Trade within boundaries

INTRODUCTION

Trade plays a crucial role in the growth of every economy. It allows people, businesses, and countries to exchange goods and services to fulfill their needs. The basic idea of trade is simple—it involves buying and selling goods in exchange for money, along with the transfer of ownership from one person to another.

In ancient times, trade was done through barter, where people directly exchanged goods and services. However, this system had many problems, such as difficulty in finding someone who needed what you had and had what you needed. The invention of money solved these issues, making trade much easier and more efficient.

Today, trade happens at different levels—within local markets, between different states in a country, and even across the world. It helps businesses grow, creates jobs, and improves the overall economy by ensuring that goods and services reach the right people at the right time.

Trade means the exchange of goods and services between people, businesses, or countries. It involves buying and selling to fulfill needs and earn profit. Trade connects producers and consumers, helping goods reach those who need them.

For example, a farmer sells vegetables to a shopkeeper, who then sells them to customers. This exchange benefits both the seller and the buyer.

Trade is essential because it allows people to get what they need, encourages business growth, and supports the economy.

Trade can be classified into two main types-

TYPES OF TRADE

Internal trade 

Internal trade refers to the buying and selling of goods and services within the same country. Both buyers and sellers belong to the same nation, and transactions follow national business laws. Examples include purchasing goods from local shops, malls, exhibitions, regional markets, departmental stores, or door-to-door salesmen. Trade between different states or cities is also a part of internal trade.

Since producers are located in one place and consumers are spread across different regions, a distribution channel is needed. Wholesalers buy goods in bulk from producers and sell them to retailers, who then provide them to consumers in smaller quantities. This system ensures that goods are available at the right time, in the right place, and in the right quantity.

CHANNEL OF DISTRIBUTION

Flow of Goods in a Business Chain:  

Producer/Manufacturer → Wholesaler → Retailer → Consumer

TYPES OF INTERNAL TRADE

Internal trade is classified into two types: Wholesale Trade and Retail Trade. 

A) Wholesale Trade

Wholesale trade refers to the purchase of goods in large quantities from manufacturers or producers for resale to retailers. The person engaged in wholesale trade is called a wholesaler. Since a wholesaler buys from manufacturers and sells to retailers, they act as both a buyer and a seller.

 Wholesalers play a crucial role in the distribution of goods and services, helping producers reach consumers efficiently.

Definitions

1. Philip Kotler: "Wholesaling includes all activities involved in selling goods or services to those who buy for resale or for business use."

Features of wholesaler

1. Bulk Purchases – Wholesalers buy goods in large quantities from producers.

2. Risk-Taking – They bear risks related to storage, price fluctuations, and demand changes.

3. Limited Product Range – They usually deal with one or a few types of goods.

4. High Capital Requirement – Significant investment is needed for bulk buying and storage.

5. Price Stability – Wholesalers help stabilize prices by balancing supply and demand.

6. Market Information – Manufacturers get direct market feedback through wholesalers.

7. Retailer Support – They supply goods to retailers based on their needs.

Wholesalers provide valuable services to both manufacturers and retailers.

A. Services to Manufacturers:

1. Large Purchases: A wholesaler buys goods in bulk from manufacturers and sells them to retailers after collecting their orders.

2. Storage: Wholesalers have their own storage facilities, which help bridge the time gap between production and consumption.

3. Transportation: They use their own transportation to deliver goods from the place of production to retailers.

4. Financial Assistance: Wholesalers often pay manufacturers in advance, helping them produce goods faster.

5. Market Information: They provide manufacturers with updated market information, including demand trends, consumer preferences, and market conditions.

B. Services to Retailers:

1. Stock of Goods: Wholesalers maintain large stocks, ensuring retailers can easily obtain goods whenever needed.

2. Regular Supply: They ensure a steady supply of goods, reducing the need for retailers to maintain large inventories.

3. Risk Bearing: Wholesalers bear risks related to price fluctuations and unsold stock, freeing retailers from these concerns.

4. Financial Support: They provide financial assistance to retailers through credit facilities, discounts, and flexible payment options, improving retailers' working capital.

5. Market Information: Wholesalers inform retailers about market trends, new products, product variations, and promotional schemes. They may also offer guidance on purchasing strategies.

B) Retail Trade

Retail trade refers to the sale of goods in relatively small quantities to the final consumer. These goods are sold by wholesalers, distributors, or dealers. The person engaged in retail trade is known as a retailer.

Retailers operate at the local level or within a limited area, providing goods directly to consumers at reasonable prices.

Definitions:

. William Stanton:

"Retail trade includes all activities directly related to the sale of goods and services to the ultimate consumer for personal and non-business use."

Features of Retail Trade

1. Direct Sale to Consumers: Retail trade involves selling goods directly to the final consumer for personal use.

2. Small Quantity Sales: Goods are sold in smaller quantities as per the needs of individual customers.

3. Variety of Products: Retailers offer a wide range of products to meet different customer preferences.

4. Local Operation: Most retailers operate within a limited area, such as a neighborhood or city market.

5. Personalized Service: Retailers provide personal attention, advice, and after-sales service to customers.

Services of Retailers to Wholesalers

1. Connecting Link: Retailers act as a bridge between wholesalers and consumers, ensuring smooth product distribution.

2. Helps in Distribution: Retailers help quickly distribute goods, especially perishable items like dairy products, fruits, vegetables, and pulses.

3. Marketing Support: If wholesalers cannot handle marketing activities, retailers take on the responsibility. They may manage transportation, address supply shortages, or advertise products to boost sales.

4. Providing Market Information: Retailers inform wholesalers about changing consumer preferences, demand patterns, and market trends.

5. Attracting Consumers: Retailers advertise products and create awareness, which helps wholesalers increase sales.

Services of Retailers to Consumers

1. Continuous Supply: Retailers maintain sufficient stock, ensuring consumers get goods whenever needed.

2. Easy Accessibility: Being located near residential areas, retailers offer convenience to consumers by saving time and effort.

3. Home Delivery: Many retailers provide home delivery services, making shopping more convenient for customers.

4. Wide Product Selection: Retailers offer a variety of products, allowing consumers to choose based on their preferences and needs.

5. Credit Facility: Some retailers extend credit to regular customers, enabling them to buy goods even when short on cash.

6. Customer Assistance: Retailers help consumers by providing product information, recommendations, and after-sales support.

TYPES OF RETAILERS

Types of Retailers

Retailers are classified into two main types: Itinerant Retailers (who move from place to place) and Fixed Shop Retailers (who have a permanent location)

Itinerant Retailers

These retailers do not have a fixed shop and move around to sell their goods. They require low capital investment and generally deal in daily-use items.

Types of Itinerant Retailers:

1. Hawkers & Peddlers – Move from street to street carrying goods in carts or baskets. They sell items like vegetables, fruits, bangles, and household goods at low prices.