Chapter 10 — Internal Trade

Chapter 10, Internal Trade, covers the meaning and types of internal trade, services of wholesalers to manufacturers and retailers, services of retailers, types of retailers (itinerant and fixed shop), forms of large-scale retailers such as departmental stores, chain stores, super markets, and consumer cooperative stores, the implementation of GST, and the role of Chambers of Commerce in promoting internal trade.

Buying and selling of goods and services within the boundaries of a nation is referred to as internal trade. No custom duty or import duty is levied on such trade as the goods are part of domestic production and meant for domestic consumption. Payment is made in the legal tender of the country.

Wholesale trade refers to purchase and sale of goods and services in large quantities for the purpose of resale or intermediate use. Retail trade refers to purchase and sale of goods in relatively small quantities, generally to ultimate consumers. Wholesalers serve as a link between manufacturers and retailers, while retailers sell directly to final consumers.

Wholesalers provide seven key services to manufacturers: (i) facilitating large-scale production by pooling retailer orders, (ii) bearing risk of price fall, theft, pilferage, spoilage, and fire, (iii) financial assistance through cash purchases and advance money, (iv) expert advice on customer tastes and market conditions, (v) help in marketing functions, (vi) facilitating continuity of production throughout the year, and (vii) storage in their godowns and warehouses.

Wholesalers provide five important services to retailers: (i) making products of various manufacturers readily available, (ii) marketing support through advertising and promotional activities, (iii) grant of credit facilities so retailers can manage with relatively small working capital, (iv) specialised knowledge about new products, prices, and quality, and (v) risk sharing by purchasing in bulk so retailers avoid risks of storage, pilferage, and price fluctuations.

Itinerant retailers are traders who do not have a fixed place of business and keep moving from street to street or place to place in search of customers. They include peddlers and hawkers (who carry goods on bicycles or handcarts), market traders (who open shops on fixed days or dates), street traders or pavement vendors (found near railway stations and bus stands), and cheap jacks (who have temporary independent shops in a business locality).

A departmental store is a large establishment offering a wide variety of products classified into well-defined departments, aimed at satisfying practically every customer's need under one roof. It combines retailing and warehousing functions with centralised purchasing. Advantages include attracting large numbers of customers, convenience, attractive services, and economies of large-scale operations. Limitations include lack of personal attention, high operating cost, high possibility of loss, and inconvenient location for short-notice purchases.

Chain stores or multiple shops are networks of retail shops owned and operated by manufacturers or intermediaries, dealing in standardised and branded consumer products with rapid sales turnover. They sell at fixed prices on cash basis only and are controlled by a head office. Unlike departmental stores, they are spread across many localities rather than a central place, deal in a limited range of products, provide minimal services, and do not offer credit facilities.

A consumer cooperative store is an organisation owned, managed, and controlled by consumers themselves, formed with the objective of reducing the number of middlemen and thereby providing goods at reasonable prices. At least ten people come together, form a voluntary association, and get it registered under the Cooperative Societies Act. Capital is raised by issuing shares to members; management is democratic on the principle of one man one vote.

GST (Goods and Services Tax) is a destination-based single tax on the supply of goods and services from the manufacturer to the consumer, implemented from July 1, 2017, under the principle of 'One Nation and One Tax'. It replaced 17 indirect taxes (8 Central + 9 State levels) and 23 cesses of the Centre and the States. GST has four tax slabs of 5%, 12%, 18%, and 28% and comprises Central GST (CGST) and State GST (SGST).

Chambers of Commerce such as ASSOCHAM, CII, and FICCI act as national guardians of trade, commerce, and industry. They interact with the government to facilitate interstate movement of goods (including registration of vehicles and construction of highways), manage octroi and local levies, harmonise sales tax structure and Value Added Tax, promote marketing of agro products, enforce weights and measures laws, streamline excise duty, promote sound infrastructure such as roads and railways, and simplify labour legislation.

A super market is a large retailing business unit selling a wide variety of consumer goods on the basis of low price appeal, wide variety and assortment, self-service, and heavy emphasis on merchandising appeal. Goods are kept on racks with clearly labelled price and quality tags. The customers pick up goods themselves, bring them to the cash counter, and take home delivery. Sales are made on cash basis only, and super markets are generally located at central locations to secure high turnover.

A mail order house is a retail outlet that sells merchandise through mail without any direct personal contact between buyers and sellers. Orders are obtained through advertisements, catalogues, circulars, and price lists sent by post. Products suitable for this business must be capable of being graded and standardised, easily transported at low cost, have ready demand in the market, be available in large quantities throughout the year, and can be described through pictures.

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