Internal Trade

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8
Internal Trade
8.1 Introduction
In the lesson on trade you have already been made familiar with the
distinction between internal and external trade i.e. between home trade
and foreign trade. You will recall that internal trade consists of exchange
of goods and services between people living within the same country. In
this lesson you will learn about internal trade in detail.
8.2 Objectives
After studying this lesson you will be able to -
• recall the meaning of Internal Trade;
• explain the features and importance of Internal Trade;
• enumerate the types of internal trade with the help of charts/
diagrams;
• state the meaning and characteristics of wholesale trade and retail
trade;
• distinguish between wholesale trade and retail trade;
• enumerate the services of a wholesaler and a retailer;
• enumerate and explain the various types of retailers;
• differentiate between multiple shops and departmental store;
28 :: Business Studies
• state the conditions necessary for the success of a mail-order business;
• enumerate the characteristics of a Super Bazar.
8.3 Internal Trade: Meaning, Features and Importance
Meaning of Internal Trade
Internal trade is the sum total of activities which brings the producers
and consumers within the same country together. It involves distribution
of goods and services from the point of production to the point of
consumption within the boundries of the same country.
Features and importance
The main features of Internal Trade are as follows:
1. The buying and selling of goods takes place within the boundaries
of the same country.
2. The medium of exchange is the currency of the country.
3. There are minimum legal and administrative formalities involved
in organising internal trade.
4. It involves transactions between producers, consumers and the
middlemen.
5. It consists of a distribution network of middlemen and agencies
engaged in exchange of goods and services.
6. Generally there is minimum interaction between the producers and
ultimate consumers.
Importance
The importance of Internal Trade is as given :
1. It facilitates the exchange of goods and services between the
producers and the ultimate consumers within the country.
2. It helps in improving the standard of living and quality of the life
of the people.
3. It helps the growth of the industry in the country by facilitating
Internal Trade :: 29
the availability of raw materials and other inputs, and distribution
of the finished products.
4. It provides opportunity for the people to get employment in trading
organisations as well as to be self employed as trader.
5. It also helps in the growth of agriculture. Agriculture products
are sold to consumers across the country and the seeds, fertilizers,
tools and equipment which are used by farmers are made available
to them only through the services of the traders.
6. It promotes foreign trade. It is not always possible to sell and
buy from other countries directly. It is generally done through the
agencies involved in internal trade.
Internal trade may be divided into several types which are shown
in the chart below.
Internal Trade
Wholesale Trade Retail Trade
Small Scale Large Scale Retail Trade
Retail Trade
Wandering Fixed Shops/Stalls
Trade
General Specialised
stores trade
Hawkers Provision
Stores Departmental
Stores Multiple
Pedlars Stationery Shops
Shops Super Bazars
Door to door Chemists Mail Order
Salesmen Shops Business
Consumer
Retailing Hardware Co-operative
in Weekly Shops Stores
Bazars
Other(Tailors, Repair
30 :: Business Studies
Shops, etc.)
Intext Questions 8.1
Following are the statements relating to internal trade. Write which of
these show its feature and which relate to its significance.
(i) The buying and selling takes place within the boundaries of
a country.
(ii) The buyer comes to know about new products which help in
raising his standard of living.
(iii) It gives an opportunity of self-employment
(iv) The medium of exchange is the currency of the country.
8.4 Meaning and Characteristics of Wholesale Trade
Meaning :
Wholesale trade refers to buying of goods from manufacturers or their
agents in bulk and selling them to retailers and industrial users. Those
who are engaged in wholesale trade are called wholesalers. They act as
a link between the manufacturers or producers and the retailers: Generally
they specialise and deal in one or a few products.
Characteristics:
Following are the features of wholesale trade
(i) The wholesaler generally deals in one or a few items. He becomes
a specialist trader in that line e.g. machinery, textiles, medicines
etc.
(ii) Wholesalers buy goods from the manufacturers and producers in
bulk and sell them again in large quantities to the retailers.
(iii) 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 sold on credit. Besides it also
Internal Trade :: 31
requires large storage space.
