Unit 9: Internal Trade

INTERNAL TRADE

Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade. Whether the produce are purchased from a neighborhood shop in locality or a central market or a departmental store or a mall or even from any doo-to-door salesperson or form an exhibition, all these are the goods are purchased from an individual or establishment within a country. No custom duty or import duty is levied on such trade as goods are part of domestic production and are meant for domestic consumption. Generally, payment has to be made in the legal tender of the country or any other acceptable currency.

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Internal trade can be classified into two broad categories viz., (i) wholesale trade (ii) retail trade.

(i)WHOLESALE TRADE

Whole sale trade refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.

Wholesaling is concerned with the activities of those persons or establishment which sell to retailers and other merchants, and/or to industrial, institutional and commercial users but who do not sell in significant amount to ultimate consumers. Wholesalers serve as an important link between manufacturers and retailers.

Services of wholesalers

Wholesalers provide various services to manufacturers as well as retailers and provide immense help in the distribution of goods and services. By making these are needed and at a time when these are needed for consumption or use, they provide both the time and place utility.

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Services to Manufactures

Major services offered by wholesalers to the producers of goods and services are given below:

a. Facilitating large scale production: Wholesalers collect small orders from a number or retailer and pass on the pool of such orders to the manufacturers and of make purchases in bulk quantities. This enables the producers to undertake production on a large scale and take advantage of the economies of scale.

b. Bearing risk: The wholesale merchants deal in good in their own name, take delivery of the goods and keep the good purchased in large lots in their warehouses. In the process, they bear variety of risks such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc. to the extent; they relieve the manufacturers from bearing these risks.

c. Financial assistance: The wholesalers provide financial assistance to the manufactures in the sense that they generally make cash payment for the goods purchased by them. To that extent, the manufactures need not block their capital in the stocks, sometimes they also advance money to the producers for bulk orders placed by them.

d. Expert advice: As the wholesalers are in direct contact with the retailers, they are in a position to advice the manufactures customer’s tastes and preference, market conditions, competitive activities and the features preferred by the buyers. They serve as an important on these and related aspects.

e. Help in marketing function: The wholesalers take care of the wholesalers take care of the distribution of goods to a number of customers spread over a large geographical area. This relieves the manufactures from many of the marketing activities and enable them to concentrate on the production activity.

2. Services to Retailers

The important services offered by manufacturers to the retailers are described as below:

a. Availability of goods: Retailers have to maintain adequate stock of variety to their customers. The wholesalers make the products of various to their customer. The wholesalers make the products of various manufacturers readily available to the retailers. This relieves the retailer of the work of collecting goods from several producers and keeping big inventory of the same.

b. Marketing Support: The whole salers perform various marketing functions and provide support to the retailers. They undertake advertising and other sales promotional activities to induce customers to purchase the goods. The retailers are benefitted as it helps them in increasing the demand for various new products.

c. Grant of credit: The wholesalers generally extend credit facilities to their regular customers. This enables the retailers to manage their business with relatively small amount of working capital.

d. Specialized knowledge: The wholesalers specialize in one line of products and know the pulse of the market. They pass on the benefit of their specialized knowledge to the retailers. They inform the retailers about the new products, their uses, quality, prices, etc. they may also advise them on the décor of the retail outlet, allocation of shelf space and demonstration of certain products.

e. Risk sharing: The wholesalers purchase in bulk and sell in relatively small quantities to the retailers. Being able to purchase merchandise in smaller quantities, retailers are in position to avoid the risk of storage, pilferage, obsolescence, reduction in prices and demand fluctuations in respect of large quantities of goods that they would have to purchase in case the services of wholesalers are not available.

RETAIL TRADE

A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. The retailer normally buys goods in large quantities form the wholesalers and sells them in small quantities to the ultimate consumers. The retails represents the final stage in the distribution where goods are transferred from the hands of the hands of the manufacturers or wholesalers to the final consumers or users. Retailing is, devoted to the sale of goods and services to the ultimate consumers for their personal and non-business use.

