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| Study with love |
When products or services are provided in exchange of products, services or money, it is known as trade. These activities are done with the purpose of profit. If these transactions are undertaken within the boundaries of a country, it is known as internal trade.
Natural wealth, geographical situation, atmosphere and means, facilities are not available in equal quantum in all the areas, but customers at various places are in need of them. E.g. various types of grains, pulses and fruits, etc. are produced in various geographical are depending upon their quality of land and atmosphere, etc. These products are sent to customers residing in other areas with the purpose of profit. This activity is known as internal trade.
Trading activities can be understood easily through the following classification :
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| Classification of trading activities |
When the purchaser and seller are within the same country, it is known as internal trade but when the purchaser and the seller are in different countries, that trade is known as foreign trade or international trade.
Internal trade can be wholesale or retail, cash or credit and also spot or future trade.
Internal trade is done on the basis of the currency and weight-measurement of the concerned country. The transportation of materials becomes easy and it takes comparatively less time. The risk in internal trade is low as the contact between purchaser and seller can be kept easily.
Out of the types shown in the above chart trade classified from the point of view of distribution will be discussed here.
Wholesale trade
Wholesale trade is a link between the producer and the retailer. So, after purchasing in large quantity from producers, the wholesalers distribute the goods to the retailers according to their requirements. This is known as wholesale trade.
Functions of the wholesaler :
(1) The wholesaler purchases goods on large scale.
(2) As the wholesaler purchases goods on large scale and stores them, his capital investment is big.
(3) Wholesalers classify the goods on the basis of quality after purchasing them from various producers or sometimes pack the goods in various smaller packages.
(4) Wholesaler brings goods from the producers to his own godown and stores. Wholesaler sends them to the godown or shop of the retailer at the time and in the quantity of his requirements.
(5) Wholesalers many a time undertakes sales promotion to increase the sales, e.g. through publicity by different media, discount, etc.
(6) The wholesaler is an effective link between a producer and a retailer. He contribute considerably in the exchange of opinions of customers and retailers, ideas of producers and retailers, experiences, information, suggestions, image of unit in the market.
(7) Wholesaler bears the risk which is inherent in the storage and maintenance of goods.
The services of the wholesalers can be classified as under :
(1) Services of the wholesalers to producers
(2) Services of wholesalers to retailer.
(3) Services of wholesalers to society.
(A) Services of wholesalers to producers :
(1) Wholesalers place an order with the producer after receiving orders from retailer or after estimating the retail sales.
(2) The self-confidence of the producer is enhanced with the receipt of large order from the wholesalers.
(3) Due to the services of wholesalers the producers do not have to send goods in small quantities to the retailers so their time is saved.
(4) Wholesalers collect the latest information from the market and provide it to producers so as to increase their knowledge and understanding. Due to this information producers can prepare effective purchase-sale policy and can take right decisions.
(5) Wholesalers engage experts, if required and get their advices and guidance. The advantage earned due to this guidance is also enjoyed by the producer.
(6) As wholesalers maintain big stock, retailer can get even a very small quantity, if he wants. Thus, sales through small quantities ultimately result into the sales of large quantity.
(7) Wholesalers provide information of fake goods sold in the market to the producer. Consequently, producer can control such activities.
Services of wholesalers to retailers
(1) Wholesalers maintain goods of various types in large quantity so whenever retailers require goods even in small quantity, they are available.
(2) Wholesalers provide continuous services to retailers by doing efficient distribution of materials.
(3) Retailers also enjoy the guidance and experiences of wholesalers.
(4) Wholesalers provide goods even on credit to retailers.
(5) The advantages of advertisements given by wholesalers and efforts of sales promotion of wholesalers are shared by retailers.
Services of wholesalers to society :
(1) Wholesalers provide goods to customers for satisfying their needs.
(2) Wholesalers are helpful in distributing .goods of-suitable quality, to the customers.
(3) By informing producer about fake goods wholesalers ultimately protect the interest of customers.
