NCERT Textbook - Internal Trade | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 10
Internal t rade LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
describe the meaning and types of internal trade;
•	
specify the services of wholesalers to manufactures and retailers;
•	
explain the services of retailers;
•	
classify the types of retailers;
•	
explain the forms of small scale and large scale retailers; and
•	
state the role of Chambers of Commerce and industry in the promotion 
of internal trade.
•	
officiate 	the	 implementation	of	GST
Chapter 10.indd   215 9/2/2022   2:21:21 PM
2024-25
Page 2


Chapter 10
Internal t rade LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
describe the meaning and types of internal trade;
•	
specify the services of wholesalers to manufactures and retailers;
•	
explain the services of retailers;
•	
classify the types of retailers;
•	
explain the forms of small scale and large scale retailers; and
•	
state the role of Chambers of Commerce and industry in the promotion 
of internal trade.
•	
officiate 	the	 implementation	of	GST
Chapter 10.indd   215 9/2/2022   2:21:21 PM
2024-25
216 BUSINESS  STUDIES
10.1  Introduct Ion Trade 	 refers 	 to	 buying 	 and 	 selling 	 of	
goods and services with the objective 
of	 earning 	 profit. 	 Mankind	 has	 been	
engaged in trading, in some form or the 
other, since early days of civilisation. 
The 	 importance 	 of 	 trade 	 in 	 modern	
times has increased as new products 
are being developed every day and are 
being made available for consumption 
throughout the world. No individual or 
country 	 can 	 claim	 to	 be	 self-sufficient 	
in producing all the goods and services 
required 	 by 	 it. 	 Thus, 	 each 	 one 	 is	
engaged in producing what it is best 
suited to produce and exchanging the 
excess produce with others.
On the basis of geographical 
location of buyers and sellers, trade 
can broadly be classified into two 
categories (i) Internal trade; and (ii) 
External 	 trade. 	 Trade 	 which 	 takes	
place within a country is called internal 
trade. 	 Trad e 	 between 	 two 	 or 	 more	
countries, on the other hand, is called 
external 	 trade. 	 The 	 present 	 chapter	
discusses in detail the meaning and 
nature of internal trade and explains 
its different types and the role of 
chambers of commerce in promoting 
internal trade.
10.2 Internal t rade Buying and selling of goods and services 
within the boundaries of a nation are 
referred to as internal trade. Whether 
the products are purchased from a 
neighbourhood shop in a locality or a 
central 	 market 	 or 	 a 	 departmental 	 store	
or a mall or even from any door-to-door 
salesperson or from an exhibition, all 
these are examples of internal trade 
as the goods are purchased from an 
individual or establishment within a 
country. No custom duty or import 
duty is levied on such trade as goods 
are part of domestic production and 
are meant for domestic consumption. 
Have 	 you 	 ever 	 thought 	 if 	 there 	 were 	 no 	 markets, 	 how 	 products 	 of 	 different	
manufacturers would reach us? We are all aware of our general provisions store 
round the corner which is selling items of our daily need. But is that enough? When 
we	 need 	 to 	 buy	 items 	 of 	 a	 specialised 	 nature,	 we 	 like	 to	 look	 at	 bigger	 markets	 or	
shops with variety. Our observation tells us that there are different types of shops 
selling different items or specialised goods and depending on our requirements 
we	 purchase	 from 	 certain	 shops 	 or	 markets.	 In	 rural 	 areas, 	 we 	 may	 have	 noticed 	
people selling their goods on the streets, these goods may range from vegetables to 
c l o t he s . 	 Thi s 	 i s 	 a 	 c o m p l e t e l y	 di f f e r e nt 	 s c e ne 	 f r o m 	 w hat 	 w e 	 s e e 	 i n 	 t he 	 ur ba n 	 a r e a s .	 I n	
our 	 country, 	 all 	 kinds	 of	 markets	 co-exist	 in 	 harmony. 	 With 	 the 	 advent	 of 	 imported 	
goods and multinational corporations, we have shops selling these products too. 
In big towns and cities, there are many retail shops selling particular branded 
products only. Another aspect of all this is, how these products reach the shops 
from	 the 	 manufacturers?	 There 	 must 	 be 	 some	 middlemen 	 doing	 this 	 job.	 Are 	 they	
really useful or do prices increase because of them?
Chapter 10.indd   216 9/2/2022   2:21:21 PM
2024-25
Page 3


Chapter 10
Internal t rade LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
describe the meaning and types of internal trade;
•	
specify the services of wholesalers to manufactures and retailers;
•	
explain the services of retailers;
•	
classify the types of retailers;
•	
explain the forms of small scale and large scale retailers; and
•	
state the role of Chambers of Commerce and industry in the promotion 
of internal trade.