(iv) Wholesalers have direct contact with manufactures but indirect
contact with consumers as they generally deal with the retailers.
(v) Generally people engaged in wholesale trading of similar goods
have their business premises located in the same area for the
convenience of the retailers.
(vi) Besides selling, wholesale trade is also involved in some other
activities like packaging, grading, advertising, and market research.
Services of wholesalers
Wholesalers render various services to the producers and retail traders,
which are explained below:
(A) To the Manufacturers:
(i) Wholesalers take the responsibility selling there by enabling
producers to concentrate on manufacturing.
(ii) The wholesaler buys goods in bulk and places orders in advance.
Hence the manufacturers are capable of producing goods in large
quantities and continue to produce the same volume regularly. Thus,
they can reap the benefits of large scale and planned production.
(iii) Wholesalers often make cash purchases and sometimes make
payment in advance thus providing financial help to the
manufacturers.
(iv) The wholesaler maintains godowns for holding stock of goods.
Manufacturers are thereby saved from the botheration of investment
in godowns and managing them.
(v) The Wholesaler gets feedback from the retailers about the needs
and preferences of consumers. He passes on this information to
the manufactures who can make necessary changes in their products.
(B) To Retailers:
(i) The wholesaler sells goods to retailers in small quantities which
32 :: Business Studies
saves the retailers from maintaining large stocks.
(ii) Retailers get credit facility from wholesalers.
(iii) Wholesalers inform the retailers about new items to be introduced
in the market by the manufacturers.
(iv) Wholesalers undertake advertising and sales promotion of products.
This helps to increase the sale of retailers.
(v) The wholesaler assures regular supply of goods to the retailers.
Thereby the retailers risk of facing shortage and price fluctuations
is considerably reduced.
(vi) Retailers sometimes have the advantage of getting supply of goods
by the wholesalers at their shops on the basis of orders placed
with the agents (salesmen) engaged for the purpose.
Merits of wholesale trade
Following are the merits of wholesale trade :
(1) Helps specialisation : As the wholesalers take the responsibility
of distribution of goods, it enables the manufacturers to concentrate
on manufacturing. Thus there is specialisation which helps to
increase the efficiency of production and to reduce costs.
(2) Improves efficiency of marketing : Wholesalers become
specialists in marketing. They are better equiped and more
experienced at it. The benefit of this specilisation goes both to
manufacturers and consumers.
(3) Stablisation of prices : Wholesalers stock goods when there is
lower demand and supply the same when demand picks up. Thus,
it brings about adjustment in demand and supply, which in turn
brings stability in prices and consistency in production.
(4) Creates consumer awareness and ensures availability of goods
and services : Wholesalers bring to the knowledge of consumers
new products available in the market. They assemble goods and
Internal Trade :: 33
distribute the same through retailers. Thus, the consumers are
assured of the right type of goods being available at the right time
and right place.
(5) Services beneficial to trade : A number of services like grading,
packaging, branding and market research are under taken by
wholesalers for the benefit of producers as well as consumers.
Demerits
Following are the demerits of wholesale trade :
1. Higher burden on consumers : The consumer pays a much higher
price than the manufacturing cost of goods due to the involvement
of wholesaler who recover their cost and earn their margin of
profit in between.
2. Possibility of unfair trade practices : Wholesalers may keep
stock of goods in large quantities and may create artificial shortage
to reap the benefit of higher prices caused thereby. They
sometimes indulge in black-marketing activities.
Intext Questions 8.2
(A) Which of the following statements are true and which are false?
(i) Wholesalers are engaged in large scale buying and selling.
(ii) The wholesalers deal in a wide variety of commodities.
(iii) Wholesalers have shops in the shopping centres.
(iv) Wholesalers provide credit facilities to the retailers.
(B) Which of the following services are rendered by wholesalers to
(a) manufacturers, and (b) retailers.
(i) Take the responsibility of marketing the products.
(ii) Supply goods in smaller quantities.
