present chapter discusses in detail the of earning profit. Mankind has been meaning and nature of internal trade engaged in trading, in some form or and explains its different types and the t h e o t h e r, s i n c e e a r l y d a y s o f role of chambers of commerce in civilisation. The importance of trade promoting internal trade. in modern times has increased as new products are being developed every 10.2 INTERNAL TRADE day and are being made available for consumption throughout the world. Buying and selling of goods and No individual or country can claim to services within the boundaries of a be self-sufficient in producing all the nation are referred to as internal trade. goods and services required by it. Whether the products are purchased Thus, each one is engaged in from a neighbourhood shop in a locality producing what it is best suited to or a central market or a departmental produce and exchanging the excess store or a mall or even from any door- produce with others. to-door salesperson or from an On the basis of geographical exhibition, all these are examples of location of buyers and sellers, trade can internal trade as the goods are broadly be classified into two categories purchased from an individual or (i) Internal trade; and (ii) External trade. establishment within a country. No Trade which takes place within a custom duty or import duty is levied 2019-20 INTERNAL TRADE 235 on such trade as goods are part of 10.3 W HOLESALE TRADE domestic production and are meant for As discussed in the previous section, domestic consumption. Generally, wholesale trade refers to buying and payment has to be made in the legal selling of goods and services in large tender of the country or any other quantities for the purpose of resale or acceptable currency. intermediate use. Internal trade can be classified into Wholesaling is concerned with the two broad categories viz., (i) wholesale activities of those persons or trade and (ii) retail trade. Generally, for establishments which sell to retailers products, which are to be distributed to and other merchants, and/or to a large number of buyers who are industrial, institutional and commercial located over a wide geographical area, it users but who do not sell in significant becomes very difficult for the producers amount to ultimate consumers. to reach all the consumers or users Wholesalers serve as an important link directly. For example, if vegetable oil or between manufacturers and retailers. bathing soap or salt produced in a They enable the producers not only to factory in any part of the country are to reach large number of buyers spread reach millions of consumers throughout over a wide geographical area (through the country, the help of wholesalers and retailers), but also to perform a variety retailers becomes very important. of functions in the process of distribution of goods and services. They Purchase and sale of goods and services generally take the title of the goods and in large quantities for the purpose of bear the business risks by purchasing resale or intermediate use is referred to and selling the goods in their own name. as wholesale trade. They purchase in bulk and sell in small On the other hand, purchase and lots to retailers or industrial users. They sale of goods in relatively small undertake various activities such as quantities, generally to the ultimate grading of products, packing into consumers, is referred to as retail trade. smaller lots, storage, transportation, Traders dealing in wholesale trade are promotion of goods, collection of market called wholesale traders and those information, collection of small and dealing in retail trade are called scattered orders of retailers and retailers. Both retailers and wholesalers distribution of supplies to them. They are important marketing intermediaries also relieve the retailers of maintaining who perform very useful functions in large stock of articles and extend credit the process of exchange of goods and facilities to them. Most of the functions services between producers and users performed by wholesalers are such or ultimate consumers. Internal trade which cannot be eliminated. If there are aims at equitable distribution of goods no wholesalers, these functions shall within a nation speedily and at have to be performed either by the reasonable cost. manufacturers or the retailers. 2019-20 236 BUSINESS STUDIES Services of Wholesalers block their capital in the stocks. Sometimes they also advance money to Wholesalers provide various services to the producers for bulk orders placed manufacturers as well as retailers and by them. provide immense help in the (iv) Expert advice: As the wholesalers distribution of goods and services. By are in direct contact with the retailers, making the products available at a place they are in a position to advice the where these are needed and at a time manufacturers about various aspects when these are needed for consumption including customer’s tastes and or use, they provide both the time and preferences, market conditions, place utility. The various services of competitive activities and the features wholesalers to different sections are preferred by the buyers. They serve as discussed below: an important source of market information on these and related 10.3.1 Services to Manufacturers aspects. Major services offered by wholesalers to (v) Help in marketing function: The the producers of goods and services are wholesalers take care of the given as below: distribution of goods to a number of (i) Facilitating large scale production: retailers who, in turn, sell these goods Wholesalers collect small orders from a to a large number of customers spread number of retailers and pass on the pool over a large geographical area. This of such orders to the manufacturers and relieves the manufacturers from many make purchases in bulk quantities. This of the marketing activities and enable enables the producers to undertake them to concentrate on the production production on a large scale and take activity. advantage of the economies of scale. (vi) Facilitate production continuity: (ii) Bearing risk: The wholesale The wholesalers facilitate continuity of merchants deal in goods in their own production activity throughout the name, take delivery of the goods and year by purchasing the goods as and keep the goods purchased in large lots when these are produced and storing in their warehouses. In the process, they them till the time these are demanded bear variety of risks such as the risk of by retailers or consumers in the fall in prices, theft, pilferage, spoilage, market. fire, etc. To that extent, they relieve the (vii) Storage: Wholesalers take manufacturers from bearing these risks. delivery of goods when these are (iii) Financial assistance: The produced in factory and keep them in wholesalers provide financial assistance their godowns/warehouses. This to the manufacturers in the sense that reduces the burden of manufacturers they generally make cash payment for of providing for storage facilities for the the goods purchased by them. To that finished products. They thus provide extent, the manufacturers need not time utility. 2019-20 INTERNAL TRADE 237 10.3.2 Services to Retailers (v) Risk sharing: The wholesalers purchase in bulk and sell in relatively The important services offered by small quantities to the retailers. Being manufacturers to the retailers are able to purchase merchandise in smaller described as below: quantities, retailers are in a position to (i) Availability of goods: Retailers avoid the risk of storage, pilferage, have to maintain adequate stock of obsolescence, reduction in prices and varied commodities so that they can demand fluctuations in respect of larger offer variety to their customers. The quantites of goods that they would have wholesalers make the products of to purchase in case the services of various manufacturers readily wholesalers are not available. available to the retailers. This relieves the retailers of the work of collecting goods from several producers and 10.4 RETAIL TRADE keeping big inventory of the same. A retailer is a business enterprise that (ii) Marketing support: The whole- is engaged in the sale of goods and salers perform various marketing services directly to the ultimate functions and provide support to the consumers. The retailer normally buys retailers. They undertake advertising goods in large quantities from the and other sales promotional activities wholesalers and sells them in small to induce customers to purchase the quantities to the ultimate consumers. goods. The retailers are