•	
officiate 	the	 implementation	of	GST
Chapter 10.indd   215 9/2/2022   2:21:21 PM
2024-25
216 BUSINESS  STUDIES
10.1  Introduct Ion Trade 	 refers 	 to	 buying 	 and 	 selling 	 of	
goods and services with the objective 
of	 earning 	 profit. 	 Mankind	 has	 been	
engaged in trading, in some form or the 
other, since early days of civilisation. 
The 	 importance 	 of 	 trade 	 in 	 modern	
times has increased as new products 
are being developed every day and are 
being made available for consumption 
throughout the world. No individual or 
country 	 can 	 claim	 to	 be	 self-sufficient 	
in producing all the goods and services 
required 	 by 	 it. 	 Thus, 	 each 	 one 	 is	
engaged in producing what it is best 
suited to produce and exchanging the 
excess produce with others.
On the basis of geographical 
location of buyers and sellers, trade 
can broadly be classified into two 
categories (i) Internal trade; and (ii) 
External 	 trade. 	 Trade 	 which 	 takes	
place within a country is called internal 
trade. 	 Trad e 	 between 	 two 	 or 	 more	
countries, on the other hand, is called 
external 	 trade. 	 The 	 present 	 chapter	
discusses in detail the meaning and 
nature of internal trade and explains 
its different types and the role of 
chambers of commerce in promoting 
internal trade.
10.2 Internal t rade Buying and selling of goods and services 
within the boundaries of a nation are 
referred to as internal trade. Whether 
the products are purchased from a 
neighbourhood shop in a locality or a 
central 	 market 	 or 	 a 	 departmental 	 store	
or a mall or even from any door-to-door 
salesperson or from an exhibition, all 
these are examples of internal trade 
as the goods are purchased from an 
individual or establishment within a 
country. No custom duty or import 
duty is levied on such trade as goods 
are part of domestic production and 
are meant for domestic consumption. 
Have 	 you 	 ever 	 thought 	 if 	 there 	 were 	 no 	 markets, 	 how 	 products 	 of 	 different	
manufacturers would reach us? We are all aware of our general provisions store 
round the corner which is selling items of our daily need. But is that enough? When 
we	 need 	 to 	 buy	 items 	 of 	 a	 specialised 	 nature,	 we 	 like	 to	 look	 at	 bigger	 markets	 or	
shops with variety. Our observation tells us that there are different types of shops 
selling different items or specialised goods and depending on our requirements 
we	 purchase	 from 	 certain	 shops 	 or	 markets.	 In	 rural 	 areas, 	 we 	 may	 have	 noticed 	
people selling their goods on the streets, these goods may range from vegetables to 
c l o t he s . 	 Thi s 	 i s 	 a 	 c o m p l e t e l y	 di f f e r e nt 	 s c e ne 	 f r o m 	 w hat 	 w e 	 s e e 	 i n 	 t he 	 ur ba n 	 a r e a s .	 I n	
our 	 country, 	 all 	 kinds	 of	 markets	 co-exist	 in 	 harmony. 	 With 	 the 	 advent	 of 	 imported 	
goods and multinational corporations, we have shops selling these products too. 
In big towns and cities, there are many retail shops selling particular branded 
products only. Another aspect of all this is, how these products reach the shops 
from	 the 	 manufacturers?	 There 	 must 	 be 	 some	 middlemen 	 doing	 this 	 job.	 Are 	 they	
really useful or do prices increase because of them?
Chapter 10.indd   216 9/2/2022   2:21:21 PM
2024-25
217 INTERNAL TRADE
Generally, 	 payment 	 has	 to 	 be 	 made 	 in 	
the legal tender of the country or any 
other acceptable currency.
Internal 	 trade 	 can 	 be 	 classified 	 into	
two broad categories viz., (i) wholesale 
trade 	 and 	 (i i ) 	 retail 	 trade. 	 General l y, 	 for	
products, which are to be distributed 
to a large number of buyers who 
are located over a wide geographical 
area, 	 it 	 becomes	 very 	 difficult 	 for	 the	
producers to reach all the consumers 
or users directly. For example, if 
vegetable oil or bathing soap or salt 
produced in a factory in any part of 
the country are to reach millions of 
consumers throughout the country, 
the help of wholesalers and retailers 
becomes very important. Purchase 
and sale of goods and services in large 
quantities for the purpose of resale 
or intermediate use is referred to as 
wholesale trade.