(iii) Helps increased selling by advertising the products and taking
34 :: Business Studies
up sales promotion activities.
(iv) Supply information regarding the needs, preferences and
tastes of consumers.
8.5 Meaning and Characteristics of Retail Trade
Meaning :
Retail trade refers to purchase of goods by traders 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.
Characteristics :
Following are the characteristics of retail trade :
1. Retail trade generally involves dealing in a variety of items.
2. A retailer makes purchases from producers or wholesalers for
sale to the consumers in small quantities.
3. Retail trade is normally carried on in or near the main market in
an area.
4. Generally retail trade involves buying on credit and selling for
cash.
5. A retailer has indirect relation with the manufacturer (through
wholesalers) but a direct link with the consumers.
Types of Retail Traders
Broadly speaking retail traders are of two types (a) Small scale retailers,
and (b) large scale retailer.
Small Scale Retailers :
These retailers are of several types :
(i) Wandering Traders/Hawkers : These retailers do not have a fixed
place to sell but carry the goods and move from door to door, or
on roads or in bazars. They carry items like clothes, utensils,
Internal Trade :: 35
bangles, and other items of daily use either on their head or back,
or on bicycles, or hand-carts.
(ii) Market Stall-holders : In the rural areas as well as towns, bazars
are held in particular localities on different days of the week. You
must have seen Sunday Bazars, Monday Bazars, Tuesday Bazars
etc. The retailer deals with a variety of item, sets up temporary
stall in these bazars and sells the goods. Customers get a good opportunity
to buy goods of daily use at one place and at cheaper rates.
(iii) Retail Stalls : Near bus stands, Railway Stations, places visited
by general public, street crossings and on the wayside pavements,
stalls are set up by small traders selling fruit juice, cigarettes, tea,
etc.
(iv) Fixed shops : Fixed shops exist on roads as well as in the shopping
centres, market places, where retailers sell different types of goods.
These include shops selling general items like provisions and
stationery.
There are also small shops dealing in the same type of products, such as medicines,
ready made garments, books and papers, toys, shoes, etc. These are run with small
capital invested by owners who may use the help of one or two assistants.
Large Scale Retailers :
Large scale retailers may be of the following types :
(i) Departmental store : It is a retail establishment which sells a
wide variety of goods under one roof. Merchandise of particular
categories are sold in separate departments in the store.
(ii) Multiple shops/Chain stores : It is a system of retail selling
under which there is a large number of retail shops owned by the
same proprietor and located in different parts of a city or country.
The products sold in these shops are the similar and of uniform
price. Bata shops selling shoes may be cited as a typical example
of multiple shops.
(iii) Mail Order House : Retail trade involving sale of goods on
the basis of orders received by post is known as mail order
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business. In this type of retailing the seller receives orders by
post and goods are delivered to the buyer by V.P.P. (Value payable
post). The parcel or packet is delivered by the post man to the
customer on payment of the value of goods and V.P.P. charges. The price
of goods collected by the postman is transmitted to the seller in
due course.
(iv) Consumer Cooperative store : This type of retail store is an
establishment owned and managed by consumers themselves, set
up on cooperative lines and registered under the Cooperative
Societies Act. It purchases goods directly from manufacturers or
wholesalers and sells the same to its members at reasonable prices.
Super Bazar
Super Bazar is a type of retail establishment which sells a wide variety
of goods of daily use under one roof. Items are grouped and placed in
different departments or shelves for each group. Customers can pick up
items of their choice and pay for the same at the cash counter. Many of
these establishments have been promoted by the government on co-
operative basis. The objective is to make items of necessity available to
consumers at reasonable price.
Hire purchase and Instalment shops
Under hire purchase or instalment system, the buyer takes possession of
goods immediately after the deal but does not pay its full price then. The
price is paid in instalments. The instalments may be monthly or quarterly.
High priced goods like T.V sets, computers refrigerators, washing
machines, scooters etc. are sold on this basis by retail traders.