benefitted as it The retails represents the final stage helps them in increasing the demand in the distribution where goods are for various new products. transferred from the hands of the (iii) Grant of credit: The wholesalers manufacturers or wholesalers to the generally extend credit facilities to their final consumers or users. Retailing is, regular customers. This enables the thus, that branch of business which is retailers to manage their business with devoted to the sale of goods and relatively small amount of working services to the ultimate consumers for capital. their personal and non-business use. (iv) Specialised knowledge: The There may be different ways of wholesalers specialise in one line of selling the goods viz., personally, on products and know the pulse of the telephone, or through vending market. They pass on the benefit of machines. Also, the products may be their specialised knowledge to the sold at different places, viz., in a store, retailers. They inform the retailers at the customer’s house or any other about the new products, their uses, place. Some of the common situations quality, prices, etc. They may also that we encounter in our daily life, for advise them on the decor of the retail example, are the sale of ball pens or outlet, allocation of shelf space and some magic medicine or book of jokes demonstration of certain products. in the roadways buses; the sale of 2019-20 238 BUSINESS STUDIES cosmetics/detergent powder, on door-to- provide help in the distribution of their door sales basis; and the sale of products by making these available to vegetables by the road side by a small the final consumers, who may be farmer. But as long as the goods are sold scattered over a large geographic area. to ultimate consumers, these will be They thus provide place utility. treated as cases of retail selling. Thus, (ii) Personal selling: In the process of irrespective of ‘how’ the products are sold sale of most consumer goods, some or ‘where’ the sale is made, if the sales amount of personal selling effort is are made directly to the consumers, it necessary. By undertaking personal will be considered as retailing. selling efforts, the retailers relieve the A retailer performs different functions producers of this activity and greatly in the distribution of goods and services. help them in the process of actualising He/she purchases a variety of products the sale of the products. from the wholesale distributors and (iii) Enabling large-scale operations: others, arranges for proper storage of On account of retailer’s services, the goods, sells the goods in small quantities, manufacturers and wholesalers are bears business risks, grades the freed from the trouble of making products, collects market information, individual sales to consumers in small extends credit to the buyers and quantities. This enables them to promotes the sale of products through operate on, at relatively large scale, and displays, participation in various thereby fully concentrate on their other schemes, etc. activities. Services of Retailers (iv) Collecting market information: As retailers remain in direct and constant Retailers serve as an important link touch with the buyers, they serve as an between the producers and final important source of collecting market consumers in the distribution of information about the tastes, preferences products and services. They provide and attitudes of customers. Such useful services to the consumers, information is considered very useful in wholesalers and manufacturers. Some taking important marketing decisions in of the important services of retailers are an organisation. described as below: (v) Help in promotion: From 10.4.1 Services to Manufacturers time-to-time, manufacturers and and Wholesalers distributors have to carry on various promotional activities in order to The invaluable services that the increase the sale of their products. For retailers render to the wholesalers and example, they have to advertise their producers are given as here under: products and offer short-term incentives (i) Help in distribution of goods: A in the form of coupons, free gifts, sales retailer’s most important service to the contests, and so on. Retailers participate wholesalers and manufacturers is to in these activities in various ways and, 2019-20 INTERNAL TRADE 239 thereby, help in promoting the sale of and sell these in small quantities, the products. according to the requirements of their customers. Also, they are normally 10.4.2 Services to Consumers situated very near to the residential areas and remain open for long hours. This Some of the important services of offers great convenience to the retailers from the point of view of customers in buying products of their consumers are as follows : requirements. (i) Regular availability of products: (iv) Wide selection: Retailers generally The most important service of a retailer keep stock of a variety of products of to consumers is to maintain regular different manufacturers. This enables the availability of various products consumers to make their choice out of a produced by different manufacturers. wide selection of goods. This enables the buyers to buy products as and when needed. (v) After-sales services: Retailers provide important after-sales services (ii) New products information: By in the form of home delivery, supply of arranging for effective display of products and through their personal spare parts and attending to selling efforts, retailers provide customers. This becomes an important important information about the factor in the buyers’ decision for repeat arrival, special features, etc., of new purchase of the products. products to the customers. This serves (vi) Provide credit facilities: The as an important factor in the buying retailers sometimes provide credit decision making process of the facilities to their regular buyers. This purchase of such goods. enables the latter to increase their level (iii) Convenience in buying: Retailers of consumption and, thereby, their generally buy goods in large quantities standard of living. Terms of Trade The following are the main terms used in the trade 1. Cash on delivery (COD):- It refers to a type of transaction in which payment for goods or services is made at the time of delivery. If the buyer is unable to make payment when the goods or services are delivered then it will be returned to the seller. 2. Free on Board or Free on Rail (FoB or FOR):- It rerers to a contract between the seller and the buyer in which all the expenses up to the point of delivery to a carrier (it may be a ship, rail, lorry, etc.) are to be borne by seller. 3. Cost, Insurance and Freight (CFF):- It is the price of goods which includes not only the cost of goods but also the insurance and frieght charges payable on goods upto destination port. 4. Errors and Omissions Excepted(E&OE):- It refers to that term which is used in trade documents to say that mistakes and things that have been forgotten should be taken into account. 2019-20 240 BUSINESS STUDIES 10.5 TYPES OF RETAILING TRADE (b) They normally deal in consumer products of daily use such as There are many types of retailers in toiletry products, fruits and India. For proper understanding, it vegetables, and so on. would be useful, to classify them into (c) The emphasis of such traders is certain common categories. Different on providing greater customer classifications have been used by service by making the products experts to categorise retailers into available at the very doorstep of different types. For example, on the the customers. basis of ‘size of business’, they may be (d) As they do not have any fixed categorised into large, medium and business establishment to operate small retailers. On the basis of ‘type of from, these retailers have to keep ownership’, they may be categorised their limited inventory of into ‘sole trader’, ‘partnership firm’, merchandise either at home or at ‘cooperative store’ and ‘company’. some other place. Similarly, on the basis of ‘merchandise Some of the most common types of handled’, the different classifications itinerant retailers operating in India are may be ‘speciality store’, ‘supermarket’ as below: and ‘departmental store’. Another (i) Peddlers and hawkers: Peddlers common basis of classification is and hawkers are probably amongst whether or not they have a fixed place the oldest form of retailers in the of business. On this basis, there are market place who have not lost their two categories of retailers: utility even during the modern times. (a) Itinerant retailers, and They are small producers or petty (b) Fixed shop retailers traders who carry the products on a bicycle, a hand cart, a cycle-rickshaw Both these types of retailers have or on their heads, and move from place been described in detail in the sections to place to sell their merchandise at that follow here after. the doorstep of the customers. They generally deal in non-standardised 10.5.1 Itinerant Retailers and low-value products such as toys, Itinerant retailers are traders who do vegetables and fruits, fabrics, carpets, not have a fixed place of business to snacks and ice creams, etc. They are operate from. They keep on moving with also found in streets of residential their wares from street to street or place areas, places of exhibitions or meals, to place, in search of customers. and outside schools, during a lunch break. Characteristics The main advantage of this form of retailing is the provision of convenient (a) They are small traders operating service to the consumers. However, with limited resources. one should be careful in dealing with them, 2019-20 INTERNAL TRADE 241 as the products they deal in are not always 10.5.2 Fixed Shop Retailers reliable in terms of quality and price. This is the most common type of (ii) Market traders: Market traders are retailing in the market place. As is the small retailers who open their shops evident from the name, these are retail at different places on fixed days or shops who maintain permanent dates, such as every Saturday or establishment to sell their merchandise. alternate Saturdays, and so on. These They, therefore, do not move from traders may be dealing in one place to place to serve their customers. particular line of merchandise, say Some of the other characteristics of fabrics or ready-made garments, toys, such traders are: or crockery, or alternatively, they may be general merchants. They are mainly Characteristics catering to lower -income group of (a) Compared with the itinerant traders, customers and deal in low-priced normally they have greater resources consumer items of daily use. and operate on a relatively large (iii) Street traders (pavement scale. However, there are different size vendors): Street traders are the small groups of fixed shop retailers, retailers who are commonly found at varying from very small to very large. places where huge floating population (b) These retailers may be dealing in gathers, for example, near railway different products, including stations and bus stands, and sell consumer durables as well as non- consumer items of common use, such durables. as stationery items, eatables, ready- (c) This category of retailers has greater made garments, newspapers and credibility in the minds of magazines. They are different from customers, and they are in a position market traders in the sense that they to provide greater services to the do not change their place of business customers such as home delivery, so frequently. guarantees, repairs, credit facilities, (iv) Cheap jacks: Cheap jacks are availability of spares, etc. petty retailers who have independent shops of a temporary nature in a Types business locality. They keep on The fixed-shop retailers can be changing their business from one classified into two distinct types on the locality to another, depending upon the basis of the size of their operations. potentiality of the area. However, the These are: change of place is not as frequent as in (a) small shop-keepers, and the case of hawkers or market traders. (b) large retailers. They deal in consumer items as well as The different types of retailers falling services such as repair of watches, under the above two broad heads are shoes, buckets etc. described as follows: 2019-20 242 BUSINESS STUDIES Fixed Shop Small Retailers (iii) Street stall holders: These small vendors are commonly found at street (i) General stores: General stores are crossings or other places where flow of most commonly found in a local market traffic is heavy. They attract floating and residential areas. As the name customers and deal mainly in goods of indicates, these shops carry stock of a cheap variety like hosiery products, variety of products required to satisfy the toys, cigarettes, soft drinks, etc. They day-to-day needs of the consumers get their supplies from local suppliers residing in nearby localities. Such stores as well as wholesalers. The total area remain open for long hours at convenient covered by a stall is very limited and, timings and often provide credit facilities therefore, they handle goods on a very to some of their regular customers. small scale. Their main advantage is in The biggest advantage of such providing convenient service to the stores is in terms of convenience to the customers in buying some of the items customers in buying products of daily of their needs. use such as grocery items, soft drinks, (iv) Second-hand goods shop: These toiletry products, stationery and shops deal in second-hand or used confectionery. As most of their goods, like books, clothes, customers are residents of the automobiles, furniture and other same locality, an important factor household goods. Generally persons contributing to their success is the with modest means purchase goods image of the owner and the rapport he from such shops. The goods are sold has established with them. at lower prices. Such shops may also (ii) Speciality shops: This type of retail stock rare objects of historical value store is, of late, becoming very popular, and antique items which are sold at particularly in urban areas. Instead of rather heavy prices to people who have selling a variety of products of different special interest in such antique goods. types, these retail stores specialise in The shops, selling second-hand the sale of a specific line of products. goods may be located at street For example, shops selling children’s crossings or in busy streets in the form garments, men’s wear, ladies shoes, of a stall having very little structure — toys and gifts, school uniforms, a table or a temporary platform to college books or consumer electronic display the books or may have goods, etc. These are some of the reasonably good infrastructure, as in commonly found stores of this type in the case of those selling furniture or the marketplace. used cars or scooters or motorcycles. The speciality shops are generally located in a central place where a large Fixed shop — Large stores number of customers can be attracted, 1. Departmental stores and they provide a wide choice to the A departmental store is a large customers in the selection of goods. establishment offering a wide variety 2019-20 INTERNAL TRADE 243 of products, classified into well- (c) As the size of these stores is very defined departments, aimed large, they are generally formed as at satisfying practically every a joint stock company managed by customer’s need under one roof. It a board of directors. There is a has a number of departments, each managing director assisted by a one confining its activities to one kind general manager and several of product. For example, there may department managers. be separate departments for (d) A departmental store combines toiletries, medicines, furniture, both the functions of retailing groceries, electronics, clothing and as well as warehousing. dress material within a store. Thus, They purchase directly from they satisfy diverse market segments manufacturers and operate with a wide variety of goods and separate warehouses. That way they services. It is not uncommon for a help in eliminating undesirable department store in the United States middlemen between the producers of America to carry ‘needle to an and the customers. aeroplane’ or ‘all shopping under one (e) They have centralised purchasing roof.’ Everything from ‘a pin arrangements. All the purchases in to an elephant’ is the spirit behind a department store are made a typical department store. centrally by the purchase In India real departmental stores department of the store, whereas have not yet come in a big way sales are decentralised in different in the retailing business. However, departments. some stores on this line in India include ‘Akberally’ in Mumbai Advantages and ‘Spencers’ in Chennai. Some of the important features The major advantages of retailing of a departmental store are through departmental stores may be as follows: listed as follows: (a) A modern departmental store may ( i ) Attract large number of provide all facilities such as customers: As these stores are usually restaurant, travel and information located at central places, they attract a bureau, telephone booth, rest- large number of customers during the rooms, etc. As such they try to best part of the day. provide maximum service to higher (ii) Convenience in buying: By class of customers for whom price offering large variety of goods under is of secondary importance. one roof, the departmental stores (b) These stores are generally located provide great convenience to customers at a central place in the heart of a in buying almost all goods of their city, which caters to a large number requirements at one place. As a result, of customers. customers do not have to run from one 2019-20 244 BUSINESS STUDIES place to another to complete their (iii) High possibility of loss: As a shopping. result of high operating costs and large- (iii) Attractive services: A scale operations, the chances of departmental store aims at providing incurring losses in a departmental store maximum services to the customers. are high. For example, if there is any Some of the services offered by it change in the tastes of customers or include home delivery of goods, latest fashions, it necessitates selling of execution of telephone orders, grant of such out-of-fashion articles in credit facilities and provision for clearance sale, to reduce the huge restrooms, telephone booths, inventory of goods built up. restaurants, saloons, etc. (iv) Inconvenient location: As a (iv) Economy of large-scale departmental store is generally situated operations: As these stores are at a central location, it is not convenient organised at a very large scale, the for the purchase of goods that are benefits of large scale operations, needed at short notice. particularly, in respect of purchase of In spite of some of these limitations goods are available to them. the departmental stores have been popular in some of the western (v) Promotion of sales: The countries of the world because of their departmental stores are in a position benefits to a certain class of customers. to spend considerable amount of 2. Chain Stores or Multiple Shops: money on advertising and other Chain stores or multiple shops promotional activities, which help in are networks of retail shops that boosting their sales. are owned and operated by manufacturers or intermediaries. Limitations Under this type of arrangement, a However, there are certain limitations number of shops with similar of this type of retailing. These are appearance are established in described as follows: localities, spread over different parts of (i) Lack of personal attention: the country. These different shops Because of the large-scale operations, normally deal in standardised and it is very difficult to provide adequate branded consumer products, which personal attention to the customers in have rapid sales turnover. These shops these stores. are run by the same organisation and (ii) High operating cost: As these have identical merchandising stores give more emphasis on providing strategies, with identical products and services, their operating costs tend to displays. Some of the important be on the higher side. These costs, in features of such shops may be turn, make the prices of the goods high. described as follows: They are, therefore, not attractive to the (a) These shops are located in fairly lower income group of people. populous localities, where 2019-20 INTERNAL TRADE 245 sufficient number of customers The chain operation is most can be approached. The idea is to effective in handling high-volume serve the customers at a point merchandise, whose sales are relatively which is nearest to their residence constant throughout the year. In India, or work place, rather than Bata Shoe stores are typical examples attracting them to a central place. of such shops. Similar type of retail (b) The manufacturing/procurement outlets are coming up in other products of merchandise for all the retail also. For example, the exclusive units is centralised at the head showrooms of D.C.M., Raymonds and office, from where the goods are the fast food chains of Nirula’s and despatched to each of these shops McDonalds. according to their requirements. This results in savings in the cost Advantages of operation of these stores. Multiple shops are offering various (c) Each retail shop is under the direct advantages to the consumers, which supervision of a Branch Manager, are described as follows: who is held responsible for its day- (i) Economies of scale: As there is to-day management. The Branch central procurement, the multiple- Manager sends daily reports to the shop organisation enjoys the head office in respect of the sales, economies of scale. cash deposits, and the require- (ii) Elimination of middlemen: By ments of the stock. selling directly to the consumers, the (d) All the branches are controlled by multiple-shop organisation is able to the head office, which is concerned eliminate unnecessary middlemen in with formulating the policies and the sale of goods and services. getting them implemented. (iii) No bad debts: Since all the sales (e) The prices of goods in such shops in these shops are made on cash basis, are fixed and all sales are made on there are no losses on account of bad cash basis. The cash realised from debts. the sales of merchandise is (iv) Transfer of goods: The goods not deposited daily into a local bank account on behalf of the head in demand in a particular locality may office, and a report is sent to the be transferred to another locality where head office in this regard. it is in demand. This reduces the (f) The head office normally appoints chances of dead stock in these shops. inspectors, who are concerned with (v) Diffusion of risk: The losses day-to-day supervision of the incurred by one shop may be covered shops, in respect of quality of by profits in other shops, reducing the customer service provided, total risk of an organisation. adherence to the policies of the (vi) Low cost: Because of centralised head office, and so on. purchasing, elimination of middlemen, 2019-20 246 BUSINESS STUDIES centralised promotion of sales and handled by multiple shops change increased sales, the multiple shops rapidly, the management may have have lower cost of business. to sustain huge losses because of (vii) Flexibility: Under this system, if large stocks lying unsold at the a shop is not operating at a profit, the central depot. management may decide to close it or shift it to some other place without Difference between Departmental really affecting the profitability of the stores and Multiple shops organisation as a whole. Although both these types of retail organisations are large establishments, Limitations there are certain differences (i) Limited selection of goods: Some between the two. Such differences are of the multiple shops deal only in given here below: limited range of products. This is (i) Location: A departmental store is especially the problem with the chain located at a central place, where a large stores which are owned and operated number of customers can be attracted by manufacterers, and as such mostly to it. However, the multiple stores are sell the products produced by the located at a number of places for themselves. They do not sell products approaching a large number of of other manufacturers. In that way the customers. Thus, central location is consumers get only a limited choice not necessary for a multiple shop. of goods. This, however is not the case (ii) Range of products: Departmental with retailer owned chain stores such stores aim at satisfying all the needs as Big Apple or Reliance Retail which of customers under one roof. As such, sell products of a large number of they have to carry a variety of products manufacturers. of dif ferent types. However, the (ii) Lack of initiative: The personnel multiple stores generally aim to satisfy managing the multiple shops have to the requirements of customers relating obey the instructions received from the to a specified range of their products head office. This makes them habitual only. of looking up to the head office for (iii) Services offered: The departmental guidance on all matters, and takes away stores lay great emphasis on providing the initiative from them to use their maximum service to their customers. creative skills to satisfy the customers. Some of the services, provided by them (iii) Lack of personal touch: Lack of include alteration of garments, initiative in the employees sometimes restaurant and so on. As against this, leads to indifference and lack of the multiple shops provide very limited personal touch in them. service confined to guarantees and (iv) Difficult to change demand: If repairs if the sold out goods turn out the demand for the merchandise to be defective. 