(4) Wholesalers send the complaints, choices, etc. of customers to the producers.
(5) Wholesalers can be helpful in replacing goods while considering the genuine complaints of customers.
(6) Wholesalers try to provide the goods continuously in- the market according to the needs of the customers.
(7) Due to continuous availability of materials wholesalers play an important role in stabilizing the price-level in the market.
Retail Trade
When a retailer provides goods to customers after purchasing from the wholesaler, that activity is known as retail trade.
Retailer is the last middleman in the distribution channel, who directly sells goods to the customers. Retail trade is made possible by various retailing institutes in the retail trade organisation. This is known as Retail Trade Organisation.
Characteristics of retail trade
(1) Retail trade is a link between the customer and the wholesaler / producer.
(2) As the customer is directly contacted in retail (trade, salesmanship and attractive display of materials become very much important in it.
(3) Necessities, choices, opinions and complaints of customer become the focal points of interest in retail trade.
(4) The turnover in retail trade is comparatively higher.
(5) The risk in retail trade is less than in the wholesale true.
Advantages of retail trade
(1) Retail trade makes goods available having many varieties catering to the needs and linking of the customers. It supplies goods at the doorstep of the customer.
(2) Retails informs wholesaler about the changes in the choices an opinions of customers.
(3) Retailer supplies materials to the customers on credit so sales are increased.
(4) Retailer provides sales related services and after sales services like repairing with the sales of goods.
(5) Retailers arrange products in an artistic way to attract customers. By demonstrating effectively they persuade customers to understand the utility of products. All these efforts of retailers are useful for the customers to take decisions to purchase.
Limitations of retail trade
(1) Due to the existence of retailer, the distribution channel becomes longer and as the expenses and profit of each middleman is added, the price paid by the customer becomes very high.
(2) Due to long distribution channel reaching goods to the customer is delayed.
(3) Certain perishable goods should reach customer within minimum time. Delay in this is matter results into deterioration of goods, e.g. vegetables, fruits, etc.
Types of retail trade :Various types of retail trade are done by various institutes and in different methods, the information is made clear in the classification given below : |
| Retail trade |
[1] Vendors :
(A) Hawkers : Hawkers sell their products to the customers by moving from one place to other place. They sell in the middle of the streets, in residential places and at the cross of four roads near traffic signals, e.g. newspapers, magazines, fruits, pea nuts and other things like these are sold in this manner.
By purchasing from these retailers, customers get their required things at their door-steps or at nearby places, generally at cheaper rate.
(B) Temporary traders : Purchases of certain products increase during certain events, festivals and certain seasons. For earning profit from the purchases of the customers certain traders sell products and services only during time-period. These sellers are temporary traders, e.g. Balloon-sellers in the fair, sellers of kite-string on footpath during Uttarayan.
(C) Fixed day traders (traders in Hat, Gujari) : In certain cities markets are arranged on a particular day, in which many types of goods are sold. This market is on for the whole day, and a lot of enthusiasm is seen amongst retailers and customers. On every Sunday, this market is arranged near Elisbridge in Ahmedabad.
(D) Street Sellers : Street sellers are service providers at the street-ends or at particular places(to the people) who are moving to and fro and are staying in surrounding areas. They provide services required by the people frequently, e.g. the vegetable seller at the street-end.
[2] Fixed Shops
1. (A) Big Shops
(A) Departmental Stores
A departmental store is such a retail shop where many types of goods are available at one place. It is said that from pin to piano everything is available in these stores, e.g. books, stationary, cosmetics, soap-detergent powder, medicines, cloth and TV, fridge, and other things, etc. can be purchased from these shops.
Characteristics
(1) Various things are available from various departments of one shop only.
(2) Various things are arranged after making their classification so all the things of one type can be easily available from one department only.
(3) Sometimes facilities like phone, restaurant are provided in these stores.
(4) These stores are situated in the central or trading area of the city.