Services of Retailers
Retailers provide various services to the manufacturers and consumers
which may be explained as follows :
(A) To the Manufacturers and Wholesalers :
(i) It is through the retailers that goods are ultimately sold to
consumers.
Internal Trade :: 37
(ii) The retailer communicates the needs and preferences of consumers
through the wholesalers to the manufacturers who are thereby able
to make necessary changes in the products to meet the consumers’
needs.
(iii) The retailer bears the risk of falling demand and declining prices
which reduces the risk borne by manufacturers and wholesalers.
(iv) Retailers maintain stocks which they enables manufacturing to be
continued according to plans.
(B) To the Consumers :
(i) The consumer can buy goods of their choice whenever they need
and in small qualities near their residence.
(ii) Retailers keep the consumers informed about new products and
thus helps their in meeting their requirements in a better way.
(iii) Retailers also provide certain facilities to the consumers such as
home delivery, credit, after sale service etc.
(iv) As the retailer keeps a wide variety of goods of different producers
and manufacturers the consumers are able to make an informed
choice of the product to satisfy their needs.
Merits
Following are the merits of retail trade :
1. Easy availability of goods : The retailer makes goods available
to the consumers at their convenience in terms of time, place and
quantity.
2. Services to consumers : He provides a variety of services to the
consumers like home delivery, credit facility and after-sales
services.
3. Helps in feed back : He gathers information about the needs and
preferences of consumers and passes it on to the wholesalers and
manufacturers.
4. Promotion of new products : The retailer is able to promote the
sale, particularly of new products and also increase the sale of
38 :: Business Studies
existing products.
5. Purchase decisions : The retailer can help consumers to make
the right choice of products by explaining to them the features of
different varieties of a product.
Demerits :
Following are the demerits of retail trade :
1. Adds to price : As the cost of running business and profits of the
retailer are added to the cost, the buyer is required to pay a higher
price.
2. Manipulation of sale : Retailer sometimes try to push the sales
of those goods on which they earn higher margin of profits. This
may not be in the consumers’ interest.
3. Limited Choice : As retail business is on a very small scale and
the customers are limited, a retailer cannot stock different varieties
of the same product. Hence there is a limited choice for the
consumers.
4. Short supply : Sometimes retailer may run out of stock of a
particular product and fails to satisfy customer needs.
5. Non availability of particular goods : A retailer generally deals
in those products for which there is large demand from local
consumer. Hence it may not be possible for the residents of a
locality to get all their requirements met by the local retailer.
Specialised retailing agencies :
Retailers generally trade in a wide variety of goods. But there are retailers
who specialise in a particular line of goods. You must have seen a medical
store in your locality which sells only medicines. These are called single
line stores. Their shops are generally located in shopping centres. They
sell goods of a particular kind but of different qualities and of different
manufacturers.
Following are the kinds of specialised retail business :
1. Medical stores
Internal Trade :: 39
2. Ready made garments
3. Sweet shops
4. Shoes shops
5. Book shops
6. Stationery shops
7. Bakery shops
8. Jewellary shops.
Difference between wholesale trade and retail trade
Following are the differences between wholesale trade and retail trade :
Basis Wholesale trade Retail trade
1. Number of items Deals in a few items Deals in a variety
2. Quantity of goods Large Small
bought and sold
3. Source of purchase Manufactures Wholesalers/producers
4. Purpose Sells goods for Sells goods for
resale consumption or use
5. Amount of Capital Large Small
required
6. Nature of Direct link with the Indirect link with the
relationship producers and indirect producers and direct link
with the consumers. with the consumers.
7. Location Located in the same Located near residential
area along with other areas inhabited by
wholesalers dealing consumers.
in similar product.
8. Display Does not require Requires display of
any display of goods products.
Intext Questions 8.3
(A) Fill in the blanks with appropriate words :
40 :: Business Studies
(i) Trading in small quantities and in a wide variety of goods is
called ________________.
(ii) Producers supply their products to the consumers through
_______________ and _____________.
(iii) Retailers sell goods to the consumers both for cash and
_____________.
(iv) The retailer has a direct link with ________________
(B) Classify the following small scale retailers :
(i) Carrying goods in for sale on bicycle or hand driven cart.