On the other hand, purchase 
and sale of goods in relatively small 
quantities, generally to the ultimate 
consumers, is referred to as retail 
trade. 	 Traders 	 dealing 	 in 	 wholesale	
trade are called wholesale traders 
and those dealing in retail trade are 
called retailers. Both retailers and 
wholesalers 	 are	 important 	 marketing	
intermediaries who perform very useful 
functions in the process of exchange of 
goods and services  between producers 
and users or ultimate consumers. 
Internal trade aims at equitable 
distribution of goods within a nation 
speedily and at reasonable cost.
10.3 Whol esale t rade As discussed in the previous section, 
wholesale trade refers to buying and 
selling of goods and services in large 
quantities for the purpose of resale or 
intermediate use.
Wholesaling is concerned with 
the activities of those persons or 
establishments which sell to 
retailers and other merchants, and/
or to industrial, institutional and 
commercial users but who do not 
sell	 in	 significant 	 amount 	 to 	 ultimate 	
consumers. Wholesalers serve as an 
i m port ant 	 l i nk 	 betw een 	 manuf act ur er s	
and 	 retai l ers. 	 They 	 enabl e 	 the	
producers not only to reach large 
number of buyers spread over a wide 
geographical area (through retailers), 
but also  to perform a variety of 
functions in the process of distribution 
of	 goods 	 and	 services. 	 They	 generally 	
t ake 	 t he 	 t i tl e 	 of 	 t he 	 goods 	 and 	 bear	
the	 business	 risks	 by	 purchasing 	 and 	
selling the goods in their own name. 
Th ey 	 pu rch ase 	 in 	 bu lk 	 an d 	 sell 	 in 	 small	
lots to retailers or industrial users. 
They 	 undertake 	 various 	 activities 	 such	
as 	 grading	 of 	 products,	 packing 	 into 	
smaller lots, storage, transportation, 
promotion of goods, collection of 
market 	 information, 	 collection 	 of 	 small	
and scattered orders of retailers and 
distribution	 of 	 supplies 	 to 	 them.	 They 	
also relieve the retailers of maintaining 
large 	 stock 	 of 	 articles 	 and 	 extend 	 credit	
f aci l i ti es 	 to 	 them. 	 Most 	 of 	 the 	 f unct ions	
performed by wholesalers are such 
which cannot be eliminated. If there 
are no wholesalers, these functions 
shall have to be performed either by 
the manufacturers or the retailers.
Chapter 10.indd   217 9/2/2022   2:21:21 PM
2024-25
Page 4


Chapter 10
Internal t rade LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
describe the meaning and types of internal trade;
•	
specify the services of wholesalers to manufactures and retailers;
•	
explain the services of retailers;
•	
classify the types of retailers;
•	
explain the forms of small scale and large scale retailers; and
•	
state the role of Chambers of Commerce and industry in the promotion 
of internal trade.
•	
officiate 	the	 implementation	of	GST
Chapter 10.indd   215 9/2/2022   2:21:21 PM
2024-25
216 BUSINESS  STUDIES
10.1  Introduct Ion Trade 	 refers 	 to	 buying 	 and 	 selling 	 of	
goods and services with the objective 
of	 earning 	 profit. 	 Mankind	 has	 been	
engaged in trading, in some form or the 
other, since early days of civilisation. 
The 	 importance 	 of 	 trade 	 in 	 modern	
times has increased as new products 
are being developed every day and are 
being made available for consumption 
throughout the world. No individual or 
country 	 can 	 claim	 to	 be	 self-sufficient 	
in producing all the goods and services 
required 	 by 	 it. 	 Thus, 	 each 	 one 	 is	
engaged in producing what it is best 
suited to produce and exchanging the 
excess produce with others.
On the basis of geographical 
location of buyers and sellers, trade 
can broadly be classified into two 
categories (i) Internal trade; and (ii) 
External 	 trade. 	 Trade 	 which 	 takes	
place within a country is called internal 
trade. 	 Trad e 	 between 	 two 	 or 	 more	
countries, on the other hand, is called 
external 	 trade. 	 The 	 present 	 chapter	
discusses in detail the meaning and 
nature of internal trade and explains 
its different types and the role of 
chambers of commerce in promoting 
internal trade.
10.2 Internal t rade Buying and selling of goods and services 
within the boundaries of a nation are 
referred to as internal trade. Whether 
the products are purchased from a 
neighbourhood shop in a locality or a 
central 	 market 	 or 	 a 	 departmental 	 store	
or a mall or even from any door-to-door 
salesperson or from an exhibition, all 
these are examples of internal trade 
as the goods are purchased from an 
individual or establishment within a 
country. No custom duty or import 
duty is levied on such trade as goods 
are part of domestic production and 
are meant for domestic consumption. 
