Internal Trade Revision Notes | Class 11 Business Studies Notes

Internal Trade Revision Notes | Class 11 Business Studies Notes

Internal Trade refers to buying and selling of goods and services within the country. 

Types of internal trade

1. Wholesale Trade
2. Retail Trade

Wholesale Trade 

• Refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use. 
• Wholesalers serve as an important link between manufacturers and retailers. 

Services of wholesalers to manufacturers:

1. Large scale production: As the wholesalers purchase goods from the manufacturers in bulk quantities, manufacturers are able to undertake large scale production and thus take advantage of the economies of scale.
2. Risk bearing: The wholesalers purchase goods from manufacturers in bulk quantities and keep them in their own warehouses. As such, wholesalers bear risk to the goods due to fall in prices, theft, spoilage etc and relieve the manufacturers from such risks. 
3. Finance: Wholesalers generally purchase goods from manufacturers on cash basis and sometimes even give advance money for bulk orders. 
4. Expert Advice: As wholesalers are in direct contact with the retailers, they are in position to inform the manufacturers about the customers' tastes and preferences, competitors' moves, market conditions etc. 
5. Storage: Wholesalers purchase goods from manufacturers in large quantities and keep them in their warehouses. This helps in reducing the burden of manufacturers.
6. Relief from marketing function: The wholesalers take care of the distribution of goods to retailers who, in turn, sell these goods to a large number of customers. This relieves the manufacturers and they can concentrate on the production activities. 

Services of wholesalers to retailers:

1. Availability of Goods: The wholesaler provides the products of various manufacturers to the retailers. This saves the retailers from keeping large quantity of each product. 
2. Credit Facility: Wholesalers provide financial help to retailers selling them goods on credit.
3. Marketing Support: Wholesalers undertake advertisements and other marketing functions to persuade customers to purchase the goods. This benefits the retailers in increasing the demand of products. 
4. Specialised Knowledge: Wholesalers specialise in a particular line of products and have expert knowledge of market conditions relating to such products. They are in position to inform retailers about new products and their uses, quality, prices etc.
5. Risk Sharing: Retailers purchase goods from wholesalers in smaller quantities. This saves the retailers from bearing the risk of spoilage, price fluctuations, obsolescence, change in demand and other damages. 

Retail Trade

Retail trade refers to trade in which goods are purchased from wholesaler and sold in smaller quantities to the consumers.

Retailers serve as link between manufacturers/wholesalers and customers

Services of retailers to wholesalers and producers:

1. Distribution of Goods: Retailers help manufacturers and wholesalers in distribution of goods. 
2. Market Information: Retailers are in direct contact with their customers. They provide valuable information about market to wholesalers and manufacturers about tastes and preferences of customers. 
3. Promotion: Retailers undertake various promotional activities like advertising, offering incentives, free gifts etc. 
4. Enabling Large Scale Operations: Retailers relieve the wholesalers and manufacturers from the burden of making individual sales to consumers in small quantities. It helps them to operate on a large scale and focus on other essential activities. 

Services of retailers to customers: 

1. Availability of Goods: Retailers hold stock of various goods produced by different manufacturers. It enables the buyers to choose the products as per their tastes and to buy them as and when needed. 
2. Convenience: Retail shops are usually situated near residential areas and remain open for long hours. 
3. Wide Selection: Retailers hold stock of various goods produced by different manufacturers. It enables the buyers to choose the products as per their tastes and to buy them as and when needed. 
4. New Product Information: Retailers provide information about new products and their features to the customers.
5. Credit Facility: Retailers also sell goods to their regular customers on credit basis. 
6. After Sale Services: Retailers provide important after sale services to customers like home delivery, repair of goods etc. 

Types of Retailers

1. Itinerant Retailers
2. Fixed Shop Retailers

1. Itinerant Retailers

Itinerant retailers are traders who do not have a fixed place of business. They keep on moving from one place to another to sell their products.

Types of Itinerant Retailers 

1. Peddlars and Hawkers: They are petty traders who carry the products on a bicycle, cart or on their heads. They move from one place to another to sell their products. They deal in low value products like ice creams, fruits, vegetables, toys, carpets etc. They can be found in streets of residential areas or outside schools.
2. Market traders: These are traders who open their shops at different places on fixed days such as every Monday or every Saturday and so on. The deal in low price consumer products like garments, toys, crockery etc. 
3. Street traders: These are small traders who are found at crowded places like bus stand or railway stations. They deal in consumer products like eatables, newspapers, magazines etc. 
4. Cheap Jacks: These are small retailers who have independent shops of a temporary nature in business locality. They take some temporary shop on rent and change their place one place become less profitable.