(ii) Selling goods in weekly bazars
(iii) Stall selling fruit juice
(iv) A shop selling ready made garments
(v) A general store
(C) Write whether the following statements indicate services to the
wholesaler or to the consumer.
(i) Makes available goods conveniently in terms of time, place
and quantity.
(ii) Provides facilities of home delivery and after sale service.
(iii) Passes on information regarding market conditions.
(iv) By maintaining stock of goods, the botheration of
maintaining stocks by others is saved.
8.6 Departmental Store
A Departmental store is a large-scale retail trade establishment where
consumers may find a large variety of goods under one roof. It consists
of a number of departments each dealing with specific types of goods.
Each such department forms a complete sales unit in itself. All the
departments are centrally controlled. State Emporia and central cottage
Internal Trade :: 41
industries emporium are some examples of Departmental stores.
Features :
A departmental store has the following features :
(i) A wide variety of goods are sold under one roof.
(ii) It is divided into many departments. Each department deals in one
or more related lines of items.
(iii) Management and control is centralised. The purchases made are
also centralised.
(iv) A wide-variety of services like credit facilities, home delivery,
restaurant, and other entertainment facilities are provided to the
customers.
(v) It is generally located in the heart of a city.
Advantages :
Following are the advantages of a Departmental Store :
(i) Wide choice of products : A wide variety of products from
different manufactures are sold in these stores. A customer, thus,
has a wide choice of goods from which he can select to suit his
needs.
(ii) Convenience of shopping : As a large variety of goods are sold
under one roof, a customer need not go from one bazar to another
or from one shop to another. He can buy them at one place.
(iii) Economies of large scale : A large volume of goods are bought
and sold in Departmental stores. This leads to economies of large
scale operations.
(iv) Mutual Advertisement : While visiting a Departmental store,
customers are often attracted by goods displayed in different
departments. Hence they may purchase items other than those they
had originally in mind. Thus each department advertises for other
departments.
42 :: Business Studies
(v) Ability to employ specialists : These stores are organised on a
large scale. Hence they can employ specialists having expert
knowledge of buying, advertising, cost control, etc. This adds to
the efficiency of management.
Disadvantages :
Following are the disadvantages of Departmental Stores :
(i) Heavy Investment : Huge amount of capital is required initially
to establish and run a departmental store. It is a risky business
also.
(ii) High Cost of operation : The cost of running a departmental
store is very high. Luxurious surroundings, free services and high
rent lead to increase in the operating costs. This is to be borne by
customers in the form of higher prices.
(iii) High Prices : High operating costs and quality of goods make the
prices high in a departmental store.
(iv) Distance from residential localities : Departmental stores are
located away from the residential areas. Therefore they lose orders
of articles required at short notice. Most customers thus prefer
going to the small retail shops situated in their residential areas.
(v) Lack of personal attention : In departmental stores there is no
direct contract between the owner and the customer. Customers in
these stores are attended by paid sales-assistants and their services
are impersonal.
(vi) Difficulty of supervision : There are a large number of selling
units of is a departmental store. Supervision of these units
sometimes becomes difficult.
Intext Questions 8.4
(A) Complete the following statements :
(1) A wide variety of services such as :
(a)
Internal Trade :: 43
(b)
are provided by departmental stores.
(ii) A departmental store is divided into various__________.
(iii) The management and control of a departmental store is
_______________.
(iv) The customers prefer shopping in a departmental store
because he can buy goods of his need at
________________.
(B) State whether the following statements are true or false :
(i) Departmental stores cater to the needs of well to do people.
(ii) Departmental stores belong to the category of Large Scale
Retail Trading.
(iii) Departmental store can be run with a small amount of capital.
(iv) Departmental stores are situated in the heart of the city.
8.7 Super Bazar :
A Super Bazar is like a Departmental store engaged in retail selling of
a wide variety of goods. It may have several departments or several sales
counters. There are super markets which are also organised on the same
lines.