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Services of Retailers

Retailers serve as an important link between the producers and final consumers in the distribution of products and services to the consumers, wholesalers and manufacturers. Some of the important services of retailers are described as below:

Services to Manufacturers and wholesalers

The invaluable services that the retailers render to the wholesalers and producers are given as here under:

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

b. Personal selling: In the process of sale of most consumer goods, some amount of personal selling effort is necessary. By undertaking personal selling efforts, the retailers relieve the producers of this activity and greatly help them in the process of actualizing the sale of the products.

c. Enabling large-scale operations: On account of retailer’s services, the manufacturers and wholesalers are freed from the trouble of making individual sales to consumers in small quantities. This enables them to operate on, at relatively large scale, and thereby fully concentrate on their other activities.

d. Collecting market information: As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences and attitudes of customers. Such information is considered very useful in taking important marketing decisions in an organization.

e. Help in Promotion: From time-to-time, manufacturer and distributors have to carry on various promotional activities in order to increase the sale of their products. For example, they have to advertise their products and offer short-term incentives in the form of coupons, free gifts, sales contests, and so on. Retailers participate in these activities in various ways and, thereby, help in promoting the sale of the products.

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Services to Consumers

Some of the important services of retailers from the point of view of consumers are as follows:

a. Regular available of products: The most important service of a retailer to consumers is to maintain regular availability of various products produced by different manufacturers. This enables the buyers to buy products as and when needed.

b. New product information: By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc., of new products to the customers. This serves as an important factor I the buying decision making process of the purchase of such goods.

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

Wide selection: Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.
After-sales services: Retailers provide important after-sales services in the form of home delivery, supply of spare parts and attending to customers. This becomes an important factor in the buyers’ decision for repeat purchase of the products.
Provide credit facilities: The retailers sometimes provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption and. thereby, their standard of living.

TYPES OF RETAILING TRADE

There are many types of retailers in India. For proper understanding, it would be useful, to classify them into certain common categories. Different classification has been used by experts to categories retailers into different types. For example, on the basis of ‘size of business’, they may be categorized into large, medium and small retailers. On the basis of ‘type of ownership’, they may be categorized into ‘sole trader’, ‘Partnership firm’, ‘cooperative store’ and ‘company’. Similarly, on the basis of ‘merchandise handled’, the different classification may be ‘speciality store’, ‘supermarket ’ and ‘departmental store’, Another common basis of classification is whether or not they have fixed place of business. On this basis, there are two categories of retailers:

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Itinerant retailers, and
Fixed shop retailers

Both these types of retailer have been described I detail in the sections that follow here after.

Itinerant Retailers

Itinerant retailers are traders who do not have a fixed place of business to operate from. They keep on moving with their wares from street to street or place to place, in search of customers.

Characteristics

They are small traders operating with limited resources.
They normally deal in consumer products of daily’ use such as toiletry products, fruits and vegetables, and so no.
The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers.
As they do not have any fixed business establishment to operate from, these retailers have to keep their limited inventory of merchandise either at home or at some other place.

Some of the most common types of itinerant retailers operating in India are as below:

Peddlers and hawkers: peddlers and hawkers are probably amongst the oldest form of retailers in the market place who have not lost their utility even during the modern times. They are small producers of petty traders who carry the products on a bicycle, a hand cart, a cycle-rickshaw to place to sell their merchandise at the doorstep of the customers.

Market traders: market traders are the small retailers who open their shops at different places on fixed days or dates, such as every Saturday or alternate Saturday, and so no. These traders may be dealing in one particular line of merchandise, say fabrics or ready-made garments, toys, or crockery, or alternatively, they may be general group of customers and deal I low-priced consumer items of daily use.
Street traders (pavement vendors): street traders are the small retailers who are commonly found at places where huge floating population gathers, for example, near railway stations and bus stands, and sell consumer items of common use, such as stationery items, eatables, ready-made garments, newspapers and magazines. They are different from market traders in the sense that they do not change their place of business so frequently.
Cheap jacks: cheap jacks are petty retailers who have independent shops of a temporary nature in a business locality. They keep on changing their business form one locality to another. Depending upon the potentiality of the area. However, the change of place is not as frequent as in the case of hawkers or market traders. They deal in consumer items as well as services such as repair of watches, shoes, buckets etc.

