Businesses and trading firms have an important role in every economy as they generate revenue as well as employment. Studying Class 11 Business Studies, you will get to know about the concept of internal trade which simply refers to the commercial and trading activities within a country’s political boundaries. This detailed chapter on Internal Trade familiarizes students with the basic aspects of this concept as well as its major types such as wholesale trade and retail trade, amongst others. Through this blog, we have elaborated on what internal trade is along with a quick summary and chapter notes for Class 11 Internal Trade as well as important questions for you to practice.
This Blog Includes:
- What is Internal Trade?
- Features of Internal Trade
- What is Wholesale Trade?
- What is Retail Trade?
- Types of Retailers
- Classification of Retailers
- Hawkers and Peddlers
- Street Traders
- Cheap Jacks
- List of Main Documents Used In Internal Trade
- Chambers Of Commerce And Industry
- Goods and Services Tax
- Important Questions
What is Internal Trade?
Trade has been in practice since ages and has evolved in nature as the pages of history turned. The barter system of the ancient civilizations, the magic of the silk route, the exploitative practices of the colonial trade are all the evolutionary phases of the trade. As per the Class 11 chapter on Internal trade, it can be described as the trading and commercial activities which occur within the political boundaries of a nation-state and is governed by national laws. In India, the Department for Promotion of Industry and Internal Trade facilitates the administration of domestic trade in the country and ensures that businesses are adhering to prominent trade laws and practices.
Features of Internal Trade
Internal Trade is considered as quite different from bilateral trade because the latter means trade among different nations beyond their boundaries. The chapter on Internal Trade in Class 11 also notes that bilateral trade differs from its domestic counterpart on the basis of boundaries and domestic trade has its own features and characteristics which are as follows:
- If the sale and purchase take place within a neighbourhood, a city, a state, or between two or more states but within the national boundary of a country, then it comes under internal trade.
- Customs and import duties are not levied on internal trade. They are subjected to local or national taxes such as GST and Sales Tax.
- Payment is generally made in the national currency or any other acceptable legal instrument.
- Internal trade is usually of two types wholesale and Retail.
What is Wholesale Trade?
Wholesale trade refers to the buying and selling of goods and services in large quantities to be resold or to be used for other purposes. Wholesalers are the people who sell goods to retailers, merchants, industrial houses, and commercial uses. As per the chapter on Internal Trade in Class 11, wholesalers are an important link between the retailers and producers as producers can’t afford to sell their products according to the retailer’s financial capabilities. Wholesalers are people who serve as an important link between the manufacturers and the retailers.
Services to Manufacturers and Retailers
The manufacturers produce goods while the retailers supply it to the public. The manufacturers need to sell off a large number of goods, while the retailers can’t afford to buy in such a large scale. This where the wholesalers come in, they act as the link between the two. In Class 11 chapter on Internal Trade, you will also get to know that wholesalers buy goods in large quantities from the manufacturers and sell them to retailers in smaller quantities.
Take a look at the prominent functions and services of wholesalers for manufacturers:
- Making large scale production practical
- Taking risk
- Necessary financial assistance
- Helps in the marketing function
- Promoting production continuity
- Storage facilities
- Availability of goods
- Specialised knowledge about the market
In internal trade, wholesalers also provide certain services to retailers which include:
- Making the goods available
- Intermediate marketing support
- Credit grants
- Sharing market risks
What is Retail Trade?
Retail trade means the sale of goods in small batches to end consumers. A retailer acquires products from a wholesaler and sells them to the consumer. Retailers are the ground level merchants responsible for supplying goods directly to the public. They are not able to buy goods directly from the manufacturers because of lack of capital and demand, so they buy it from the wholesalers in a quantity they are comfortable with. As per the Class 11 chapter on Internal Trade, the Department of Promotion of Industry and Internal Trade in India carries the responsibility of providing ease to the retailers in their business.
Here are the services provided by retailers to consumers in internal trade:
- Direct hassle-free supply
- Providing a variety of goods
- Necessary guidance to consumers
- Exhibition of goods and providing after-sale services
- Home delivery services
- Convenience of location
- Facility of credit
The services facilitated by wholesalers and manufacturers are:
- Access to the consumer market
- Providing information on consumer behaviour
- Risk bearing
- Effective distribution of goods to remote places
Types of Retailers
The Class 11 chapter on Internal Trade also elucidates that the ministry of Commerce and the Department for promotion of industry and internal trade classifies retailers based on some important parameters that are size, product mix, pricing, and service level. According to these parameters, retail trade can be classified into the following categories :
Retailers who do not possess a fixed place to operate their businesses, for example, Hawkers and peddlers who are street vendors and move from street to street to pursue customers. As per the chapter of Internal Trade in Class 11, some important features of itinerant retailers are:
- Clothes, toys along with fruits and vegetables are the items they trade in.
- Most of the products sold by itinerants retailers are local.
- Most vendors supply the goods at the doorstep of the customer.
Periodic Market Traders
Periodic market traders conduct their business at different places on fixed days. They have a fixed weekly market. The main features of periodic market traders are:
- They operate their businesses in a weekly market.
- The goods they sell are low priced and of low quality.
- Periodic market traders set up shops during Festivals like Diwali, Christmas, and Eid.