Following are the characteristics of a Super Bazar-
1. It is organised as a co-operative store in which capital is contributed
by member through shares.
2. It may have branches located in different residential localities.
3. The prices charged in a Super Bazar are relatively lower than in a
Departmental Store.
4. In a Super Bazar normally there are a number of self service
counters where customers are required to help themselves in
44 :: Business Studies
choosing products from open shelves and take them to the cash
counter for making payment.
5. Other features of a Super Bazar like centralised buying, services
and facilities provided are similar to those of a departmental store.
Advantages :
Following are the advantages of Super Bazar.
(i) Locational Advantage : Consumers can buy goods nearby and do
not have to go to far off places as super bazars have branches in
different localities.
(ii) Low Price : As the goods are purchased in bulk and directly from
the manufacturers, the goods are sold at comparatively lower prices.
(iii) Benefit to the members : The members get the goods at
concessional rates. In case of surplus or profits, they get dividend
also.
(iv) Goods of Standard Quality : Only goods of standard quality are
sold in Super Bazars.
(v) Wide Choice of goods : A wide range of goods are sold in Super-
Bazars and are kept in open shelves. Customers have wide choice
and freedom to choose.
(vi) Used as a Public Distribution System : Items which are rationed
and could be sold in fair price shops as controlled items are also
sold through Super Bazars.
(vii) Advantages of Departmental Stores : Other advantages of
departmental stores like self advertisement, services and facilities
provided etc. are advantages of Super Bazars as well.
Disadvantages :
Following are the disadvantages of Super Bazar.
(i) Heavy Investment : Super Bazar require large amount of capital
to start and run.
(ii) Restricted choice : The items of one type sold in Super Bazars
Internal Trade :: 45
are from the same manufacturer. So the choice is limited.
(iii) No other service : Except providing the facility of buying goods
of daily use under the same roof no extra facilities and services
like home delivery and credit, are provided.
(iv) Novel and unusual items not available : In Super Bazars only
popular brands are sold. Unusual or novelty items are not found in
them.
Intext Questions 8.5
(A) Fill in the blanks with suitable words :
1. Super bazars sell goods at a price charged with a ________
profit margin.
2. The objective of Super Bazar is to make available goods to
consumers at reasonable price under one ______________.
3. Customers pick up articles of their choice from the open
selves and bring them to the ______________ counter.
4. Super Bazars have ________ in different parts of the city.
(B) State whether the following statements are true or false:
1. Super Bazars sell novelty and unusual goods as well.
2. Super Bazar is a large scale wholesale establishment.
3. Super Bazars sell goods to their members at a concessional rate.
4. Goods of one line from different manufactures are sold in
Super Bazar.
5. Super Bazars have no similarity with the Departmental stores.
8.8 Multiple Shops
When a number of retail shops dealing in similar products and organised
by the same owner form a chain and are scattered in different parts of
46 :: Business Studies
a city or country then these are called multiple shops. Typical examples
of multiple shops are Bata shoe stores, Mafatlal cloth shops, DCM cloth
stores, restaurants like Kentucky Fried Chicken (KFC), and Wimpy. To
make the meaning more clear let us study their features which are as
follows :
Features :
(i) Multiple shops have identified sign boards, and outer decoration
and show cases.
(ii) Generally, a single product line is sold in multiple shops. For
example, Bata sells only shoes of different designs for men, women
and children while KFC sells only fast food items, mainly chicken.
(iii) The price is uniform in all the shops for similar items. The price
is fixed in advance by the central office.
(iv) All multiple shops owned by a firm are controlled and managed
from its head office. Purchases or production is centralised while
selling is decentralised.
(v) Sales are strictly for cash (however credit cards may be accepted)
and no other facility like home delivery, corporating or
entertainment are provided.
Difference between Departmental Store and Multiple Shops
Basis Departmental Store Multiple shops
1. Location Located at a central Situated at different
place in the city. localities of the same city.