2. Fixed shop Retailers

This is the most common type of retailing in the market place. As it evident from the name, these are retail shops who maintain permanent establishment to sell their merchandise, they, therefore, do not move from place to place to serve their customers. Some of the other characteristics of such traders are:

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Characteristics

Compared with the itinerant traders, normally they have greater resources and operate on a relatively large scale. However, there are different size groups of fixed shop retailers, varying form very small to very large.
These retailers may be dealing in different products, including consumer durables as well as non-durables.
This category of retailers has greater credibility in the minds of customers, and they are in a position to provide greater services to the customers such as home delivery, guarantees, repairs, credit facilities, availability of spares, etc.

Types

The fixed-shop retailers can be classified into two distinct types on the basis of the size of their operation.

These are:

Small shop-keepers, and
Large retailers.

The different types of retailers falling under the above two broad two broad heads are described as follows:

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Fixed shop small Retailers

a. General stores: General stores are most commonly found in a local market and residential areas. As the name indicated, these shops carry stock of a variety of products required to satisfy the day-to-day needs of the consumers residing in nearby localities. Such stores remain open for long hours at convenient timings and often provide credit facilities to some of their regular customers.

b. Specialty shops: This type of retail store is, of late, becoming very popular, particularly in urban areas, instead of selling a variety of products of different types, retail stores specialize in the sale of a specific line of products. For example, shops selling children’s garments, men’s wear, ladies shoes, toys and gifts, school uniforms. College books or consumer electronic good, etc. These are some of the commonly found stores of this type in the marketplace.

c. Street stall holders: These small vendors are commonly found at street crossings or other places where flow of traffic is heavy. They attract floating customers and deal mainly in goods of cheap variety like hosiery products, toys, cigarettes, soft drinks, etc. They get their supplies from local suppliers as well as wholesalers.

d. Second-hand goods shop: These shops deal in second-hand or used goods, like books, clothes, automobiles, furniture and other household goods. Generally persons with modest means purchase goods from such shops. The goods are sold at lower prices. Such shops may also stocks rate objects of historical value and antique items which are sold at rather heavy prices to people who have rather heavy prices to people who have rather heavy prices to people who have special interest in such antique goods.

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Fixed shop-Large stores

Departmental stores

A departmental store is a large establishment offering wide variety of products, classified into well-defined departments, aimed at satisfying practically every customer’s need under one roof. It has a number of departments, each one confining its activities to one kind of product. For example, there may be separate departments for toiletries, medicines, furniture, groceries, electronics, clothing and dress material within a store.

A modern departmental store may provide all facilities such as restaurant, travel and information bureau, telephone booth, rest-rooms, etc. as such they try to provide maximum service to higher class of customers for whom price is of secondary importance.
These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
As the size of these stores is very large, they are generally formed as a joint stock company managed by a board of directors. There is a managing director assisted by a general manager and several department managers.
A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate help in eliminating undesirable middlemen between the producers and the customers.

Advantages

The major advantages of retailing through departmental stores may be listed as follows:

Attract large number of customers: As these stores are usually located at central places, they attract a large number of customers during the best part of the day.
Convenience in buying: By offering large variety of goods under one roof, the departmental stores provide great convenience to customers in buying almost all goods of their requirements at one place. As a result, customers do not have to rum from one place to another to complete their shopping.
Attractive services: A departmental store aims at providing maximum services to the customers. Some of the services offered by it include home delivery of goods, execution of telephone orders, grant of credit facilities and provision for restrooms, telephone booths, restaurants, saloons, etc.
Economy of large-operations: As these stores are organized at a very large scale, the benefits of large scale operations, particularly, in respect of purchase of goods are available to them.
Promotion of sales: The departmental stores are in a position of spend considerable amount of money on advertising and other promotional activities, which help in boosting their sales.