Have 	 you 	 ever 	 thought 	 if 	 there 	 were 	 no 	 markets, 	 how 	 products 	 of 	 different	
manufacturers would reach us? We are all aware of our general provisions store 
round the corner which is selling items of our daily need. But is that enough? When 
we	 need 	 to 	 buy	 items 	 of 	 a	 specialised 	 nature,	 we 	 like	 to	 look	 at	 bigger	 markets	 or	
shops with variety. Our observation tells us that there are different types of shops 
selling different items or specialised goods and depending on our requirements 
we	 purchase	 from 	 certain	 shops 	 or	 markets.	 In	 rural 	 areas, 	 we 	 may	 have	 noticed 	
people selling their goods on the streets, these goods may range from vegetables to 
c l o t he s . 	 Thi s 	 i s 	 a 	 c o m p l e t e l y	 di f f e r e nt 	 s c e ne 	 f r o m 	 w hat 	 w e 	 s e e 	 i n 	 t he 	 ur ba n 	 a r e a s .	 I n	
our 	 country, 	 all 	 kinds	 of	 markets	 co-exist	 in 	 harmony. 	 With 	 the 	 advent	 of 	 imported 	
goods and multinational corporations, we have shops selling these products too. 
In big towns and cities, there are many retail shops selling particular branded 
products only. Another aspect of all this is, how these products reach the shops 
from	 the 	 manufacturers?	 There 	 must 	 be 	 some	 middlemen 	 doing	 this 	 job.	 Are 	 they	
really useful or do prices increase because of them?
Chapter 10.indd   216 9/2/2022   2:21:21 PM
2024-25
217 INTERNAL TRADE
Generally, 	 payment 	 has	 to 	 be 	 made 	 in 	
the legal tender of the country or any 
other acceptable currency.
Internal 	 trade 	 can 	 be 	 classified 	 into	
two broad categories viz., (i) wholesale 
trade 	 and 	 (i i ) 	 retail 	 trade. 	 General l y, 	 for	
products, which are to be distributed 
to a large number of buyers who 
are located over a wide geographical 
area, 	 it 	 becomes	 very 	 difficult 	 for	 the	
producers to reach all the consumers 
or users directly. For example, if 
vegetable oil or bathing soap or salt 
produced in a factory in any part of 
the country are to reach millions of 
consumers throughout the country, 
the help of wholesalers and retailers 
becomes very important. Purchase 
and sale of goods and services in large 
quantities for the purpose of resale 
or intermediate use is referred to as 
wholesale trade.
On the other hand, purchase 
and sale of goods in relatively small 
quantities, generally to the ultimate 
consumers, is referred to as retail 
trade. 	 Traders 	 dealing 	 in 	 wholesale	
trade are called wholesale traders 
and those dealing in retail trade are 
called retailers. Both retailers and 
wholesalers 	 are	 important 	 marketing	
intermediaries who perform very useful 
functions in the process of exchange of 
goods and services  between producers 
and users or ultimate consumers. 
Internal trade aims at equitable 
distribution of goods within a nation 
speedily and at reasonable cost.
10.3 Whol esale t rade As discussed in the previous section, 
wholesale trade refers to buying and 
selling of goods and services in large 
quantities for the purpose of resale or 
intermediate use.
Wholesaling is concerned with 
the activities of those persons or 
establishments which sell to 
retailers and other merchants, and/
or to industrial, institutional and 
commercial users but who do not 
sell	 in	 significant 	 amount 	 to 	 ultimate 	
consumers. Wholesalers serve as an 
i m port ant 	 l i nk 	 betw een 	 manuf act ur er s	
and 	 retai l ers. 	 They 	 enabl e 	 the	
producers not only to reach large 
number of buyers spread over a wide 
geographical area (through retailers), 
but also  to perform a variety of 
functions in the process of distribution 
of	 goods 	 and	 services. 	 They	 generally 	
t ake 	 t he 	 t i tl e 	 of 	 t he 	 goods 	 and 	 bear	
the	 business	 risks	 by	 purchasing 	 and 	
selling the goods in their own name. 
Th ey 	 pu rch ase 	 in 	 bu lk 	 an d 	 sell 	 in 	 small	
lots to retailers or industrial users. 