2. Products Deals in a wide variety Deal in a few items
of goods of different of one manufacturer
manufacturers
3. Customers Caters to the need of well Attracts general
to do people who public who are
prefer variety and service. price conscious
4. Price Price of goods is high and Price is uniform
differ from one departmen- in all the shops
tal store to another
Internal Trade :: 47
5. Ownership Owned by entre Owned by manu-
preneurs facturers factors.
6. Investment Large amount of Can be started
capital is required with a smaller amount
of capital.
Intext Questions 8.6
(A) The following statements when correctly matched will state the
difference between a departmental store and a Chain Store. Match
them
Departmental Store Chain Store
(a) Caters to the needs of well (i) Can be started with a
to do people small amount of capital.
(b) Located at a central place (ii) Meant for general public.
in the city.
(c) Credit facilities are available (iii) Scattered through out
the city.
(d) Large amount is required (iv) Sales are strictly for cash.
(B) Fill in the blanks with suitable words:
(i) Multiple shops are also called _____________.
(ii) Multiple shops have ______________ looks.
(iii) Items of a ________________ product line are sold in
Multiple shops.
(iv) Purchases are _________________ in Multiple shops.
(v) Price is _________________ in all the shops in Multiple
shops.
8.9 Mail order Business
You might have read advertisements in the news papers presenting a
range of books for sale. You are asked to fill up the coupan stating the
48 :: Business Studies
name of the book or books you want to buy and post it to the seller at
the given address. If you send this coupan duly filled in, you will get the
book or books ordered by V.P. post in the form of a parcel. The post man
will collect the value of the books and V.P. charges and deliver the parcel
to you and the post office will remit the money to the seller. This mode
of selling is called Mail order Business.
Mail order business refers to sale of goods through the post office. It is
a method of selling goods by producers or traders directly to consumers.
Under this system the seller advertises products through news papers,
magazines, catalogues and the television, inviting prospective buyers to
place orders by postal mail. The advertisement gives details of the
product, assuring the quality, address to which order is to be mailed and
the price, including postal charge to be paid. The buyers may write for
details. Once the order is received, goods are properly packed and a
parcel is made. This parcel is sent to the buyer by post with the
instructions that the same be delivered to the buyer when he pays the
specified amount. This service of the post office is called Value Payable
Post (V.P.P).
By this method of sale a buyer can have goods of his choice while
sitting at home and the seller can sell his products to customers living
in very remote areas. Examples of Mail order Business are Sky Shopping
Net Work and Otto Burlington.
Requirements to make Mail order Business a success:
The following conditions should be fulfilled to make a Mail order business
successful:
(i) Existance of efficient Postal Service: The postal service provided
in the country should be proper and efficient.
(ii) Existence of customers widely scattered : The customers should
be scattered all over the country or over a wide area.
(iii) Innovative Products : Products should be designed to meet
specific requirements of customers which are not usually available
in the market.
(iv) Effective Advertisement : The only means of making known to
the potential buyer of the business is advertisement. So effective
Internal Trade :: 49
advertisement is essential for success of mail order business.
(v) Maintenance of up to date mailing list : A Mailing list of the
prospective buyers should be prepared and kept up to date. The
sources of getting names and addresses of such persons aer trade
and telephone directories, year books, list of members of clubs
and trade associations, etc.
(vi) Reliability of dealings : As the customer does not have an
opportunity to inspect the goods and relies solely on the details
supplied to him through advertisements, the mail order house should
be honest in dealings.
(vii) Follow up : Regular follow up of customers is also required.
They should be informed whenever new products and improved
products are introduced.
Intext Questions 8.7
Fill in the blanks with suitable word :
(i) Mail order business consists of sale of goods by ______.
(ii) Mail order business is done through the _______________
service of the post office.
(iii) One of the conditions of the success of Mail order Business
is the existence of customers who are _____________.
(iv) Regular _________________ of customer is required for
the success of mail order business.
8.10 What You Have Learnt :
Internal trade consists of those activities which bring together the
producers and consumers with in the same country.
