NCERT Solutions - Internal Trade

Short Answer Questions

Q1: What is meant by internal trade?
Ans: Internal trade refers to the buying and selling of goods and services within the national boundaries of a country. In other words, it is the exchange of goods and services inside the domestic territory for meeting domestic demand. Purchases from a local shop, a mall or an exhibition are all examples of internal trade. The government does not levy customs or import duties on goods produced and sold within the country for domestic consumption.
Internal trade can be classified into two main categories:
(a) Wholesale trade: Buying and selling of goods in bulk, normally for resale to retailers or other business buyers.
(b) Retail trade: Buying and selling of goods in small quantities for final consumption by customers.

Q2: Specify the characteristics of fixed shop retailers.
Ans: Fixed-shop retailers operate from permanent establishments such as shops or showrooms. They do not move from place to place to serve customers. Some key characteristics are:

• They may operate on a small or large scale and generally have greater resources than itinerant traders.
• They usually deal in more than one product; their range can include both durable and non-durable goods.
• Fixed-shop retailers often provide services such as free home delivery and supply of goods on credit to regular customers.

Q3: What purpose is served by wholesalers providing warehousing facilities?
Ans: Wholesalers buy goods in bulk from manufacturers, store them and distribute them to retailers in smaller quantities. By providing warehousing facilities they create place utility (making goods available near distribution centres) and time utility (storing goods until they are needed). Their warehouses reduce the storage burden on manufacturers, enabling manufacturers to produce on a larger scale and maintain smooth supply to retailers.

Q4: How does market information provided by the wholesalers benefit the manufacturers?
Ans: Wholesalers supply manufacturers with valuable market information such as customer tastes and preferences, prevailing market conditions, the level of competition and the features demanded by consumers. This feedback helps manufacturers to adjust product design, quality, features and production levels to meet changing market needs.

Q5: How does the wholesaler help the manufacturer in availing the economies of scale?
Ans: Wholesalers purchase large quantities from manufacturers, which enables manufacturers to maintain higher production volumes. By storing, marketing and distributing these bulk purchases, wholesalers reduce manufacturers' need for large storage and distribution investments. This support lowers the manufacturer's average cost per unit and helps them obtain economies of scale.

Q6: Distinguish between single line stores and speciality stores. Can you identify such stores in your locality?
Ans: Single-line stores specialise in a single product line but offer a wide variety within that line. For example, a shop selling garments may carry many types of clothes for men, women and children. Speciality stores, by contrast, concentrate on a narrower segment within a product line - for example, a shop that sells only men's clothing and stocks many brands and styles of that category. Based on these features, one can identify whether local shops are single-line stores or speciality stores by observing the range and focus of their merchandise.

Q7: How would you differentiate between street traders and street shops?
Ans:

Q8: Explain the services offered by wholesalers to manufacturers.
Ans: Wholesalers provide several important services to manufacturers, including:

• Facilitating large-scale production: By buying in bulk, wholesalers enable manufacturers to produce larger quantities without worrying about immediate distribution.
• Providing storage facilities: Wholesalers store purchased goods in their godowns or warehouses, reducing manufacturers' need for storage space.
• Collecting market information: Wholesalers supply feedback on customer preferences, market conditions and competition, helping manufacturers align production with demand.

Q9: What are the services offered by retailers to wholesalers and consumers?
Ans: Retailers perform several services that link manufacturers, wholesalers and final consumers. These include:

• Providing information to customers: Retailers inform customers about new products, features and prices, helping them make purchase decisions.
• Providing information to wholesalers: Retailers pass on customer feedback, demand patterns and competitive information to wholesalers, who in turn inform manufacturers.
• Storing a variety of goods: Retailers keep a range of products according to consumer tastes, allowing customers to choose from available options.
• Facilitating distribution: Retailers ensure goods reach consumers for final consumption.
• Helping promotion: Through direct contact with customers, retailers promote sales via demonstrations, displays and personal selling.