They 	 undertake 	 various 	 activities 	 such	
as 	 grading	 of 	 products,	 packing 	 into 	
smaller lots, storage, transportation, 
promotion of goods, collection of 
market 	 information, 	 collection 	 of 	 small	
and scattered orders of retailers and 
distribution	 of 	 supplies 	 to 	 them.	 They 	
also relieve the retailers of maintaining 
large 	 stock 	 of 	 articles 	 and 	 extend 	 credit	
f aci l i ti es 	 to 	 them. 	 Most 	 of 	 the 	 f unct ions	
performed by wholesalers are such 
which cannot be eliminated. If there 
are no wholesalers, these functions 
shall have to be performed either by 
the manufacturers or the retailers.
Chapter 10.indd   217 9/2/2022   2:21:21 PM
2024-25
218 BUSINESS  STUDIES
Services of Wholesalers
Wholesalers provide various services 
to manufacturers as well as retailers 
and provide immense help in the 
distribution of goods and services. 
By	 making 	 the	 products	 available 	 at	
a place where these are needed and 
at a time when these are needed for 
consumption or use, they provide both 
the	 time 	 and 	 place 	 utility.	 The	 various	
services of wholesalers to different 
sections are discussed below:
10.3.1 Services to Manufacturers
Major 	 services 	 offered	 by 	 wholesalers 	
to the producers of goods and services 
are given as below:
(i) Facilitating large scale production: 
Wholesalers collect small orders 
from a number of retailers and pass 
on the pool of such orders to the 
manufacturers 	 and	 make	 purchases	
in 	 bulk 	 quantities. 	 This 	 enables 	 the	
producers 	 to 	 undertake 	 production 	 on	
a 	 large 	 scale 	 an d 	 take 	 advan tage 	 of 	 th e	
economies of scale.
(ii) Bearing risk: 	 The 	 wholesale	
merchants deal in goods in their own 
name,	 take 	 delivery	 of	 the	 goods	 and	
ke ep 	 t he 	 goods 	 pur chase d	 i n 	 l ar ge	 l ot s	
in their warehouses. In the process, 
they 	 bear 	 variety	 of	 risks	 such 	 as	 the	
risk 	 of 	 fall 	 in	 prices,	 theft,	 pilferage, 	
spoilage, 	 fire, 	 etc. 	 To 	 that	 extent, 	 they	
relieve the manufacturers from bearing 
these 	 risks.
(iii) Financial assistance: 	 The	
wholesalers provide financial 
assistance to the manufacturers 
in the sense that they generally 
make 	 cash 	 payment 	 for 	 the 	 goods	
purchased 	 by 	 them. 	 To 	 that 	 extent, 	 the	
manufacturers 	 need 	 not 	 block 	 their	
capital	 in	 the	 stocks. 	 Sometimes 	 they 	
also advance money to the producers 
for	 bulk	 orders	 placed	by	 them.
(iv) Expert advice: As the wholesalers 
are in direct contact with the retailers, 
they are in a position to advice the 
manufacturers about various aspects 
including customer’s tastes and 
preferences, 	 market 	 condi ti ons,	
competitive activities and the features 
pref erred 	 by 	 the 	 buyers. 	 They 	 serve	
as 	 an 	 important 	 source 	 of 	 market	
information on these and related 
aspects.
(v) Help in marketing function: 
The 	 w hol esal ers 	 t ake 	 care 	 of 	 t he	
distribution of goods to a number of 
retailers who, in turn, sell these goods 
to a large number of customers spread 
over 	 a 	 large 	 geographical 	 area. 	 This	
relieves the manufacturers from many 
of	 the	 marketing 	 activities 	 and 	 enable 	
them to concentrate on the production 
activity.
(vi) Facilitate production continuity: 
The 	 w hol es al er s 	 f aci l i t at e 	 cont i nui t y 	 of	
production activity throughout the 
year by purchasing the goods as and 
when these are produced and storing 
them till the time these are demanded 
by retailers or consumers in the 
market.
(vii) Storage: 	 Whol esal ers 	 t ake	
delivery of goods when these are 
p rod u ced 	 in 	 factory 	 an d 	 keep 	 th em	
in 	 their 	 godowns/warehouses. 	 This	
reduces the burden of manufacturers 
of providing for storage facilities for the 
finished 	 products.	 They	 thus	 provide 	
time utility. 
Chapter 10.indd   218 9/2/2022   2:21:21 PM
2024-25
Page 5


Chapter 10
Internal t rade LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
describe the meaning and types of internal trade;
•	
specify the services of wholesalers to manufactures and retailers;
•	
explain the services of retailers;
•	
classify the types of retailers;
•	
explain the forms of small scale and large scale retailers; and
•	
state the role of Chambers of Commerce and industry in the promotion 
of internal trade.