Features :
Some of the features of internal trade are buying and selling within the
country, use of home currency, involves minimum legal requirements to
50 :: Business Studies
organise. It consists of producers, consumers and middlemen. Direct
sale and purchase between producers and consumers is minimum.
Importance :
It helps in improving the standard of living of the people, creates
employment opportunities, helps the growth of agriculture and foreign
trade.
Internal trade consists of wholesale trade and retail trade.
Wholesale trade refers to buying goods from manufacturers or their agents
in bulk and selling their to retailers and industrial users.
The wholesaler deals in a few items but in bulk, has direct contact with
manufactures but indirect link with consumers.
The wholesaler helps manufacturers to concentrate on manufacturing and
level production, provides finance and undertakes warehousing; also helps
the retailer by selling goods in small quantities on credit and by
maintaining a steady supply to them.
Merits of wholesalers : Helps specialisation, improves efficiency of
marketing, stablises prices, creates consumer awareness, provides services
beneficial to trade.
Demerits of wholesaler : Higher burden on consumers and possibility
of unfair trade practices.
Retail trade consists of buying goods from the manufactuerer or
wholesaler and selling their to the consumers.
Retail trading may be of the following types : Hawkers, Market stall
holders, Small shops, Departmental stores, Multiple shops, Mail orders
Houses, Consumer co-operative stores, Super Bazars and Hire purchase
shops.
Retailers provide services both to the manufacturers and the consumers.
Retail trade has its own merits and demerits. Wholesale trade and retail
trade have differences on the basis of number of items dealt in, quantity
of goods sold, purpose, amount of capital required, location, etc.
Internal Trade :: 51
Departmental store is a large retail establishment where consumers may
find a wide variety of goods under one roof. It consists of a number of
departments each dealing with specific goods.
Super Bazars and Super Markets are also like departmental stores having
several departments or sales-counters. These are generally organised as
co-operative stores.
Multiple shops are retail shops dealing in similar products and organised
by the same owner forming a chain, scattered within a city or in different
cities. Multiple shops and Departmental stores may be differentiated on
the basis of location, products, customers, price, ownership and
investment.
Mail order business consist of sale of goods through the post office. It
is a method of selling directly to the consumers by manufactuers or
wholesalers. To make it a success there should be customers widely
scattered, innovative products, efficient postal service, effective
advertisement, an upto date mailing list and reliability in dealings.
8.11 Terminal Exercises
1. State the meaning of internal trade.
2. Name any two types of small-retail trade.
3. State the meaning of whole-sale trade.
4. What is the difference between a super-bazar and a departmental
store.
5. You want to start a Mail order Business. What factors will you
consider before you decide to do so?
6. State and explain the various services provided by a wholesaler to
(a) manufacturers, and (b) consumers.
7. Define Departmental store. Give the distinction between a
Departmental store and a multiple shop.
8. Discuss the importance of internal trade.
52 :: Business Studies
8.12 Answers to Intext Questions :
8.1 (i) feature (ii) significance,
(iii) significance (iv) feature
8.2 (A) (i) true (ii) false (iii) true (iv) true
(B) (i) Manufacturers (ii) Retailers
(iii) Retailers (iv) Manufacturers
8.3 (A) (i) Retail trade (ii) Wholesalers, retailers
(iii) credit (iv) consumer
(B) (i) Hawker (ii) Market stall holders
(iii) Stall shop (iv) Small shops (v) Small shops
(C) (i) Consumer (ii) Consumer
(iii) Wholesaler (iv) Wholesaler
8.4 (A) (i) (a) Credit facilities (b) Home delivery (ii) departments
(iii) centralised (iv) one place
(B) (i) true (ii) true (iii) false (iv) true
8.5 (A) (1) low (2) roof (3) cash (4) branches
(B) (1) False (2) false (3) true (4) false (5) false
8.6 (A) (a) (ii), (b) (iii), (c) (iv), (d) (i)
(B) (i) Chain stores (ii) identical (iii) single
(iv) centralised (v) uniform
8.7 (i) post (ii) parcel (iii) scattered (iv) mailing list.

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