Limitations

However, there are certain limitations of this type of retailing. These are described as follows:

Lack of personal attention: Because of the large-scale operations, it is very difficult to provide adequate personal attention to the customers in these stores.
High operating cost: As these stores give more emphasis on providing services, their operating costs tend to be on the higher side. These costs, in turn, make the prices of the goods high. They are, therefore, not attractive to the lower income group of people.
High possibility of loss: As a result of high operating costs and large-scale operations, the chances of incurring losses in a departmental store are high. For example, if there is any change in the tastes of customers or latest fashions, it necessitates selling of such out-of-fashion articles in clearance sale, to reduce the huge inventory of goods built up.
Inconvenient location: As a departmental store is generally situated at a central location, it is not convenient for the purchase of goods that are needed at short notice. In spite of some of these limitations the departmental stores have been popular in some of the western countries of the world because of their benefits to a certain class of customers.

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Chain stores or multiple shops:

chain stores of multiple shops are networks of retail shops that are owned and operated by manufactures or intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country. These different shops normally deal in standardized and branded consumer products, which have rapid sales turnover. These shops are run by the same organization and have identical products and displays. Some of the important features of such shops may be described as follows;

These shops are located in fairly populous localities, where sufficient number of customers can be approached. The idea is to serve the customers at a point which is nearest to their residence or work place. Rather then attracting them to a central place.
The manufacturing/procurement of merchandise for all the retail office. From where the goods are dispatched to each of these shops according to their requirements. This result in savings in the cost of operation of these stores.
Each retail shop is under the direct supervision of a Branch Manager, who is help responsible for its day-to-day management. The Branch Manager sends daily reports to the head office in respect of the sales, cash deposits, and the requirements of the stock.
All the branches are controlled by the head office, which is concerned with formulating the policies and getting them implemented.

Advantages

Multiple shops are offering various advantages to the consumers, which are described as follows:

Economies of scale: As there is central procurement, the multiple shop organization enjoys the economies of scale.
Elimination of middlemen: By selling directly to the consumers, the multiple-shop organization is able to eliminate unnecessary middlemen in the sale of goods and services.
Non bad debts: Since all the sales in these shops are made on cash basis, there are no losses on account of bad debts.
Transfer of goods: The gods not in demand in a particular locality may be transferred to another locality where it is in demand. This reduces the chances of dead stock in these shops.
Diffusion of risk: The losses incurred by one shop may be covered by profits in other shops, reducing the total risk of and organization.

Limitations

Limited selection of goods: Some of the multiple shops deal only in limited range of products. This is especially the problem with the chain stores which are owned and operated by manufactures, and as such mostly sell the products produced by the themselves.

Lack of initiative: The personal managing the multiple shops have to obey the instructions received from the head office.

Lack of Personal touch: Lack of initiative in the employees sometimes leads to indifference and lack of personal touch in them.
Difficult of change demand: if the demand for the merchandise handled by multiple shops change rapidly, the management may have to sustain huge losses because of large stocks lying unsold at be central depot.

Difference between Departmental stores and multiple shops

Although both these type of retail organization are large establishments, there are certain differences between the two. Such differences are given here below:

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Location: A departmental store is located at a central place. Where a large number of customers can be attracted to it. However, the multiple stores are located at a number of places for approaching a large number of customers. Thus, central location is not necessary for a multiple shop.
Range of products: Departmental stress aim at satisfying all the needs of customers under one roof. As such, they have to carry a variety of products of different types. However, the multiple stores generally aim to satisfy the requirements of customers relating to a specified range of their products only.
Services offered: The departmental stores lay great emphasis on providing maximum service to their customers. Some of the services, provided by them include alternation of garments, restaurant and so on. As against this the multiple shops provide very limited service confined to guarantees and repairs if the sold out goods turn out to be defective.
Pricing: The multiple shop chains sell goods at fixed prices and maintain uniform pricing policies for all the shops. The departmental stores, however, do not have uniform pricing policies for all the shops. The departmental stores, however, do not have uniform pricing policy for all the departments; rather they have to occasionally offer discounts on certain products and varieties to clear their stock.
Class of customers: The depart mental stores cater to the needs of relatively high income group of customers who care more for the customers who care more for the services provided rather than the prices of the product. The multiple shops, on the other hand, cater to different types of customers, including those belonging to the lower income groups, who are interested in buying quality goods at reasonable prices.
Credit facilities: All sales in the multiple shops are made strictly on cash basis. In contrast, the departmental stores may provide credit facilities to some of their regular customers.
Flexibility: As the departmental stores deal in a wide variety of products, they have certain flexibility in respect of the line of goods marketed. However, there is not much scope for flexibility in the chain stores, which deal only in limited line of products.