2019-20 INTERNAL TRADE 247 (iv) Pricing: The multiple shop chains in newspapers or magazines, circulars, sell goods at fixed prices and maintain catalogues, samples and bills, and price uniform pricing policies for all the lists sent to them by post. All the relevant shops. The departmental stores, information about the products such as however, do not have uniform pricing the price, features, delivery terms, terms policy for all the departments; rather of payment, etc., are described in the they have to occasionally offer advertisement. On receiving the orders, discounts on certain products and the items are carefully scrutinised with varieties to clear their stock. respect to the specifications asked for (v) Class of customers: The depart- by the buyers and are complied with mental stores cater to the needs of through the post office. relatively high income group of There can be different alternatives for customers who care more for the receiving payments. First, the customers services provided rather than the prices may be asked to make full payment in of the product. The multiple shops, on advance. Second, the goods may be sent by Value Payable Post (VPP). Under this the other hand, cater to different arrangement, the goods are sent through types of customers, including those post and are delivered to the customers belonging to the lower income groups, only on making full payment for the who are interested in buying quality same. Third, the goods may be sent goods at reasonable prices. through a bank, which is instructed to (vi) Credit facilities: All sales in the deliver the articles to the customers. In multiple shops are made strictly on cash this arrangement there is no risk of bad basis. In contrast, the departmental debt, as the goods are handed over to stores may provide credit facilities to the buyers only after he makes full some of their regular customers. payment. However, there is a need to (vii) Flexibility: As the departmental ensure the buyers that the goods stores deal in a wide variety of despatched are in accordance with their products, they have certain flexibility specifications. in respect of the line of goods marketed. This type of business is not suitable However, there is not much scope for for all types of products. For example, flexibility in the chain stores, which deal goods that are perishable in nature or only in limited line of products. are bulky and cannot be easily handled, are not recommended for mail-house Mail Order Houses trading. Only the goods that can be Mail order houses are the retail outlets (i) graded and standardised, (ii) easily that sell their merchandise through transported at low cost, (iii) have ready mail. There is generally no direct demand in the market, (iv) are available personal contact between the buyers in large quantity throughout the year, and the sellers in this type of trading. (v) involve least possible competition in For obtaining orders, potential customers the market and (vi) can be described are approached through advertisements through pictures etc., are suitable for 2019-20 248 BUSINESS STUDIES this type of trading. Another important Limitations point in this regard is that mail house (i) Lack of personal contact: As there business cannot be successfully carried is no personal contact between the out unless education is wide spread. buyers and the sellers under the It is so because only the literate system of mail order selling, there people can be reached through are greater possibilities of mis- advertisements and other forms of understanding and mistrust between written communication. the two. The buyers are not in a position to examine the products before buying Advantages and the sellers cannot pay personal (i) Limited capital requirement: Mail attention to the likes and dislikes of the order business does not require heavy buyers and cannot clear all their doubts expenditure on building and other through catalogues and advertisements. infrastructural facilities. Therefore, it (ii) High promotion cost: The mail can be started with relatively low order business has to rely heavily on amount of capital. advertisements and other methods of (ii) Elimination of middle men: The promotion in order to inform and biggest advantage of mail-order persuade the potential buyers to buy business from the point of view of their products. As a result, there is consumers is that unnecessary heavy expenditure on promotion of the middlemen between the buyers and products. sellers are eliminated. This may result (iii) No after sales service: In mail in lot of savings both to the buyers as order selling, the buyers and sellers well as to the sellers. may be located very far away from each (iii) Absence of bad debt: Since the other and there is no personal contact mail order houses do not extend credit between the two. As a result, there is facilities to the customers, there are absence of after sales services which is no chances of any bad debt on account so important for the satisfaction of the of non payment of cash by the customers. customers. (iv) No credit facilities: The mail order (iv) Wide reach: Under this system the houses do not provide credit facilities goods can be sent to all the places to the buyers. Thus, customers with having postal services. This opens wide limited means may not be interested in scope for business as a large number this type of trading. of people throughout the country can (v) Delayed delivery: There is no be served through mail. immediate delivery of goods to the (v) Convenience: Under this system customers, as receipt and execution of goods are delivered at the doorstep of order through mail takes its own time. the customers. This results in great (vi) Possibility of abuse: This type of convenience to the customers in buying business provides greater possibility of these products. abuse to dishonest traders to cheat the 2019-20 INTERNAL TRADE 249 customers by making false claims raised by issue of shares to members. about the products or not honouring The management of the store is the commitments made through hand democratic and entrusted to an bills or advertisements. elected managing committee where (vii) High dependence on postal one man one vote is the rule. The services: The success of mail order liability of the members of a business depends heavily on the cooperative store is generally limited availability of efficient postal services at to the extent of the capital contributed a place. But in a vast country like ours, by them. To ensure fair management where many places are still without of funds, the accounts of the stores postal facilities, this type of business are audited by the Registrar of has limited prospects. Cooperative Societies or a person authorised by him/her. Consumer Cooperative Store Advantages A consumer cooperative store is an organisation owned, managed and The major advantages of a consumer controlled by consumers themselves. cooperative store are as follows: The objective of such stores is to reduce (i) Ease information: It is easy to form the number of middlemen who increase a consumer cooperative society. Any the cost of produce, and thereby ten people can come together to form a provide service to the members. voluntary association and get The cooperative stores generally themselves registered with the Registrar buy in large quantity, directly from of Cooperative Societies by completing manufacturers or wholesalers and sell certain formalities. them to the consumers at reasonable (ii) Limited liability: The liability of prices. Since the middleman are the members in a cooperative store is eliminated or reduced, the members get limited to the extent of the capital products of good quality at cheaper contributed by them. Over and above rates. The profits earned by consumer that amount, they are not liable cooperative stores during a year are personally to pay for the debts of utilised for declaring bonus to society, in case the liabilities are members and for strengthening the greater than its assets. general reserves and general welfare (iii) Democratic management: funds or similar funds for social and Cooperative societies are democratically educational benefits of the members. managed through management To start a consumer cooperative committees which are elected by the store, at least 10 people have to come members. Each member has one vote, together and form a voluntary irrespective of the number of shares association and get it registered held by him/her. under the Cooperative Societies Act. (iv) Lower prices: A cooperative store The capital of a cooperative