11th Class Business Studies Internal Trade Internal Trade (Notes)

Internal Trade (Notes)

Category : 11th Class

 

Internal Trade

 

Facts that Matter

 

  • Trade refers to buying and selling of goods with a view to earning profits.
  • On the basis of geographical area, it may be internal trade or international trade.
  • Trade which takes place within the boundaries of a country is called internal or home trade.
  • Trade which takes place between two or more countries is called international trade. Internal Trade
  • It refers to buying and selling of goods and services within the geographical boundaries of the country.

 

Types of Internal Trade

 

  • Wholesale Trade
  • Retail Trade

 

Wholesale Trade

 

  • It refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.

 

Services of Wholesalers to Manufacturers

 

  • It helps in facilitating large-scale production.
  • It helps in bearing risk.
  • It provides financial assistance.
  • It provides expert advice.
  • It helps in the marketing function.
  • It facilitates continuity.
  • It provides storage facilities.

 

Services of Wholesalers to Retailers

 

  • It ensures availability of goods.
  • It provides marketing support.
  • It allows grant of credit.
  • It provides specialized knowledge.
  • It contributes in risk sharing.

 

Retail Trade

 

  • It refers to buying and selling of goods and services in relatively small quantities from wholesalers and selling them to the ultimate consumers.

 

Services of Retailers to Manufacturing and Wholesalers

 

  • It ensures regular availability of products.
  • It provides new products information.
  • There is convenience in buying.
  • It provides wide selection.
  • It provides after-sale services.
  • It provides credit facilities.

 

Types of Retail Trade

 

Retail Trade may be classified into two main categories:

 

  • Itinerant Retailers: These retail traders keep on moving from place to place to sell their goods.
  • Fixed Shop Retailers: These retail traders operate their business from permanently established shops.

 

Types of Itinerant Retailers

 

  • Hawkers and Peddlers: The hawkers carry their goods in a wheeled vehicle while the peddlers carry the goods on their heads or backs.
  • Market Traders: These retailers open their shops at different places on fixed days.
  • Street Traders or Pavement Vendors: These retailers display their goods at busy street corners or pavements.
  • Cheap Jacks: These retailers generally hire a small shop in a residential colony for a temporary period.

 

Types of Fixed Shop Retailers

 

On the basis of size of operation, the fixed shop retailers can be classified into two types:

  • Fixed Shop Small Retailers
  • Fixed Shop Large Retailers

 

Types of Fixed Shop Small Retailers

 

  • General Stores: These shops deal in different types of goods which are needed by local residents in their day- to-day life.
  • Single Line Stores: These shops deal in a single product line such as readymade garments, shoes, computer, books, etc.
  • Specialty Shops: These shops specialise in sale of a specific product under one product line. For e.g., garment store dealing in men's wear only.
  • Street Stall Holders: These stalls have temporary platforms at the crossing or in busy streets and deal in inexpensive goods such as hosiery products, toys, etc.
  • Second-Hand Goods Shop: These shops deal in second-hand or used goods, such as clothes, books, furniture, etc.

 

Fixed Shop Large Retailers

 

The major fixed shop large retailers are:

  • Departmental stores
  • Chain stores or multiple shops
  • Mail order houses
  • Consumer cooperative store
  • Super markets
  • Malls

 

Departmental Stores

 

  • It is a large establishment, which sells a wide variety of products and aim to satisfy all needs of the consumers under one roof.

 

Features of Departmental Stores

 

  • It has a central location.
  • It provides services like free home delivery etc.
  • It has a corporate status.
  • It helps in elimination of middlemen.
  • It adopts centralised purchasing.
  • It provides large variety of goods.

 

Advantages of Departmental Stores

 

  • It attracts a large number of customers.
  • There is convenience in buying.
  • It aims at providing maximum services to the consumers.
  • It provides economy of large scale operations.
  • It helps in promotion of sales.

 

Limitations of Departmental Stores

 

  • There is lack of personal attention.
  • There is high operating cost.
  • There is high possibility of loss.
  • It has inconvenient location.

 

Chain Stores or Multiple Shops

 

These are networks of retail shops, which are owned by single business enterprise and deal in similar line of standardised and branded consumer products. For e.g. Bata, McDonald, etc.

 

 

Features of Chain Stores

 

  • It is located in populated localities.
  • It makes centralised purchases.
  • It has centralised control.
  • It accepts cash sales.
  • There is regular inspection.
  • It has centrally fixed price.
  • It gets involved in window dressing.

 

Advantages of Chain Stores

 

  • It provides economies of scale.
  • It helps in elimination of middlemen.
  • There is no risk of bad debts.
  • Transfer of goods is possible within different branches.
  • It leads to diffusion of risk.
  • It has low cost.
  • It has more flexibility.

 

Limitations of Chain Stores

 

  • It provides limited selection of goods.
  • There is lack of initiative.
  • There is lack of personal touch.
  • It is difficult to change demand.
  • There is no credit facility.