•	
officiate 	the	 implementation	of	GST
Chapter 10.indd   215 9/2/2022   2:21:21 PM
2024-25
216 BUSINESS  STUDIES
10.1  Introduct Ion Trade 	 refers 	 to	 buying 	 and 	 selling 	 of	
goods and services with the objective 
of	 earning 	 profit. 	 Mankind	 has	 been	
engaged in trading, in some form or the 
other, since early days of civilisation. 
The 	 importance 	 of 	 trade 	 in 	 modern	
times has increased as new products 
are being developed every day and are 
being made available for consumption 
throughout the world. No individual or 
country 	 can 	 claim	 to	 be	 self-sufficient 	
in producing all the goods and services 
required 	 by 	 it. 	 Thus, 	 each 	 one 	 is	
engaged in producing what it is best 
suited to produce and exchanging the 
excess produce with others.
On the basis of geographical 
location of buyers and sellers, trade 
can broadly be classified into two 
categories (i) Internal trade; and (ii) 
External 	 trade. 	 Trade 	 which 	 takes	
place within a country is called internal 
trade. 	 Trad e 	 between 	 two 	 or 	 more	
countries, on the other hand, is called 
external 	 trade. 	 The 	 present 	 chapter	
discusses in detail the meaning and 
nature of internal trade and explains 
its different types and the role of 
chambers of commerce in promoting 
internal trade.
10.2 Internal t rade Buying and selling of goods and services 
within the boundaries of a nation are 
referred to as internal trade. Whether 
the products are purchased from a 
neighbourhood shop in a locality or a 
central 	 market 	 or 	 a 	 departmental 	 store	
or a mall or even from any door-to-door 
salesperson or from an exhibition, all 
these are examples of internal trade 
as the goods are purchased from an 
individual or establishment within a 
country. No custom duty or import 
duty is levied on such trade as goods 
are part of domestic production and 
are meant for domestic consumption. 
Have 	 you 	 ever 	 thought 	 if 	 there 	 were 	 no 	 markets, 	 how 	 products 	 of 	 different	
manufacturers would reach us? We are all aware of our general provisions store 
round the corner which is selling items of our daily need. But is that enough? When 
we	 need 	 to 	 buy	 items 	 of 	 a	 specialised 	 nature,	 we 	 like	 to	 look	 at	 bigger	 markets	 or	
shops with variety. Our observation tells us that there are different types of shops 
selling different items or specialised goods and depending on our requirements 
we	 purchase	 from 	 certain	 shops 	 or	 markets.	 In	 rural 	 areas, 	 we 	 may	 have	 noticed 	
people selling their goods on the streets, these goods may range from vegetables to 
c l o t he s . 	 Thi s 	 i s 	 a 	 c o m p l e t e l y	 di f f e r e nt 	 s c e ne 	 f r o m 	 w hat 	 w e 	 s e e 	 i n 	 t he 	 ur ba n 	 a r e a s .	 I n	
our 	 country, 	 all 	 kinds	 of	 markets	 co-exist	 in 	 harmony. 	 With 	 the 	 advent	 of 	 imported 	
goods and multinational corporations, we have shops selling these products too. 
In big towns and cities, there are many retail shops selling particular branded 
products only. Another aspect of all this is, how these products reach the shops 
from	 the 	 manufacturers?	 There 	 must 	 be 	 some	 middlemen 	 doing	 this 	 job.	 Are 	 they	
really useful or do prices increase because of them?
Chapter 10.indd   216 9/2/2022   2:21:21 PM
2024-25
217 INTERNAL TRADE
Generally, 	 payment 	 has	 to 	 be 	 made 	 in 	
the legal tender of the country or any 
other acceptable currency.
Internal 	 trade 	 can 	 be 	 classified 	 into	
two broad categories viz., (i) wholesale 
trade 	 and 	 (i i ) 	 retail 	 trade. 	 General l y, 	 for	
products, which are to be distributed 
to a large number of buyers who 
are located over a wide geographical 
area, 	 it 	 becomes	 very 	 difficult 	 for	 the	
producers to reach all the consumers 
or users directly. For example, if 
vegetable oil or bathing soap or salt 
produced in a factory in any part of 
the country are to reach millions of 
consumers throughout the country, 
the help of wholesalers and retailers 
becomes very important. Purchase 
and sale of goods and services in large 
quantities for the purpose of resale 
or intermediate use is referred to as 
wholesale trade.
On the other hand, purchase 
and sale of goods in relatively small 
quantities, generally to the ultimate 
consumers, is referred to as retail 
trade. 	 Traders 	 dealing 	 in 	 wholesale	
trade are called wholesale traders 
and those dealing in retail trade are 
called retailers. Both retailers and 
wholesalers 	 are	 important 	 marketing	
intermediaries who perform very useful 
functions in the process of exchange of 
goods and services  between producers 
and users or ultimate consumers. 