store is purchases goods directly from the 2019-20 250 BUSINESS STUDIES manufacturers or wholesalers and Super Markets sells them to members and others. A super market is a large retailing Elimination of middlemen results in business unit selling wide variety of lower prices for the consumer goods to consumer goods on the basis of low price the members. appeal, wide variety and assortment, (v) C a s h s a l e s : The consumer self-service and heavy emphasis on cooperative stores normally sell goods on merchandising appeal. The goods traded cash basis. As a result, the requirement are generally food products and other low for working capital is reduced. priced, branded and widely used (vi) Convenient location: The consumer products such as grocery, consumer cooperative stores are utensils, clothes, electronic appliances, generally opened at convenient public household goods, and medicines. Super places where the members and others markets are generally situated at the can easily buy the products as per their main shopping centres. Goods are kept requirements. on racks with clearly labelled price and quality tags in such stores. The Limitations customers move into the store to pick up The limitations of consumer cooperative goods of their requirements, bring them stores are given as below: to the cash counter, make payment and (i) Lack of initiative: As the cooperative take home the delivery. stores are managed by people who work Super markets are organised on on honorary basis, there is a lack of departmental basis where customers sufficient initiative and motivation can buy various types of goods under amongst them to work more effectively. one roof. However, as compared to (ii) Shortage of funds: The primary departmental stores, these markets do source of funds for a cooperative store not offer certain services such as free is the money raised from members by home delivery, credit facilities, etc., and issue of shares. The stores generally face also do not appoint sales persons to shortage of funds as membership is convince customers about the quality limited. This comes in the way of growth of products. Some of the important and expansion of the cooperative stores. characteristics of a super market are (iii) Lack of patronage: The members as follows: of the cooperative stores generally do (i) A super market generally carries not patronise them regularly. As a a complete line of food items and result of this, the stores are not able to groceries, in addition to non-food operate successfully. convenience goods. (iv) Lack of business training: The (ii) The buyers can purchase different people entrusted with the management products as per their requirements of cooperative stores lack expertise as under one roof in such markets. they are not trained in running the (iii) A super market operates on the stores efficiently. principle of self-service. The 2019-20 INTERNAL TRADE 251 distribution cost is, therefore, Limitations lower. The major limitations of super markets (iv) The prices of the products are are as follows: generally lower than other types (i) No credit: Super markets sell of retail stores because of bulk their products on cash basis only. No purchasing, lower operational credit facilities are made available to cost, and low profit margins. the buyers. This restricts the (v) The goods are sold on cash basis purchasing power of buyers from only. such markets. (vi) The super markets are generally (ii) No personal attention: Super located at central locations to markets work on the principle of self- secure high turnover. service. The customers, therefore, do Advantages not get any personal attention. As a The following are the merits of super result, such commodities that require markets: personal attention by sales people (i) One roof, low cost: Super markets cannot be handled effectively in super markets. offer a wide variety of products at low (iii) Mishandling of goods: Some cost under one roof. These outlets are, customers handle the goods kept in the therefore, not only convenient but also shelf carelessly. This may raise costs economical to the buyers for making in super markets. their purchases. (iv) High overhead expenses: Super (ii) Central location: The super market incur high overhead expenses. markets are generally located in the As a result these have not been able to heart of the city. As a result, these are create low price appeal among the easily accessible to large number of customers. people staying in the surrounding (v) Huge capital requirement: localities. Establishing and running a super (iii) Wide selection: Super markets market requires huge investment. The keep a wide variety of goods of different turnover of a store should be high so designs, colour, etc., which enables the that the overheads are kept under buyers to make better selection. reasonable level. This can be possible (iv) No bad debts: As generally the in bigger towns but not in small towns. sales are made on cash basis, there are no bad debts in super markets. Vending Machines (v) Benefits of being large scale: A super market is a large scale Vending machines are the newest retailing store. It enjoys all the revolution in marketing methods. benefits of large scale buying and Coin operated vending machines are selling because of which its operating proving useful in selling several costs are lower. products such as hot beverages, 2019-20 252 BUSINESS STUDIES platform tickets, milk, soft drinks, ensure the smooth flow of goods across chocolates, newspaper, etc., in many the country implemented the Goods countries. Apart from some of the and Services Tax (GST) from July 1, products mentioned here, the latest 2017. The move also aims to make life area in which this concept is getting easier for manufacturers, producers, popular in many parts of our country investors and consumers. This system (particularly in the urban areas) is is regared as the most revolutionising the case of Automated Teller Machines tax reform in the Indian taxation (ATM) in the banking service. As the history. Tax apart from being a source name suggests, these machines have of revenue for growth also plays a key altogether changed the concept of role in making the State accountable banking and made it possible to to its taxpayers. Effective taxation withdraw money at any time without ensures that public funds are visiting any branch of a bank. effectively employed in fulfilling social Vending machines can be useful for objectives for sustainable development. selling pre-packed brands of low priced GST is a destination-based single products which have high turnover tax on the supply of goods and services from the manufacturer to the consumer, and which are uniform in size and and has replaced multiple indirect weight. However, the initial cost of taxes levied by the Central and the installing a vending machine and the State governments, thereby, converting expenditure on regular maintenance the country into a unified market. and repair are quite high. Also Among other benefits, GST is expected consumers cannot feel or see the to improve the ease of doing business product before buying and do not in tax compliance, reduce the tax have the opportunity of returning burden by eliminating tax-on-tax, unwanted goods. Apart from that, improve tax administration, mitigate special packs have to be developed for tax evasion, broaden the organised the machines. The machines have to segment of the economy and boost tax be made reliable in their operations. revenues. The GST has replaced 17 In spite of these limitations, with the indirect taxes (8 Central + 9 State levels) growth in the economy, vending and 23 cesses of the Centre and the machines have a promising future in States, eliminating the need for filing retail sales of high turnover and low multiple returns and assessments and priced consumer products. rationalising the tax treatment of goods and services along the supply chain Goods and Services Tax from producers to consumers. GST The Government of India, following the comprises Central GST (CGST) and the credo of ‘One Nation and One Tax’, and State GST (SGST), subsuming levies wanting a unified market in order to previously charged by the Central and 2019-20 INTERNAL TRADE 253 the State governments respectively. making GST a destination-based GST (CGST + SGST) is charged at each consumption tax. The provision of stage of value addition and the supplier availing input credit at each stage of off-sets the levy on inputs in the value chain helps in avoiding the previous stages of value chain through cascading effect (tax on tax) under GST, the tax credit mechanism. The last which is expected to reduce prices of dealer in the supply chain passes on commodities and benefit the the added GST to the consumer, consumers. (refer page 253) Some Facts about GST 1. GST aims to subsume a plethora of taxes into one single tax across the country and make goods uniformly priced across India, albeit some goods become costly and some become cheaper. 