NCERT Solutions For Class 11 Business Studies Chapter 9 Internal Trade

Wholesalers often purchase goods in bulk quantities from manufacturers. Once the purchase is made, the wholesalers distribute the goods in small quantities to retailers for further resale. During this stage, 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 large scale and benefit from economies of large scale.

1. Wholesalers purchases goods in bulk from manufacturers, store them and distribute them to retailers in small quantities for further resale.
2. Wholesalers take delivery of goods from the factory and keep them in godowns/warehouses. They reduce the burden of manufacturers by providing them with the storage facilities for the finished goods. By this service, wholesalers provide time utility.

Single line stores are small shops that deal in only one product - for example, garments or shoes. They offer a wide variety of products. For example, a single line store that deals in shoes will have shoes in all sizes for men, women and children.

On the other hand, speciality stores deal only in a particular type of product from a selected product line. For example women clothing. Such stores generally sell all the brands of the products in which they specialise. For example, if a store specialises in women’s clothing then it will have all the brands of women’s clothing.

• The wholesalers are in direct contact with the retailers, through which they get updated with the new trends of the market and demand of the consumers. 
• They are in a position to advise the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities and the features preferred by the buyers.
• They serve as an important source of market information on these and related aspects. It helps the manufacturers to take important decisions regarding products, prices etc.

Fixed shop retailers are retailers who have permanent establishments. This means that they sell goods and services from fixed shops and do not move from place to place to serve customers.

Followings are the main features of fixed shop retailers:

• These retailers have a permanent establishment to run their business activities. They do not move from place to place to serve their customers.
• These retailers have greater credibility in the minds of customers due to permanent establishments.
• These retailers may deal with different products, including consumer durables as well as non-durables.

Internal trade means buying and selling of goods and services within the national boundaries of the country. Purchases of goods from a local shop, a mall or an exhibition are all examples of internal trade. Government does not levy any custom duty or import duty on these goods and services.

It can be classified into two broad categories –

1. Wholesale trade
2. Retailing trade

Life without a retail shop would be very difficult for the consumers as these shops act as a link between manufacturer/ wholesalers and consumers. If there is a retail shop nearby we can buy the products as and when we require very easily. On the other hand, if there is no retail shop nearby then we will have to travel a lot of distance for buying even a daily use simple product.

Retailers help consumers in the following ways:

• Regular availability of products: Retailers maintain regular availability of various products produced by different manufacturers, which enables the buyers to choose from among a variety of products and buy them when needed.
• Convenience in buying: Retailers sell goods in small quantities. They are situated near the residential areas and remain open for long hours.
• New products information: Retailers arrange effective display of products and increase the sale by personal selling efforts. They provide vital information about new arrivals, special features, etc. of new products to the consumers.
• After sale services: Retailers provide important after sale services like home delivery, supplying spare parts.

The services provided by wholesalers to manufacturers are:

• Facilitate Large Scale Production: Wholesalers collect small orders from several retailers & consequently make purchases in large quantities from manufacturers. Manufacturers can make use of economies of scale.
• Bear Risk: Wholesalers take title & delivery of the goods and store them in their warehouses. They bear risk of- theft, pilferage, spoilage, etc.
• Financial Assistance: They provide financial assistance by generally purchasing the goods on cash. Manufacturers need not block their capital in maintaining stocks.
• Expert Advice: Wholesalers advise the manufacturers about various aspects of the consumer like tastes & preferences, as they are in direct contact with the retailers.
• Storage: By taking delivery of goods from the factory & keeping them in godowns/warehouses, wholesalers reduce burden of manufacturers of providing for storage facilities for the finished goods.

Itinerant retailers are traders who do not have a fixed place for operating their business & keep on moving from place to place, with their wares in search of consumers.

