Internal Trade

Internal Trade refers to the buying and selling of goods and services within the geographical boundaries of a country. It is also known as domestic trade or home trade. Payments for these transactions are made in the national currency (e.g., Rupees in India).

The characteristics of fixed shop retailers are:

• Permanent Establishment: They operate from a fixed premise or shop and do not move from place to place.
• Larger Resources: They generally have greater financial resources compared to itinerant traders.
• Credibility: They enjoy greater credibility and trust among customers due to their fixed location.
• Scale of Operation: They can operate on both a small scale (general stores) and a large scale (departmental stores).

Wholesalers purchase goods in bulk from manufacturers and store them in their warehouses.
Purpose Served:

• Time Utility: They bridge the time gap between production and consumption.
• Relieving Manufacturers: Manufacturers are relieved from the burden of maintaining large stocks and storage space.
• Availability: They ensure goods are readily available to retailers whenever demand arises.

Wholesalers are in direct contact with retailers, who are in touch with consumers.
Benefits to Manufacturers:

• They provide feedback on customer tastes, preferences, and fashion trends.
• They inform manufacturers about the competitors’ activities and pricing.
• This helps manufacturers plan production and improve products to suit market demand.

Wholesalers place bulk orders with manufacturers.
Economies of Scale:

• This allows manufacturers to produce goods on a large scale.
• Large-scale production spreads fixed costs over a larger output, reducing the per-unit cost of production.
• Manufacturers can focus purely on production efficiency while wholesalers handle distribution.

Basis	Single Line Stores	Speciality Stores
Product Range	Deal in a single line of products (e.g., Garments, Books).	Deal in a specific type of product within a line (e.g., Children’s books).
Variety	Stock a variety of goods within that product line.	Stock an exhaustive variety of that specific item only.
Example	A store selling all kinds of footwear.	A store selling only sports shoes.

• Street Traders (Itinerant): They do not have a fixed place of business. They move from place to place (e.g., hawkers, peddlers) carrying goods on heads, bicycles, or carts to reach customers.
• Street Shops (Fixed): These are small retailers who have a fixed location, usually at street crossings or busy corners (e.g., a permanent paan shop or a small stationery stall). They do not change their place daily.

• Facilitating Large Scale Production: By buying in bulk.
• Bearing Risk: Taking title of goods and bearing price/spoilage risks.
• Financial Assistance: Paying cash upfront or accepting bills.
• Expert Advice: Providing market information.
• Storage: Warehousing goods.

To Wholesalers:

• Help in distribution of goods to final consumers.
• Provide market information and customer feedback.
• Enable large-scale operations by handling small orders.

To Consumers:

• Regular availability of goods.
• Wide selection of products.
• Convenience in buying (near home).
• After-sales services and credit facilities.

Despite the rise of malls and online stores, itinerant traders (hawkers, peddlers) survive because:

• Low Price: They have negligible overhead costs (no rent, no expensive display), allowing them to sell goods at cheaper rates.
• Doorstep Service: They provide goods right at the customer’s doorstep, offering unmatched convenience, especially for elderly or busy housewives.
• Personal Attention: They offer personalized attention to customers which large stores often lack.
• Low Income Groups: They cater to the needs of lower-income groups who cannot afford branded products from large stores.
• Daily Needs: They deal in perishable daily use items (fruits, vegetables) where freshness is valued over brand.

Features of Departmental Stores:

• Central Location: Located in the heart of the city to attract a large crowd.
• Wide Variety: Offer a massive range of products “from a pin to an elephant” under one roof.
• Services: Provide amenities like restrooms, restaurants, and home delivery.
• Organizational Structure: Organized into separate departments (e.g., electronics, clothing) managed centrally.

Difference from Chain Stores (Multiple Shops):

Basis	Departmental Store	Chain Store (Multiple Shops)
Location	Central location.	Scattered across the city/country.
Range of Products	Wide variety of different products.	Specializes in one line of product.
Service	Offers credit, delivery, etc.	Usually “Cash and Carry”.
Risk	High risk concentrated in one place.	Risk is spread across branches.

Less Expensive because:

• Elimination of Middlemen: They buy directly from manufacturers and sell to members, saving the wholesaler/retailer margin.
• Low Overheads: They often operate with simple setups and sometimes voluntary services from members.

Relative Advantages:

• Democratic Management: Managed by members on “one man, one vote” principle.
• Limited Liability: Liability of members is limited to their capital contribution.
• Quality Goods: Since the motive is service to members, chances of adulteration are low.

If there were no retail shops (local market):

• Inconvenience: Consumers would have to travel long distances to factories or warehouses to buy even small items like toothpaste or milk.
• Bulk Buying Issues: Manufacturers usually sell in bulk. Consumers would be forced to buy huge quantities, leading to storage and spoilage issues.
• Lack of Variety: A retailer stocks goods from various manufacturers. Without them, consumers would lack choice at a single point.
• No Credit Facility: Local retailers often provide credit to trusted customers, which would be unavailable.
• Information Gap: Consumers would not get first-hand information about new products that retailers usually provide.

Mail Order Houses are retailers who sell goods by post. There is no direct personal contact between buyer and seller.
Usefulness:

• Wider Market: Can reach customers in remote areas where shops don’t exist.
• Convenience: Goods are delivered to the buyer’s home.
• Lower Cost: Saves money on showroom maintenance and sales staff.

Products Handled: Goods suitable for mail order usually are:

• Graded and standardized.
• Lightweight and easy to transport (low freight cost).
• Non-perishable.
• Examples: Books, seeds, medicines, small appliances.

GST Rate	Items
0% (Exempt)	Newspaper, Vegetables, Milk, Curd, Salt, Jute (raw), Exercise Books.
5%	Coffee/Tea, Spices, Kerosene, Kites, Fertilizers, Ayurvedic Medicines, Apparel (< ₹1000).
12%	Fruit Juices, Bhujia, Ketchup & Sauces, Spectacles, Sewing Machine, Notebooks, Jams.
18%	Hair Oil, Soap, Toothpaste, Pasta, Pastries & Cakes, Mineral Water, Steel Products, Camera, Speakers, CCTV, Telecom Services, Comp/Laptop.
28% (Luxury)	Washing Machine, Motorcycles, Luxury Goods, Automobile parts, Aerated Water.

*Note: GST rates are subject to revision by the GST Council. The above is a general classification for academic purposes.