2. With the implementation of GST, luxury goods have become costlier, while items of mass consumption have become cheaper. 3. GST is not taxation at source. It is a destination tax or rather it’s a consumption tax. A product is manufactured in Tamil Nadu and travels through the country before it reaches Delhi, where the buyer or consumer pays tax for it. Both the Centre and the State have their share in this tax. 4. The Indian GST will have a mechanism of matching of invoices. Input tax credit of purchased goods and services will only be available if the taxable supplies received by the supplies received by the supplier. The Goods and Services Tax network is a self-regulating mechanism, which not only checks tax frauds and tax evasion, but also brings in more and more businesses into the formal economy. 5. Anti-profiteering measure is one of the key features of the recently implemented Goods and Services Tax law. These measures prevent entities from making excessive profits. Since the GST, along with the input tax credit, is eventually expected to bring down prices, a National Anti-profiteering Authority (NAA) is to be set up to ensure that the benefits accrued to entities due to reduction in costs is passed on to the consumers. Also, entities that hike rates inordinately, citing GST as the reason, will be checked by this body. 2019-20 254 BUSINESS STUDIES How will GST Benefit and Empower Citizens n Reduction in overall tax burden n No hidden taxes n Development of a harmonised national market for goods and services n Higher disposable income in hand, education and essential needs n Customers to have wider choice n Increased economic activity n More employment opportunities Key Features of GST: 1. The territorial spread of GST is the whole country, including Jammu and Kashmir. 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 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). GST Council – Constitution n Chairperson: Finance Minister n Vice Chairperson is to be chosen amongst the Ministers of State Government n Members: MoS (Finance) and all Ministers of Finance/Taxation of each State n Quorum is 50% of total members n States have two-third weightage and Centre has one-third weightage n Decision is taken by 75% majority n The Council shall make recommendations on everything related to GST including, rules and rates, etc. 2019-20 INTERNAL TRADE 255 The CGST/SGST is payable on all intra-state supply of goods or services or both IGST is payable on all inter-state GST supply of goods and services Tax liability arises when the taxable person crosses exemption limit i.e., ` 20 lakh 10.6 R O L E O F C O M M E R C E A N D chambers act as the national guardians INDUSTRY ASSOCIATIONS IS IN of trade, commerce and industry. These associations have been PROMOTION OF INTERNAL playing a catalytic role in strengthening TRADE internal trade to make it an important Associations of business and part of overall economic activity.The industrial houses are formed to Chambers of Commerce and Industry promote and protect their common interact with the government at different interest and goals. Many such levels to reorient or put in place policies associations have been formed and are which reduce hindrances, increase present in the country such as interstate movement of goods, Associated Chamber of Commerce and introduce transparency and remove Industry (ASSOCHAM), Confederation multiple layers of inspection and of Indian Industry (CII) and Federation bureaucratic hurdles. Besides, the of Indian Chambers of Commerce and chambers also aim at erecting sound Industry (FICCI). These associations or infrastructure and simplifying and 2019-20 256 BUSINESS STUDIES harmonising the tax structures. The being levied in place of the sales tax interventions are mainly in the to remove the cascading effect of the following areas: sales tax. (i) Interstate movement of goods: (iv) Marketing of agro products and The Chambers of Commerce and related issues: The associations of Industry help in many activities agriculturists and other federations concerning inter state movement of play an important role in the goods which include registration of marketing of agro products. vehicles, surface transport policies, Streamlining of local subsidies and construction of highways and roads. marketing policies of organisations For example, the construction of selling agro products are some of the golden quadrilateral corridor areas where the Chambers of announced by the Prime Minister of Commerce and Industry can really India in one of the Annual General intervene and interact with concerned Meetings of the Federation of Indian agencies like farming cooperatives. Chambers of Commerce and (v) Weights a n d Measures and Industry (FICCI) will facilitate prevention of duplication brands: internal trade. Laws relating to weights and (ii) Octroi and other local levies: measures and protection of brands Octroi and local taxes are the important are necessary to protect the interest of sources of revenue of the local the consumers as well as the traders. government. These are collected on the These need to be enforced strictly. The goods and from people entering the Chambers of Commerce and Industry state or the municipal limits. The interact with the government to Chambers of Commerce try to ensure formulate such laws and take action that their imposition is not at the cost against those who violate rules and of smooth transportation and local regulations. trade. (vi) Excise duty: Central excise is the (iii) Harmonisation of sales tax chief source of the government structure and Value Added Tax: revenue levied across states by the The Chambers of Commerce and central government. The excise policy Industry play an important role in plays an important role in pricing interacting with the government to mechanism. The trade associations harmonise the sales tax structure in need to interact with the government different states. The sales tax is an to ensure streamlining of excise important part of the state revenue. A duties. rational structure of the sales tax and (vii) Promoting sound infrastructure: its uniform rates across states, are A sound infrastructure like road, port, important for promoting a balance in electricity, railways etc., play a catalytic trade. As per the new policy of the role in promoting trade. The Chambers government, the Value Added Tax is of Commerce and Industry hold 2019-20 INTERNAL TRADE 257 discussions with government agencies maximising production and generating for investments into these projects. employment. The Chambers of Commerce and Industry and the (viii) Labour legislation: A simple government are constantly interacting and flexible labour legislation is on issues like labour laws, helpful in running industries, retrenchment etc. with the government. Key Terms Internal trade Wholesalers Market traders Wholesale trade Retailers Cheap jacks Retail trade Internal retailers Speciality stores Departmental stores Chain stores Vending machines Super markets Chambers of Commerce SUMMARY Trade refers to buying and selling of goods and services with the objective of earning profit on the basis of geographical location of buyers and sellers. It can be classified into two categories (i) internal trade; and (ii) external trade. Internal trade: Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade. No custom duties or import duties are levied on such trade as goods are part of domestic production and are meant for domestic consumption. Internal trade can be categorised into two broad categories (i) wholesale trade; and (ii) retailing trade. Wholesale trade: Purchase and sale of goods and services in large quantities for the purposes of resale or intermediate use is referred to as wholesale trade. Wholesalers perform a number of functions in the process of distribution of goods and services and provide valuable services to manufacturers and retailers. Services of wholesalers: Wholesalers are an important link between manufacturers and retailers. They add value by creating time and place utility. Services of manufacturers: The services provided by wholesalers to manufacturers include (i) facilitating large scale production; (ii) bearing risk; (iii) providing