Goods and Services Tax (GST) Characteristics

Explanation of goods and services Tax (GST) working of GST, different types of GST, GST objectives, GST features, advantages of GST etc.

The goods and services Tax (GST) is also known as the goods and services Tax. One of India’s many indirect taxes; it has supplanted a variety of others such as excise duty, VAT, and services tax. The goods at services Tax Act was passed by the parliament on March 29, 2017, and it went into effect on July 1, 2017, making it the most recent piece of legislation to be passed in the country.

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Kinds of GST

Central Goods and Services Tax (CGST): The CGST is levied on products and services that are supplied within a state
State Goods and services Tax (SGST): Like the central goods and Services Tax (CGST), the state goods and services Tax (SGST) is levied on the sale of goods and services within a state
Integrated Goods and Services Tax (IGST): The IGST is levied on interstate transaction involving the sale of goods and services
Union Territory Goods and Services Tax: Tax on the supply of goods and services in the Union Territories of the country, which include the Andaman and Nicobar islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh, is levied under the Union Territory Goods and Services Tax

Key Features of GST

Here are the key features of Goods and Services Tax-

Single Indirect Tax

GST is single, unified tax reform. It consolidated numerous existing indirect central and state taxes such as the central Value Added Tax, Special Additional Duty of Customs, Service Tax, and VAT. The abolition of these indirect taxes has made many goods and services more inexpensive compared to consumers as well as made tax compliance easier for businesses.

Input Tax Credit System

The input tax credit is a popular GST feature in India. A manufacture or services provider can deduct input tax paid on purchases from their total output tax liability. To claim the tax credit, the input and output invoices must match. This removes the traditional ‘tax-on-tax’ effect. It also reduces tax evasion.

GST Composition Scheme

A voluntary composition scheme is available to SMEs in certain states with a turnover of up to Rs. 1.5 crore and in the case of North-Eastern stets and Himachal Pradesh, the limit is now Rs 75 lakh. Businesses can pay a fixed GST rate of 1%, 5%, 6% based on their business and their turnover under this scheme. However, they cannot claim the input tax credit. A company must choose between the composition scheme and the input tax credit feature.

Four-tier Tax Structure

GST has four tiers of taxation: 5%, 12%, 18%, and 28%. This tax structure applies to all goods and services. Many essential commodities, such as food, are exempt from GST. This 4-tier structure offers improved transparency and lower costs for goods and services.

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EXERCISES

Short Answer Questions

What is meant by internal trade?

Ans: Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade. Whether the produce are purchased from a neighborhood shop in locality or a central market or a departmental store or a mall or even from any doo-to-door salesperson or form an exhibition, all these are the goods are purchased from an individual or establishment within a country. No custom duty or import duty is levied on such trade as goods are part of domestic production and are meant for domestic consumption. Generally, payment has to be made in the legal tender of the country or any other acceptable currency

2. Specify the characteristics of fixed shop retailers.

Ans: Fixed shop Retailers is the most common type of retailing in the market place. As it evident from the name, these are retail shops who maintain permanent establishment to sell their merchandise, they, therefore, do not move from place to place to serve their customers. Some of the characteristics of such traders are:

Characteristics

Compared with the itinerant traders, normally they have greater resources and operate on a relatively large scale. However, there are different size groups of fixed shop retailers, varying form very small to very large.
These retailers may be dealing in different products, including consumer durables as well as non-durables.
This category of retailers has greater credibility in the minds of customers, and they are in a position to provide greater services to the customers such as home delivery, guarantees, repairs, credit facilities, availability of spares, etc.