Internal trade aims at equitable 
distribution of goods within a nation 
speedily and at reasonable cost.
10.3 Whol esale t rade As discussed in the previous section, 
wholesale trade refers to buying and 
selling of goods and services in large 
quantities for the purpose of resale or 
intermediate use.
Wholesaling is concerned with 
the activities of those persons or 
establishments which sell to 
retailers and other merchants, and/
or to industrial, institutional and 
commercial users but who do not 
sell	 in	 significant 	 amount 	 to 	 ultimate 	
consumers. Wholesalers serve as an 
i m port ant 	 l i nk 	 betw een 	 manuf act ur er s	
and 	 retai l ers. 	 They 	 enabl e 	 the	
producers not only to reach large 
number of buyers spread over a wide 
geographical area (through retailers), 
but also  to perform a variety of 
functions in the process of distribution 
of	 goods 	 and	 services. 	 They	 generally 	
t ake 	 t he 	 t i tl e 	 of 	 t he 	 goods 	 and 	 bear	
the	 business	 risks	 by	 purchasing 	 and 	
selling the goods in their own name. 
Th ey 	 pu rch ase 	 in 	 bu lk 	 an d 	 sell 	 in 	 small	
lots to retailers or industrial users. 
They 	 undertake 	 various 	 activities 	 such	
as 	 grading	 of 	 products,	 packing 	 into 	
smaller lots, storage, transportation, 
promotion of goods, collection of 
market 	 information, 	 collection 	 of 	 small	
and scattered orders of retailers and 
distribution	 of 	 supplies 	 to 	 them.	 They 	
also relieve the retailers of maintaining 
large 	 stock 	 of 	 articles 	 and 	 extend 	 credit	
f aci l i ti es 	 to 	 them. 	 Most 	 of 	 the 	 f unct ions	
performed by wholesalers are such 
which cannot be eliminated. If there 
are no wholesalers, these functions 
shall have to be performed either by 
the manufacturers or the retailers.
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218 BUSINESS  STUDIES
Services of Wholesalers
Wholesalers provide various services 
to manufacturers as well as retailers 
and provide immense help in the 
distribution of goods and services. 
By	 making 	 the	 products	 available 	 at	
a place where these are needed and 
at a time when these are needed for 
consumption or use, they provide both 
the	 time 	 and 	 place 	 utility.	 The	 various	
services of wholesalers to different 
sections are discussed below:
10.3.1 Services to Manufacturers
Major 	 services 	 offered	 by 	 wholesalers 	
to the producers of goods and services 
are given as below:
(i) Facilitating large scale production: 
Wholesalers collect small orders 
from a number of retailers and pass 
on the pool of such orders to the 
manufacturers 	 and	 make	 purchases	
in 	 bulk 	 quantities. 	 This 	 enables 	 the	
producers 	 to 	 undertake 	 production 	 on	
a 	 large 	 scale 	 an d 	 take 	 advan tage 	 of 	 th e	
economies of scale.
(ii) Bearing risk: 	 The 	 wholesale	
merchants deal in goods in their own 
name,	 take 	 delivery	 of	 the	 goods	 and	
ke ep 	 t he 	 goods 	 pur chase d	 i n 	 l ar ge	 l ot s	
in their warehouses. In the process, 
they 	 bear 	 variety	 of	 risks	 such 	 as	 the	
risk 	 of 	 fall 	 in	 prices,	 theft,	 pilferage, 	
spoilage, 	 fire, 	 etc. 	 To 	 that	 extent, 	 they	
relieve the manufacturers from bearing 
these 	 risks.
(iii) Financial assistance: 	 The	
wholesalers provide financial 
assistance to the manufacturers 
in the sense that they generally 
make 	 cash 	 payment 	 for 	 the 	 goods	
purchased 	 by 	 them. 	 To 	 that 	 extent, 	 the	
manufacturers 	 need 	 not 	 block 	 their	
capital	 in	 the	 stocks. 	 Sometimes 	 they 	
also advance money to the producers 
for	 bulk	 orders	 placed	by	 them.
(iv) Expert advice: As the wholesalers 
are in direct contact with the retailers, 
they are in a position to advice the 
manufacturers about various aspects 
including customer’s tastes and 
preferences, 	 market 	 condi ti ons,	
competitive activities and the features 
pref erred 	 by 	 the 	 buyers. 	 They 	 serve	
as 	 an 	 important 	 source 	 of 	 market	
information on these and related 
aspects.