financial assistance; (iv) expert advice; (v) help in marketing function; (vi) facilitating continuity; and (vii) storage. Services to retailers: The services provided by wholesalers to retailers include (i) availability of goods (ii) marketing support (iii) grant of credit (iv) specialised knowledge (v) risk sharing 2019-20 258 BUSINESS STUDIES Retail trade: A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. Services of retailers: Retailers are an important link between the producers and final consumers. They provide useful service to consumers wholesalers and manufacturers in the distribution of products and services. Services to manufacturers/wholesalers: Different services provided by retailers to wholesalers and manufacturers include (i) helping distribution of goods; (ii) personal selling; (iii) enabling large scale operations; (iv) collecting market information; and (v) help in promotion of goods and services. Services to consumers: The different services provided by retailers to consumers include (i) regular availability of products (ii) new product information (iii) convenience of buying (iv) trade selection (v) after sales services and (vi) providing credit facilities. Types of retail trade: Retail trade can be classified into different types according to their size, type of ownership, on the basis of merchandise handled and whether they have fixed place of business or not. Retailers can be categorised as (i) itinerant retailers; and (ii) fixed shop retailers. Itinerant retailers: Itinerant retailers are traders who don’t have a fixed place of business to operate from. They are small traders operating with limited resources who keep on moving with their wares from street to street or place to place in search of customers. The major types of such retailers are: (i) 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. (ii) 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. (iii) Street trades: Street traders are the small retailers who are commonly found at places where huge floating population gathers. (iv) 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 shop retailers: On the basis of size of operations, (fixed shop retailers can be classified as a) small shopkeepers and (b) large retailers. Fixed shop small retailers (i) 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. 2019-20 INTERNAL TRADE 259 (ii) Speciality shops: Speciality shops specialise 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., (iii) 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. (iv) Second hand 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. (v) 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. Fixed shop large stores: In fixed shop large stores, the volume and variety of goods stocked is large. Departmental stores: A departmental store is a large establishment offering a wide variety of products, classified into well-designed departments, aimed at satisfying practically every customer’s need under one roof. Advantages: (a) attracts large number of customers (b) convenience in buying (c) attractive services (d) economy of large scale operation (e) promotion of sales. Limitations: (a) lacks personal attention (b) high operating cost (c) high possibility of loss (d) inconvenient location. Chain stores or multiple shops: These shops are networks of retail shops that are owned and operated by manufacturers or intermediaries dealing in standardised and branded consumer products having rapid sales turnover. Advantages: (a) economies of scale (b) elimination of middlemen (c) no bad debts (d) transfer of goods (e) diffusion of risk (e) low cost (f) flexibility. Limitations: (a) limited selection of goods (b) lack of initiative (c) lack of personal touch (d) difficult to change demand. Difference between Departmental Stores and Multiple Shops: (a) location (b) range of products (c) services offered (d) pricing (e) class of customers (f) credit facilities (g) flexibility. Mail order houses: Mail order houses are retail outlets that sell their merchandise through mail, without any direct personal contact with the buyers. 2019-20 260 BUSINESS STUDIES Advantages: (a) limited capital requirements (b) elimination of middlemen, (c) absence of bad debts (d) wide reach (e) convenience. Limitations: (a) lack of personal contact, (b) high promotion cost (c) no after sales services (d) no credit facilities (e) delayed delivery (f) possibility of abuse (g) high dependence on postal services. Consumer cooperative stores: A consumer cooperative store is an organisation owned managed and controlled by consumers themselves formed with the objective of reducing the number of middlemen and thereby providing services to members. Advantages: (i) ease in formation (ii) limited liability (iii) democratic management (iv) lower prices (v) cash sales (vi) convenient location. Limitations: (i) lack of initiative (ii)shortage of funds (iii) lack of patronage (iv) lack of business training. Super markets: A super market is a large retailing business unit selling wide variety of consumer goods on the basis of low margin appeal, wide variety and assortment and heavy emphasis on merchandising appeal. Advantages: (i) one roof, low cost (ii) central location (iii) wide selection (iv) no bad debts (v) benefits of large scale. Limitations: (a) no credit (b) no personal attention (c) mishandling of goods (d) high over head expenses (e) huge capital requirements. Vending Machines: Vending machines are proving useful in selling pre-packed brands of low priced products which have high turnover and which are uniform in size and weight. EXERCISES Short Answer Questions 1. What is meant by internal trade? 2. Specify the characteristics of fixed shop retailers. 3. What purpose is served by wholesalers providing warehousing facilities? 4. How does market information provided by the wholesalers benefit the manufacturers? 5. How does the wholesaler help the manufacturer in availing the economies of scale? 6. Distinguish between single line stores and speciality stores. Can you identify such stores in your locality? 2019-20 INTERNAL TRADE 261 7. How would you differentiate between street traders and street shops? 8. Explain the services offered by wholesalers to manufacturers. 9. What are the services offered by retailers to wholesalers and consumers? Long Answer Questions 1. Itinerant traders have been an integral part of internal trade in India. Analyse the reasons for their survival in spite of competition from large scale retailers. 2. Discuss the features of a departmental store. How are they different from multiple shops or chain stores. 3. Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers? 4. Imagine life without your local market. What difficulties would a consumer face if there is no retail shop? 5. Explain the usefulness of mail orders houses. What type of products are generally handled by them? Specify. Projects/Assignments 1. Identify various fixed shop retailers in your locality and classify them according to the different types you have studied. 2. Do you know any retailers selling second-hand goods in your area? Find out the category of the product that they deal in? Which products are suitable for resale? List some of your findings. What conclusions do you draw? 3. Do you observe any difference in the retail business of yesterday and the times to come. Prepare a brief write-up and discuss it in class. 4. From you own experience, compare the features of two retail stores selling the same product. For example, the same products being sold at a small scale retailer like a general store and in a big store like a departmental store. What similarities and differences can you identify in terms of price, service, variety, convenience, etc. 5. The GST has been rolled out by the Government of India on July, 01, 2017. Different goods and services are classified under GST rates viz., 0%, 5%, 12%, 18% and 28%. Collect the information on GST from newspapers, media news, Internet and business magazines and classify the given goods and services five GST rates : 2019-20 262 BUSINESS STUDIES Activity: Classification of GST Rates of different Goods and Services Items No tax (0%) 5% 12% 18% 28% Jute Newspaper Coffee/Tea Shampoo Washing Machine Motorcycles Vegetables Milk Curd Salt Spices Kerosene Kites Apparel above Rs 1000 Cheese Ghee Fruit Juices Bhujia Ayurvedic Medicines Sewing Machine Cell Phones Ketchup & Sauces Exercise Books Notebooks Spectacles Non-AC Fertilisers Biscuits Pasta Pastries and cakes Jams Mineral Water Steel Products Camera Speakers and monitors Aluminum Foil CCTV Telecom Services Branded Garments 2019-20