The reasons that itinerant traders survive in spite of the tough competition from large scale retailers can be attributed to the following factors:

• They normally deal in low price consumer products of daily use such as toiletry products, fruits and vegetables etc.
• They deal directly with consumers and are therefore able to give more attention to them, better customer care services, having a proper feedback mechanism and passing the same to manufacturers.
• They move from one place to another providing goods at customers doorstep.
• These traders go to places where it is difficult for a shop to sustain due to poor demand from the customers for those goods.
• They provide services in remote areas as well.

The services offered by retailers to wholesalers are:

• Help in Distribution of Goods: Provide place utility by helping in the distribution of products to the final consumers scattered over a wide geographical area.
• Collecting Market Information: Act as a vital source of market information since they are in direct contact with consumers.
• Help in Promotion: Manufacturers & wholesalers undertake sales promotion activities to increase the sale of their products. Retailers, by facilitating short term promotional activities like offering coupons, free gifts, sales contests, etc. help in the promotion of the products.

The services offered by retailers to customers are:

• Regular Availability of Products: Maintain regular availability of various products produced by different manufacturers. This enables the buyers to choose from among a variety of products and buy them when needed.
• New Products Information: Make arrangement for effective display of products & increase the sale by personal selling efforts. Through this, they provide vital information about new arrivals, special features, etc. of new products to the consumers.
• Convenience in Buying: Sell goods in small quantities according to the requirements of their customers. Normally, they are situated near to the residential areas & remain open for long hours.

Mail order houses are retail outlets that sell their merchandise through mail. There is generally no direct personal contact between buyers and the sellers in this type of trading.

The following are the usefulness of mail order houses:

• Limited capital requirement: Mail order business does not require heavy expenditure on building and other infrastructural facilities. Hence it can be started with low capital.
• Elimination of middlemen: Mail order house eliminate the role of middlemen as they directly deal with the consumers.
• Absence of bad debt: Since mail order houses do not extend any credit facilities to the consumers there is no question of bad debt.
• Wide reach: As the goods are sent through mail, the sellers can pass on the information about their product to the entire country.
• Convenience: As the goods are delivered at the doorstep of the consumers, it is very convenient for the customers buying these products.

Types of products handled by mail-order houses are:

• Graded and standardised products.
• Goods which can be easily transported at low cost.
• Goods which have ready demand in the market.
• Goods which can be easily described through pictures.
• Goods that are readily available in bulk quantities throughout the year.
• Goods that involve least competition in the market.

A consumer cooperative store is an association organised by consumers to obtain their requirement by purchasing in bulk and selling through their stores owned, managed and controlled by themselves. It is a retail trading organisation formed by private consumers to purchase products or services at favourable prices. Consumer cooperative stores generally buys in large quantity directly from manufacturer or wholesalers and sell them to the consumers at reasonable prices. Since there is no middleman, the members get products at a cheaper rate and better quality.

Its advantages over large scale retailers are:

• Ease information: It is easy to form a consumer cooperative society. Any ten people can come together to form a voluntary association and get themselves registered with the Registrar of Cooperative Societies by completing certain formalities.
• Limited Liability: The liability of the members in a cooperative store is limited to the extent of the capital contributed by them.
• Democratic Management: Cooperative societies are democratically managed through management committees which are elected by the members. Each member has one vote.
• Lower Prices: A cooperative store purchases goods directly from the manufacturers or wholesalers, the role of middlemen is eliminated which results in better quality of product at a lesser price.
• Cash sales: The consumer cooperative stores sell goods on cash basis. As a result, the requirement of working capital is reduced.
• Convenient location: The consumer cooperative stores are generally opened at convenient public places where the members can buy the products easily.

The following are the features of departmental store:

• Modern departmental store may provide all the facilities like restaurant, telephone booth, restrooms etc.
• These stores are located at the central place of a city.
• As the size of the stores are very large, they are formed as Joint Stock Company managed by a board of directors. There is a managing director assisted by general manager and many department managers.
• A departmental store combines both the functions of retailing and warehousing. They purchase directly from manufacturers and hence eliminate middlemen between producers and consumers.
• All the purchases in a department store are made centrally by the purchase department of the store.

The following are the differences between the departmental store and multiple shops or chain stores.