(v) Help in marketing function: 
The 	 w hol esal ers 	 t ake 	 care 	 of 	 t he	
distribution of goods to a number of 
retailers who, in turn, sell these goods 
to a large number of customers spread 
over 	 a 	 large 	 geographical 	 area. 	 This	
relieves the manufacturers from many 
of	 the	 marketing 	 activities 	 and 	 enable 	
them to concentrate on the production 
activity.
(vi) Facilitate production continuity: 
The 	 w hol es al er s 	 f aci l i t at e 	 cont i nui t y 	 of	
production activity throughout the 
year by purchasing the goods as and 
when these are produced and storing 
them till the time these are demanded 
by retailers or consumers in the 
market.
(vii) Storage: 	 Whol esal ers 	 t ake	
delivery of goods when these are 
p rod u ced 	 in 	 factory 	 an d 	 keep 	 th em	
in 	 their 	 godowns/warehouses. 	 This	
reduces the burden of manufacturers 
of providing for storage facilities for the 
finished 	 products.	 They	 thus	 provide 	
time utility. 
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219 INTERNAL TRADE
10.3.2 Services to Retailers
Th e 	 important 	 services 	 offered 	 by	
manufacturers to the retailers are 
described as below:
(i) Availability of goods: Retailers 
have 	 to 	 maintain 	 adequate 	 stock	
of varied commodities so that they 
can offer variety to their customers. 
The 	 w hol esal er s 	 m ake 	 t he 	 pr oduct s	
of various manufacturers readily 
available 	 to	 the 	 retailers.	 This	 relieves	
the	 retailers 	 of 	 the 	 work	 of 	 collecting	
goods from several producers and 
keeping 	 big	inventory 	 of 	the 	same.
(ii) Marketing support: 	 The 	 w hol e-
salers 	 perform 	 various 	 marketing	
functions and provide support to the 
retailers. 	 They 	 undertake	 advertising	
and other sales promotional activities 
to induce customers to purchase the 
goods. 	 The 	 retailers 	 are 	 benefitted 	 as 	 it	
helps them in increasing the demand 
for various new products.
(iii) Grant of credit: 	 The 	 wholesalers	
generally extend credit facilities to 
their 	 regular 	 customers. 	 This	 enables 	
the retailers to manage their business 
with 	 relatively 	 small 	 amount 	 of 	 working	
capital.
(iv) Specialised knowledge: 	 The	
wholesalers specialise in one line of 
products 	 and	 know 	 the 	 pulse 	 of	 the	
market. 	 Th ey 	 pass 	 on 	 the 	 ben efit 	 of	
their 	 specialised 	 knowledge 	 to 	 the	
r e t ai l er s . 	 The y 	 i nf or m 	 t he 	 r e t ai l er s	
about the new products, their uses, 
qual i t y, 	 pri c es , 	 et c. 	 They 	 ma y 	 al s o	
advise them on the decor of the retail 
outlet, allocation of shelf space and 
demonstration of certain products.
(v) Risk sharing: 	 The 	 wholesalers	
purchase 	 in	 bulk	 and	 sell	 in	 relatively	
small quantities to the retailers. Being 
able to purchase merchandise in 
smaller quantities, retailers are in a 
position 	 to	 avoid	 the 	 risk 	 of	 storage,	
pilferage, obsolescence, reduction in 
prices and demand fluctuations in 
respect of larger quantites of goods 
that they would have to purchase in 
case the services of wholesalers are 
not available.
10.4 r eta Il t rade A retailer is a business enterprise 
that is engaged in the sale of goods 
and services directly to the ultimate 
consumers. 	 The 	 retailer 	 normally 	 buys	
goods in large quantities from the 
wholesalers and sells them in small 
quantities to the ultimate consumers. 
The	 retails	 represents 	 the 	 final 	 	 stage 	
in the distribution where goods are 
transferred from the hands of the 
manufacturers or wholesalers to the 
final 	 consumers 	 or	 users.	 Retailing	 is, 	
thus, that branch of business which 
is devoted to the sale of goods and 
services to the ultimate consumers for 
their personal and non-business use. 
There 	 may 	 be 	 diff erent 	 ways 	 of	
selling the goods viz., personally, 
on telephone, or through vending 
machines. Also, the products may be 
sold at different places, viz., in a store, 
at the customer’s house or any other 
place.	 Some 	 of 	 the 	 common 	 situations 	
that we encounter in our daily life, 
for example, are the sale of ball pens 
or 	 s o m e 	 m ag i c 	 m e di c i ne 	 o r 	 bo ok 	 of	
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