Q1. Write a paragraph about type of
trade using the points mentioned in
the tree diagram:
Types of trade
on the basic of
quantity of good
On the basic of
the extent of trade
region.
Wholesale
Retail
trade
trade
Domestic/
internal
trade
internation-
all external
trade .
Answers
Answer:
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Did you know India has the highest density of retail stores in the world? Due to our immense population, internal trade in India is actually quite robust. Retailers, wholesalers, and other such middlemen are the lifelines of India’s trade sector. Let us learn about internal trade and the importance of wholesale trade.
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Internal Trade
Internal trade is also known as domestic trade, and as the name suggests it is the trade of domestic goods within the confines of the geographical boundaries of a nation. So the buying and selling of either goods or services done within a country is the internal trade.
In such cases of internal trade, there is no levying of import/export taxes or customs duties. Only local government taxes will apply. These are goods domestically produced for domestic consumption only. Now there are two broad categories of internal trade, namely wholesale trade and retail trade. Here we will be focussing on the intricacies of wholesale trade.
Distribution channel: Wholesalers, Retailer
Wholesale Trade
Wholesale trade is one of the main categories of domestic trade. In this form of trade goods are generally bought in huge quantities from the manufacturer. These goods are then warehoused and finally sold to retailers, middlemen, merchants etc. The goods in wholesale trade are not sold to the final consume directly. So all the customers of a wholesaler are commercial users or other intermediaries, not the ultimate customers.
Wholesalers are an important link in the trade cycle of a country. They help link the manufacturers with the retailers. Since wholesaler deal on the pre-consumer level, they do not have to offer large varieties. They generally trade in only one type or one category of goods.
But they order in bulk and warehouse these products. So the manufacturer does not have to worry about storage and the retailer can buy according to his needs. In return for this, a wholesaler will enjoy the economies of scale.
Browse more Topics under Internal Trade
Retail Trade
Types of Retailing Trade
Fixed Shop – Large Retailers and Chain Stores or Multiple Shops
Mail Order Houses, Consumer Cooperative Stores and Supermarkets
Role of Indian Chambers of Commerce and Industry in Promotion of Internal Trade
Importance of Wholesalers
The functions that wholesalers perform actually benefit both the manufacturer and the retailer. They undertake various activities to lessen the burden of them both. This is why even in the modern system of trade, with departmental stores and direct retail outlets, wholesalers still play a very important role in the trade cycle and the economy as a whole. Let us take a look.
Wholesalers Services to Manufacturers
Allows for Large Scale Production: Generally, manufacturers produce their goods in large quantities. This helps them keep costs low and enjoy economies of the scale. But they are only able to do so because wholesalers order in bulk. Wholesalers will round up all the small orders from various retailers and place an order in rather larger quantities with the manufacturers. This allows them to scale their production of goods, without worrying about warehousing or spoilage.
Risk Bearing: Once the wholesaler acquires the goods from the manufacturer, he also acquires of all the risks. This includes the risk of theft, fire, spoilage, change in demand, any many more such risks. He will even bear the cost of the insurance. In the absence of the wholesaler, such risks would remain with the producers until the goods were sold.
Financial Cooperation: Wholesalers actually provide a form of financial assistance to the producers. They more often than not make cash payments for their purchases. They at times even make advance payment if the purchase order is rather large. This allows the producers not only to avoid bad debts but also frees up their working capital.
Distribution Function: Distribution is one of the most important functions of marketing. It allows the producers to remove the barrier of place, by making the goods available in place of need. But it is actually wholesalers who perform this function for the manufacturers. They distribute the goods over a large geographical area by selling them to various widespread retailers.
Warehousing: Another important function of marketing. The wholesaler buys bulk quantities from the manufacturers and stores these goods in their own warehouses and godowns. This reduces the storage headaches of the manufacturers to a large extent.
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