Fixed Shop Retailers

1. Fixed Shop Small Retailers
2. Fixed Shop Large Retailers

Fixed Shop Small Retailers

1. General stores: These shops deal in consumer products of day to day use such as grocery items, toiletry products, stationery, soft drinks, confectionery etc. These are located in residential areas and local market.
2. Secondhand goods shop: These shops deal in second hand or used products like books, furniture, clothes etc.
3. Single line stores: Those shops which deal in a single product line such as garments, shoes, books, computers etc.
4. Speciality stores: Those stores which specialise in specific line of products for example school uniforms, men's wear, ladies shoes, college books etc.
5. Street stall holders: These are found at street crossings or place where flow of traffic is higher. They deal in products such as toys, soft drinks, eatables etc.

Large Scale Retailers:

1. Departmental Stores
2. Chain Stores

Basis	Departmental Store	Chain Store
Variety	Wide variety of products	Specialised in only one line of product
Cash/Credit	Offers credit facility to their regular customers	Sell goods only on cash basis
Location	Centrally located	Located in different localities
Risk	Greater risk	Risk gets spread over all the stores located in different areas
Types of customers	Attracts customers belonging to higher income group	Attracts customers from all income groups
Services	Offers greater services like restaurants, restrooms etc	Offers limited services like guarantees

Departmental Stores:

Features of Departmental Stores:

1. Large Size: A departmental store is a large retail store requiring a large investment.
2. Wide Range: A departmental store deals in a wide range of product from low priced product to very expensive products.
3. Departmentally Organised: It is departmentally organised. Goods offered for sale are classified and each department specialises in one line of product.
4. Central Purchases: Purchases of all the departments are purchased centrally.
5. Central Location: It is located at a central place so that people from different parts of the city can easily reach there.
6. Services: Departmental stores provide a number of services and facilities to the customers like telephone booth, rest rooms, restaurants, packing, free home delivery etc.
7. Elimination of Middlemen: Departmental stores purchase goods in large quantities. They buy directly from manufacturers hence eliminating the middlemen.
8. Advertising: Departmental stores advertise on a large scale to attract customers from far and wide.

Merits of Departmental Stores:

1. Attracts large number of customers: As departmental stores are usually located at a central place, they attract a large number of customers. 
2. Convenience in buying: By offering a large variety of goods under one roof, the departmental stores provide great convenience to customers in buying goods of their requirements at one place.
3. Attractive services: Departmental stores provide a number of services and facilities to the customers like telephone booth, rest rooms, restaurants, packing, free home delivery etc.
4. Economy of large scale operations: As there stores are operating at a large scale, they enjoy benefits of economies of scale, particularly, in respect of purchase of goods.
5. Promotion: Departmental stores are in a position to spend considerable amount on advertising and other promotional activities which help in boosting their sales.

Limitations of Departmental Stores:

1. Lack of personal attention: Because of large scale operations, it is very difficult to provide adequate personal attention to the customers in these stores.
2. 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.
3. High possibility of loss: As a result of high operating costs and large scale operations, the chances of incurrent losses in these stores are higher.
4. Inconvenient location: As departmental stores are usually located at a central place, it is not convenient for the purchase of goods that are needed at a short notice. 

Chain Stores/Multiple Shops: Chain stores or multiple shops are networks of retail shops that are owned and operated by manufacturers or intermediaries. 

Features of Chain Stores:

1. Location - Chain Stores are usually situated in populous localities, where a sufficient number of customers can be approached.
2. Products - Chain stores deal in a limited range of products which are standardised and branded.
3. Cash Sales - The prices of goods in such shops are fixed and all sales are made on cash basis.
4. Centralised Purchasing - The production/procurement of products for all the retail units is centralised at the head office, from where the goods are dispatched to each of these shops according to their requirements. 
5. Control - All the branches are controlled by the head office, which is concerned with formulating the policies and getting them implemented.
6. Supervision - Each retail shop is under the direct supervision of a branch manager, who is responsible for its day-to-day management. 

Merits of Chain Stores

1. Economies of scale: Chain stores operate on a large scale. Hence, they get the benefits of economies of scale.

2. Elimination of middlemen: There are no middlemen involved.

3. No bad debts: All sales are made on a strictly cash basis. So, there are no chances of bad debts.

4. Diffusion of risks: Losses in one shop may be compensated by gains in other shops. So, risks are shared.

5. Flexibility: There is flexibility in operations of chain stores. If a shop is in consistent losses, it can be closed down without affecting other shops.

Demerits of Chain Stores

1. Limited range of products: Chain stores deal in a limited line of products.

2. Lack of initiative: Employees of chain stores are supposed to work as per the instructions of the head office. So, initiative on their part is lacking.

3. Lack of personal touch: There are many people involved between real owners and the customers. So, personal touch is lacking.

4. Losses due to change in demand: Chain stores undertake large scale production. Any change in demands or tastes of customers will result in huge losses.

5. No credit facility: Chain stores make all sales strictly on a cash basis. They do not offer credit facilities to

the customers.