3. What purpose is served by wholesalers providing warehousing facilities?

Ans:

Whole sale trade refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.

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4. How does market information provided by the wholesalers benefit the manufacturers?

Ans: Wholesalers provide a variety of information to both manufacturers and customers. To manufacturers, they provide information about:

1. The tastes and preferences of customers

2. Conditions prevailing in the market

3. Level of competition in the market and

4. Types of goods and features demanded by consumers.

This information helps manufacturers to cater to the changing needs of consumers.

5. How does the wholesaler help the manufacturer in availing the economies of scale?

Ans:

Wholesalers often purchase goods in bulk quantities from manufacturers. Once a purchase is made, the wholesalers distribute the goods in small quantities to retailers for further resale. However, during this process, they provide manufacturers with a variety of warehousing facilities such as collection, storage, marketing, and distribution of goods. These services reduce the burden on manufacturers by creating time and place utility, thus enabling them to produce goods on a large scale and benefit from the economies of scale.

6. Distinguish between single line stores and speciality stores. Can you identify such stores in your locality?

Ans:

The distinction between a single-line store and a specialty store lies in the range of products they offer and their level of specialization:

Single-Line Store:

A retail outlet that deals in a single category of products.
These stores have a variety of products within that category but do not diversify beyond it.
Example: A clothing store selling a range of apparel (shirts, dresses, pants, etc.) but nothing else.

Specialty Store:

Focuses on a specific niche or subset of a product category.
These stores cater to a particular market or interest, often offering unique or premium products.
Example: A formal wear boutique or a store exclusively selling running shoes.

Example in a Locality

Single-Line Store: A supermarket like Reliance Fresh or D-Mart, selling groceries and household essentials only.

Specialty Store: A shop like Nike or Levi’s, selling only branded sportswear or jeans, respectively.

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7. How would you differentiate between trades and street shops?

Ans:

Trade

Definition: Trade refers to the broader activity of buying, selling, or exchanging goods and services, typically on a larger scale.

Scope: Includes wholesale and retail, national and international transactions.

Operation: Can involve businesses operating in physical spaces, online platforms, or through distribution networks.

Examples: Import-export businesses, wholesale distributors, e-commerce platforms, and large retail chains.

Audience: Often targets other businesses (B2B) or larger groups of consumers (B2C).

Formality: Usually more formal, regulated, and structured.

Street Shop

Definition: A street shop is a small-scale retail establishment located on a street, typically catering to local customers.

Scope: Focuses on retail sales in a specific geographic area.

Operation: Operates from a physical storefront on a street, often with direct customer interaction.

Examples: Local grocery stores, small boutiques, food stalls, and kiosks.

Audience: Primarily serves individual consumers within the neighborhood or passersby.

Formality: Often less formal, with fewer regulations compared to larger businesses, though they still adhere to local laws.

In summary, trade encompasses a broader spectrum of business activities, while a street shop represents a localized, retail-specific aspect of trade.

8. Explain the services offered by wholesalers to manufacturers.

Ans: Wholesalers provide a range of services to manufacturers that help facilitate the distribution and sale of products. These services include:

1. Market Research and Feedback

Wholesalers interact directly with retailers and customers, providing valuable feedback on market trends, consumer preferences, and product performance.

They act as a communication link between manufacturers and the market, enabling manufacturers to make informed decisions about product design, pricing, and marketing strategies.

2. Storage and Inventory Management

Wholesalers purchase goods in bulk from manufacturers and store them in their warehouses.

This helps manufacturers reduce the cost and complexity of storage and inventory management, enabling them to focus on production.

3. Bulk Purchasing

By purchasing large quantities of goods, wholesalers help manufacturers achieve economies of scale in production.