Fixed Shop Retailers
Retailers who possess a fixed shop or establishment to operate their businesses are fixed shop retailers. They are the basis of internal trade being the most preferred destination for consumers. Fixed shop retailers can be further classified into these categories:
1. Small Scale Fixed Retail Shops
General Stores: Small retail shops located in the neighbourhood.
Single Line Retailers: They provide products belonging to a single category.
Speciality Retailers: These sell only a certain type of product.
Street Shops: These are small shops and vendors on the streets.
Second Hand Goods Shops: These shops deal in second-hand goods, usually books.
2. Large Scale Fixed Retail Shops
Large Scale Retailers: Large scale retailers purchase goods in bulk and sell them to the public.
Departmental Stores: As the name suggests, a departmental store is a retail store/showroom with a large number of departments specializing in one line of products.
Multiple Shops: Identical retail shops located throughout the city.
Mail Order Retailing: When a seller contacts the buyers through mail publicity and advertisement, then it’s known as Mail Order Retailing.
Consumer Co-operative Stores: When a voluntary group of people buy and sell goods in common, then it’s called a consumer co-operative store.
Super Markets: Private traders or co-operative societies organize Supermarkets to sell their products.
Vending Machines: Vending machines are the latest evolution of retailing. It is a machine that fetches products when a buyer fetches coins or a token into it.
The regulatory authority for internal trade activities in India, i.e. the Department for promotion of industry and internal trade frequently updates its policies in order to develop a favourable business environment for both large scale and small scale retailers.
Classification of Retailers
As per the chapter of Internal Trade in Class 11, retailers can be classified on the following basis and factors:
- Product mix
- Service level
- Form of ownership
Hawkers and Peddlers
Hawkers and peddlers are those retailers in the market who keeps moving from street to street in search of potential customers. They sell a variety of goods to the consumers such as fruits, vegetables, toys, other kitchen items etc. They generally deal with non-branded and local items or products. One of the biggest plus points of hawkers and peddlers is that they supply or sell the goods at the doorstep of the customer.
As per the chapter of Internal Trade in Class 11, street traders are those retailers who display their articles on busy street corners, pavements, bus stands, railway stations, footpaths, near metro stations and many other such places where there is always more crowd. These street traders generally operate near public places in order to find potential customers and sell their products. They deal with non branded and local items and sometimes counterfeit products as well. They sell a variety of goods such as towels, mobile covers, makeup, sunglasses, food, juices, etc.
In the chapter of Internal Trade in Class 11, we found out that cheap jacks are those retailers who hire small local shops in order to display their goods. These retailers hire these shops for a temporary period of time in different localities. Cheap jacks always shift from one locality to another depending upon the prospectus of business and sales. They deal with household articles and commodities at a very reasonable price.
List of Main Documents Used In Internal Trade
As per the chapter of Internal Trade in Class 11, the following are the main documents that are used in the internal trade.
- Pro-forma invoice
- Debit note
- Credit note
- Lorry receipts
- Railway receipts
Chambers Of Commerce And Industry
We will now explore the role of the Chamber of Commerce and Industry in the promotion of internal trade in the country as per the chapter of Internal Trade in Class 11. The Chamber of Commerce is a voluntary organization of merchants or businessmen belonging to various traders and sectors of the industry. The members of the Chamber of Commerce may also be technical experts such as chartered accountants, financiers and others engaged in business in a specific area or region. Its primary objective is to promote the general business interests of all members of the association and to stimulate the growth of trade, commerce and industry in the economy of the country. The key functions of the Chamber of Commerce and Industry are listed below:
- To conduct research and to gather statistics and other market-related/ business-related and economic information.
- Providing its members with technical, legal, and other valuable knowledge and advice.
- The publication of books, magazines and business journals.
- Making plans or arrangements for members to obtain education and training.
- In order to encourage trade, the Chamber of Commerce also organizes industrial exhibitions, trade fairs, seminars, summits and more such events
- They also advise the government on matters relating to the region’s industrial and economic growth.
- Issuance of origin certificates to exporters
- They represent matters related to business interests and other complaints related to trade and commerce before the government of the country
- Providing a platform for the discussion of popular business community issues.
- Acting as arbitrators among the representatives to settle conflicts and disputes.
Goods and Services Tax
One of the most revolutionary changes that occurred lately in the Indian internal trade was the introduction of the Goods and Services Tax. While studying our Class 11 chapter notes for Internal Trade, take a look at some of the features of the new GST tax:
- The main aim behind the formulation of GST is to convert multiple taxes into a single tax.
- GST will help in making the prices of goods uniform throughout India.
- Luxury goods have become more costly, while mass goods have become cheaper.
- GST is not a tax at source; it is a consumption tax.
- Both the central government and the state government will have their share in GST.
- The GST network is a self-regulating one, which checks and tax frauds and evasion and brings more businesses under the formal economy.
If you are studying internal trade for Class 11 Business Studies exams, here are some important questions which you must practice to get a better score.
- Define internal trade.
- Describe the important features of a fixed shop.
- Discuss the importance of warehousing facilities provided by wholesalers.
- Discuss the help provided by the wholesaler to the manufacturer with the “economies of sale”
- Discuss the major difference between a speciality store and a single line store.
Hence, we hope that this blog has helped you understand the key essentials of internal trade, its forms as well as practices. Planning to study a business degree? Our Leverage Edu experts are here to guide you through the process of finding the best course and university combinations and sorting out the admission procedure to ensure that you send an impressive application! Sign up for a free session with us today!