 

Vending Machines

 

In this form of retailing, goods are sold with the help of slot machines operated by coins or tokens.

 

 

Features of Vending Machines

 

  • Self-service system
  • Need of coins and tokens
  • \[24\times 7\]shopping
  • Suitable for low priced products , specially packed for the machines

 

Advantages of Vending Machines

 

  • It is an anytime shopping option.
  • There is self-service.
  • It provides fast service.
  • It provides more satisfaction to consumers.

 

Limitations of Vending Machines

 

  • It is costly.
  • There is no prior inspection.
  • Customized products have to be developed.

 

Goods and Services Tax (GST)

 

  • GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017.
  • The Act came into effect on 1st July 2017.
  • Under the GST regime, the tax will be levied at every point of sale. In case of interstate sales, Central GST and State GST will be charged. Infra-state sales will be chargeable to Integrated GST.

 

Key Features of GST

 

The salient features of GST are as under:

 

  • GST would be applicable on sale of goods and services as against the present concept of tax on the manufacture of goods.
  • GST would be destination based tax as against the present concept of origin based tax.
  • It would be a dual GST. The GST levied by the Centre would be called Central GST (CGST) and that to be levied by the states would be called State GST (SGST).
  • An Integrated GST (IGST) would be levied on inter-state supply of goods or services. This would be collected by the centre.
  • Import of goods or services would be treated as inter-state supplies and would be subject to IGST in addition to applicable custom duties.
  • GST would replace the following taxes currently levied and collected by the Centre:
  • Central Excise Duty (including additional Duties of Excise)

           Service Tax

          CVD (levied on imports in lieu of Excise Duty)

         SACD (levied on imports in lieu of VAT)

         Central Sales Tax (CST)

         Excise Duty levied on Medicinal & Toiletries preparations.

         Surcharges and cess.

  • State taxes that would be subsumed within GST are:
  • VAT/ Sales Tax
  • Entertainment Tax
  • Luxury Tax
  • Taxes on Lottery, betting and gambling.
  • Surcharges & Cess.

 

Words that Matter

 

  • Trade: Trade refers to buying and selling of goods and services with the aim of earning profits.
  • Internal Trade: It refers to buying and selling of goods and services within the geographical boundaries of a country.
  • External trade: It refers to buying and selling of goods and services between persons or organization operating in two or more countries.
  • Wholesale Trade: Wholesale trade refers to buying and selling of goods and servicesin large quantities for the purpose of resale or intermediate use.
  • Retail Trade: Retail trade refers to buying and selling of goods and services in relatively small quantities from wholesalers and selling them to the ultimate consumers.
  • Itinerant Retailers: Itinerant retailers are those traders who keep on moving from place to place to sell their goods.
  • Hawkers: These retailers move from place 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.
  • Street Traders: Street traders arrange or display their goods at busy street corners, pavements and other busy public places like bus stands, railway stations, cinema halls etc. For e.g. selling newspaper or magazines on stands.
  • General Shops: Shops which deal in different types of goods which are needed by the local residents quite frequently in their day-to-day life.
  • Single Line Stores: Single Line stores are those shops which deal in a single product line such as readymade garments, shoes, computer, books, etc.
  • Departmental Stores: A departmental store is a large establishment, which sells a wide variety of products and airy to satisfy all needs of the customers under one roof.
  • Chain Stores: Chain Stores are networks of retail shops, which are owned by the single business enterprise.
  • Mail Order Houses: Mail order houses represent that form of retailing in which business transactions are conducted through postal communication, without any personal contract with the buyers.
  • Vending Machines: A vending machine is new form of retailing in which goods are sold with the help of slot machine operated by coins or tokens.
  • Invoice: An invoice is a statement sent in case of credit purchase by the seller to the buyers stating therein the particulars of goods purchased.
  • Cash on Delivery (COD): It is a type of transaction in which payment for a product is made at the time of delivery.
  • Free on Board (FOB): It is a contract between the buyer and seller of goods in which seller undertakes to bear all the expenses of shipment and loading up to the point of delivery.
  • Cost Insurance and Freight (CIF): It is a contract between the seller and the buyer in which the seller has to bear the cost of shipment up to the ship, insurance cost of cargo and freight cost up to destination port.
  • Error and Omission Excepted (E and OE): This term is used in trade documents with the intention of reducing legal liability for incorrect or incomplete information supplied in a document such as price list, invoice, cash memo, quotation, etc..
  • Consumer Cooperative Store: Consumer's Cooperative store is a voluntary association of persons, registered under the Cooperative Societies Act.
  • Super Market: A Super Market is a large retailing business unit, which sells a wide variety of consumer goods under one roof
  • Malls: A shopping mall or shopping centre is a large building or a set of interconnected building, which consist of large number of shops dealing in various types of products and services.

Other Topics

Internal Trade (Notes)


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