This reduces manufacturing costs and ensures steady demand for the manufacturer’s products.

4. Distribution and Logistics

Wholesalers handle the distribution of goods to various retailers, saving manufacturers the time and expense of establishing a broad distribution network.

They ensure that products reach a wide market efficiently and on time.

5.Risk-Bearing

Wholesalers take on the risks associated with purchasing and storing goods. These risks include damage, theft, obsolescence, or changes in demand.

This shields manufacturers from potential losses related to unsold inventory.

6. Credit Facilities

Wholesalers often provide manufacturers with immediate payment for goods purchased, even if the wholesalers sell them to retailers on credit.

This improves the manufacturer’s cash flow and working capital.

7. Promotional Support

Some wholesalers assist in promoting the manufacturer’s products by offering discounts, advertising, and point-of-sale materials to retailers.

This increases product visibility and demand.

8. Specialization and Expertise

Wholesalers specialize in specific products or industries, which allows them to provide manufacturers with insights into niche markets.

Their expertise ensures efficient distribution and better customer satisfaction.

By providing these services, wholesalers allow manufacturers to focus on their core competencies—product development and production—while ensuring their products are effectively distributed to the market.

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8. What are the services offered by retailers to wholesalers and consumers?

Ans:

Services to wholesalers

The invaluable services that the retailers render to the wholesalers and producers are given as here under:

Help in distribution of goods
Personal selling
Enabling large-scale operations
Collecting market information
Help in Promotion

Services to Consumers

Some of the important services of retailers from the point of view of consumers are as follows:

Regular available of products
New product information convenience in buying
Wide selection
After-sales services
Provide credit facilities

Long Answer Questions

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.

Ans:

Some of the most common types of itinerant retailers operating in India are as below:

Peddlers and hawkers: peddlers and hawkers are probably amongst the oldest form of retailers in the market place who have not lost their utility even during the modern times. They are small producers of petty traders who carry the products on a bicycle, a hand cart, a cycle-rickshaw to place to sell their merchandise at the doorstep of the customers.

Market traders: market traders are the small retailers who open their shops at different places on fixed days or dates, such as every Saturday or alternate Saturday, and so no. These traders may be dealing in one particular line of merchandise, say fabrics or ready-made garments, toys, or crockery, or alternatively, they may be general group of customers and deal I low-priced consumer items of daily use.
Street traders (pavement vendors): street traders are the small retailers who are commonly found at places where huge floating population gathers, for example, near railway stations and bus stands, and sell consumer items of common use, such as stationery items, eatables, ready-made garments, newspapers and magazines. They are different from market traders in the sense that they do not change their place of business so frequently.
Cheap jacks: cheap jacks are petty retailers who have independent shops of a temporary nature in a business locality. They keep on changing their business form one locality to another. Depending upon the potentiality of the area. However, the change of place is not as frequent as in the case of hawkers or market traders. They deal in consumer items as well as services such as repair of watches, shoes, buckets etc.

2. Discuss the features of a departmental store. How are they different from multiple shops or chain stores.

Ans:

Departmental stores

A modern departmental store may provide all facilities such as restaurant, travel and information bureau, telephone booth, rest-rooms, etc. as such they try to provide maximum service to higher class of customers for whom price is of secondary importance.
These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
As the size of these stores is very large, they are generally formed as a joint stock company managed by a board of directors. There is a managing director assisted by a general manager and several department managers.
A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate help in eliminating undesirable middlemen between the producers and the customers.

Chain stores or multiple shops: chain stores of multiple shops are networks of retail shops that are owned and operated by manufactures or intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country. These different shops normally deal in standardized and branded consumer products, which have rapid sales turnover. These shops are run by the same organization and have identical products and displays. Some of the important features of such shops may be described as follows;

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These shops are located in fairly populous localities, where sufficient number of customers can be approached. The idea is to serve the customers at a point which is nearest to their residence or work place. Rather then attracting them to a central place.
The manufacturing/procurement of merchandise for all the retail office. From where the goods are dispatched to each of these shops according to their requirements. This result in savings in the cost of operation of these stores.
Each retail shop is under the direct supervision of a Branch Manager, who is help responsible for its day-to-day management. The Branch Manager sends daily reports to the head office in respect of the sales, cash deposits, and the requirements of the stock.
All the branches are controlled by the head office, which is concerned with formulating the policies and getting them implemented.

3. Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?

Ans: Consumer cooperative stores are considered less expensive primarily because they operate on the principle of mutual benefit rather than profit maximization. Here’s why and what advantages they have over other large-scale retail outlets:

Why Consumer Cooperative Stores Are Less Expensive:

Non-Profit Motive: These stores aim to provide goods at fair prices to their members rather than making profits.
Bulk Purchasing: They purchase goods in bulk directly from manufacturers or wholesalers, reducing intermediary costs.
Lower Operating Costs: The management and operations are often handled by members or elected representatives, reducing administrative expenses.
Return of Surplus: Any surplus earnings are either reinvested or distributed among the members as dividends, reducing costs for the consumers.

Relative Advantages Over Large-Scale Retail Outlets:

Member Ownership: Members have a say in the management and decision-making, ensuring that their interests are prioritized.
Fair Pricing: Prices are generally lower due to the absence of profit margins, benefiting consumers directly.
Community-Oriented: These stores are often community-based, promoting local economies and fostering a sense of mutual cooperation.
Transparency: Operations are transparent, and members are regularly informed about financial matters and decisions.
Reduced Exploitation: As they are member-driven, there’s minimal scope for exploitation in pricing or quality.
Local Employment: They provide employment opportunities within the community, contributing to local development.
In contrast, large-scale retailers often focus on maximizing profits, which can lead to higher prices and less member-focused decision-making.

4. Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?

Ans: If there were no retail shops, consumers would face significant difficulties, such as:

1. Limited Access to Goods

Consumers would struggle to buy daily essentials like food, groceries, and household items, as they rely on local markets for convenience. Emergency purchases would be nearly impossible without a nearby shop.

2. Higher Costs

Without retail shops, consumers might need to buy directly from manufacturers or wholesalers, which often require bulk purchases, leading to higher costs.

3. Inconvenience

Retail shops offer products in small, manageable quantities. Without them, consumers would need to travel long distances or rely on online platforms, which might not always be feasible.

4. Lack of Personalized Services

Local shops often provide advice, recommendations, and credit facilities. Without them, consumers miss out on this personalized touch.

5. Digital Divide

Consumers without access to online shopping platforms would face difficulties acquiring essential goods, particularly in rural or underdeveloped areas.

6. Impact on Community

Retail shops act as community hubs, fostering relationships. Their absence could lead to a loss of social interaction and communal support systems.

The absence of retail shops would lead to logistical, financial, and social challenges for consumers, impacting their quality of life.

5. Explain the usefulness of mail orders housed. What type of products are generally handled by them? Specify.

Ans:

Usefulness of Mail Order Houses

Mail order houses serve as a convenient and efficient method of shopping, especially for consumers who prefer not to visit physical stores or live in remote areas. They operate through catalogs, advertisements, or online platforms, providing goods directly to customers’ doorsteps.

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Benefits:

Accessibility: Enables people in rural or isolated areas to access a wide range of products.
Convenience: Shopping can be done anytime, eliminating the need for store visits.
Cost Savings: Often eliminates intermediaries, reducing costs for customers.
Product Variety: Offers a broad selection of products compared to local stores.
Targeted Shopping: Consumers can browse specific items without distractions.

Types of Products Handled by Mail Order Houses

Mail order houses generally deal with products that are:

Durable and Non-Perishable: Electronics (phones, cameras, small appliances), Furniture and home furnishings
Standardized Goods: Ready-made garments, Shoes and fashion accessories
Specialty Items: Hobbies and crafts, Jewelry and collectibles
Books and Media: Textbooks, novels, and music CDs/DVDs
Household and Lifestyle Products: Cookware, Beauty and skincare products
Tools and Equipment: Gardening tools,Sports gear

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