Internal Trade Part 1

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Sometimes during special occasions like a festival or a marriage we prefer going to a market that may be located at a distance from our residence. Now the question that arises is, how do all these products reach the market? There are a number of firms/people who are involved in this activity of bringing the product from the place of production to the market and then making it available to the ultimate consumers. They act as a link or bridge between the producers and the consumers.

Meaning of Internal Trade

The goods produced in a country may be sold within the country or outside the country. When buying and selling of goods and services takes place within the geographical boundaries of a country, it is referred to as internal trade. It may take place between buyers and sellers in the same locality, village, town or city; or may be in different states, but definitely within the same country. Internal trade is also called domestic trade or home trade.

To clarify the concept of internal trade let us now learn about its features.

Image of Features Of Internal Trade

Image of Features of Internal Trade

Image of Features Of Internal Trade

Objectives

After studying this lesson, you will be able to:

• Define internal trade;

• Explain the meaning and characteristics of wholesale trade and retail trade;

describe the role of middlemen in internal trade;

• Differentiate between wholesale trade and retail trade;

• Identify the types of retail trade and their role;

• Explain the concept of large-scale retailing;

• Explain the merits and limitations of different types of large-scale retail trade; and

• Describe the recent trends in distribution such as direct marketing, tele-marketing and internet marketing.

Classification of Internal Trade

Generally, we buy goods of our daily use from the local shopkeepers. These shopkeepers buy goods in bulk and sell them to us as per our requirement. But do you know from where these shopkeepers buy those goods? They generally buy goods in large quantity either from the producers directly or from any other shops that sell goods in bulk. Thus, we find that some shopkeepers buy goods in bulk and sell to others in bulk while other buy in bulk and sell in small quantities as per the requirement of the customers. Thus, on the basis of volume of goods traded we can classify internal trade as:

  • Wholesale trade, and

  • Retail trade.

Wholesale Trade

Wholesale trade refers to buying of goods in large quantity from producers or manufacturer for sale to other traders or buyers in small quantities. Those who are engaged in wholesale trade are called wholesalers. They act as a link between the manufacturers or producers and the small traders. Generally, they specialise and deal in one or a few products.

Characteristics of Wholesale Trade

Following are the characteristics of wholesale trade:

  • The wholesaler generally deals in one or few varieties of items. He is a specialist trader in a particular line e.g., machinery, textiles, medicines etc.

  • Wholesalers buy goods from the manufacturers and producers in bulk and sell them to the retailers and sometimes to consumers directly.

  • Wholesale trade requires a large amount of capital to be invested. This is because purchases are made in bulk, advances are given to manufacturers and the goods are generally sold on credit. Besides it also requires large storage space.

  • Generally, people who engaged in wholesale trading of similar goods have their business premises located in the same area for the convenience of the retailers. For example, wholesale grain market, wholesale paper market etc. These are wholesale markets dealing in one particular product.

  • Besides selling, wholesale traders are also involved in some other activities like packaging, grading, advertising, market research, etc.

  • After having some idea about wholesale trade let us now know about retail trade.

Retail Trade

Retail trade refers to buying goods from the manufacturers or wholesalers and selling the same to the ultimate consumers. The retail trader generally deals in a variety of goods. Those who are engaged in retail trade are called retailers. Retailers sell goods in small quantities as per the requirement of consumers.

Characteristics of Retail Trade

  • Retail trade generally involves dealing in a variety of items.

  • A retailer makes purchases from producers or wholesalers in bulk for sale to the consumers in small quantities.

  • Retail trade is normally carried on in or near the main market area.

  • Generally retail trade involves buying on credit from wholesalers and selling for cash to consumers.

  • A retailer has indirect relation with the manufacturer (through wholesalers) but a direct link with the consumers.