Long Answer Questions

Q1: Itinerant traders have been an integral part of internal trade in India. Analyse the reasons for their survival in spite of competition from large scale retailers.
Ans: Itinerant traders, also called mobile traders, do not have fixed shops and move from place to place to sell goods. They usually sell low-priced, everyday items. The reasons for their continued survival despite competition from large-scale retailers are:

• Low prices: Itinerant traders have low overheads (little or no expenditure on storage, advertising or permanent shop premises) and short inventories, which allows them to sell goods at lower prices.
• Personal attention: They sell directly to consumers and often provide personal service, quickly responding to customer needs and feedback.
• Convenience and quick availability: They sell at or near customers' doorsteps and can provide goods immediately when needed, unlike some large retailers located in central areas.
• Lower risk of losses: Dealing mainly in low-priced daily-use items reduces the risk of large unsold stocks and heavy losses that can affect large retailers who handle expensive inventories.

Q2: Discuss the features of a departmental store. How are they different from multiple shops or chain stores.
Ans: Department stores are large, fixed establishments offering a wide variety of products under one roof. Their main features include:

• Central locations: They are usually situated in central areas to attract large numbers of customers.
• Defined hierarchy: Management follows a formal organisational structure with department managers under senior management.
• Absence of middlemen: They often buy directly from manufacturers, reducing intermediary costs.
• Centralised purchasing and decentralised sales: Purchases may be handled centrally while each department manages its own sales.

Differences between department stores and multiple shops

Q3: Why are consumers cooperatives stores considered to be less expensive? What are its relative advantages over other large scale retailers?
Ans: Consumer cooperative stores are owned and managed by groups of consumers to supply goods at reasonable prices. They eliminate many middlemen by buying directly from manufacturers or wholesalers and sell to members at lower rates. As they are not profit-driven, prices tend to be lower than in regular retail outlets. Their capital requirements are usually modest compared with large-scale retailers.
Advantages of consumer cooperative stores over large-scale retailers include:

• Democratic management: They are run by elected committees and operate on the principle of one member, one vote.
• Limited liability: Members' liability is limited to the amount they have invested in shares.
• Lower prices: Direct purchases from producers and no profit motive help keep prices low for members.

Q4: Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
 Ans: Retail shops perform essential functions that make life convenient for consumers. Without local retail shops, consumers would face several difficulties:

• Lack of product information: Retailers inform customers about new products, features and prices; without them consumers would find it harder to decide what to buy.
• Reduced choice: Retail shops stock a wide range of goods, enabling consumers to compare products; their absence would limit choice.
• Inconvenient locations: Local retail shops are close to residential areas and provide easy access; without them consumers would need to travel farther to purchase essentials.
• No credit facilities: Many retailers grant small credit to regular customers; without local shops, this convenience would disappear.
• Irregular availability: Retailers ensure timely availability of everyday goods; their absence could cause shortages or delay.
• No after-sales service: Many retailers arrange repairs or servicing; without them customers would find it difficult to get support for purchased goods.

Q5: Explain the usefulness of mail order houses. What types of products are generally handled by them? Specify?
Ans: Mail-order houses sell goods through postal or courier services, using catalogues, circulars or advertisements to inform customers about products, prices and payment terms. Their usefulness includes:

• Wide geographical reach: They can serve customers across the country by sending goods through the mail.
• Customer convenience: Goods are delivered to the customer's doorstep, saving time and effort.
• Lower costs: Eliminating many intermediaries can reduce prices for consumers.
• Low capital requirement: They do not need large display space or showrooms, so initial investment is comparatively small.

Mail-order houses generally handle products that are non-perishable, standardised and easy to describe and transport. Typical product characteristics are:
(a) Easy to grade and standardise.
(b) Low transportation cost.
(c) High and steady market demand.
(d) Available in bulk throughout the year.
(e) Limited market competition.
(f) Simple to describe in a catalogue or circular.