(5) Customers are received by the employees of the store and they are provided with the information required for purchase and demonstrations of products are also held.
(6) Training to employees is also given for co-operative behaviour with customers.
(7) Large-scale capital investment is necessary in these shops.
(8) The likings, opinions and complaints of customers can be known as there is direct contact with them in these shops.
(B) Chain Stores
Chain stores are those which are of uniform type and are started by the same owner at different places or in different cities. Each shop does retailing only. E.g. Bata is selling its own produced items shoes-chappals etc., through its owned chain stores. Related other items over and above its produced items are also sold in these shops.
Characteristics
(1) Only one owner / institute retails at many places through these shops.
(2) Very limited varieties of products are sold exclusively in these shops.
(3) Fits are sold in cash in: these shops.
(4) The price of the products is same in all the shops.
(5) Decoration and internal lay-out are mostly uniform for all the shops.
(6) The management of these shops is centralised and the policies of the company, behaviour with customers, etc. are seen to be uniform. For this, training is also given to employees.
Franchise : Franchise shop is a retail shop which makes a contract with a (Parent) company having a particular trade-mark or brand in which under the same name-brand, arrangement is made to sell (or to produce and sell ) the product with the same lay-out as of parent company, e.g. Medonald, Pizza Hut, NUT, APTECH.
Parent company permits the use of its trade-mark or brand and take license fee or commission in exchange. Sometimes, the parent company imparts training. to the purchasing trader of franchise or to his permanent employee/s. It is seen in Indiathat certain refreshment houses, computer training centres are working under this system. Publicity is made from one place only. So, each franchise shop needs not make publicity separately. The parent company gives reform-oriented guidance and watches the system of doing business, layout of ship and quality of products continuously.
Characteristics :
(1) In reality, these shops are the licensees of the parent company.
(2) Franchise shops are loose form of the chain shops. The parent company gives its name, rand, goodwill and publicity expenses.
(3) An the other hand, the franchisee bears the day-to-day expenses.
(4) Every shop is a special shop.
Business transactions only of those products can be done for which the parent company has given license.
(C) Consumers’ co-operative institutes :
Shops run by customers for providing materials of the right quality and at reasonable price we know as consumers’ co-operative stores/shops. By removing the middlemen and by reducing expenses through centralised purchases, profit is disbursed amongst the members. Its membership is. voluntary. The executive committee elected by the members administers. In short, shops started on co-operative basis by customers or producers for satisfying their needs are known as co-operative stores, e.g. Shreyas co-operative consumers’ stores, a stationery stem for the students to provide books, stationery at reasonable price and of good quality.
Characteristics :
(1) Membership is free and voluntary.
(2) Voting right is per member according to the principle of co-operative society.
(3) Administration is done by the representatives elected by the members.
(4) The main purpose is to protect the interest of the members and to avoid their exploitation.
(5) Profit is disbursed within the limits prescribed by law.
(6) Representatives and members give honorary services.- So, the administration is run economically.
(7) Most of the sales are on the cash basis.
(8) Capital is procured by issuing shares to the members.
(9) There is no need of advertising because members themselves are the beneficiaries. Of course, generally the whole customer class can take advantage of it.
Retail traders’ shops supplying many products from one place to customers are known as super markets. Its management can be run on co-operative or private basis, e.g. Apna Bazar.
Many products of many brands are available in super market. Customers purchase products after selecting an item with the help of salesmen in it. Sales are done either in cash or through credit-card. Its internal administration is just like departmental stores. This type of stores is increasing throughout the world.
(D) Mail - Order Business
For supplying goods to customers who are generally educated and residing in any area, at their door-steps, orders are received from them through post after motivating them to purchase without seeing them in person but with the help of advertisements. The ordered products are delivered to them by post again. This system is favourable only for low - weight, durable, comparatively costlier and standardised products. Catalogue is sent to the potential customers. As goods are sent through V.P.P. the transactions become cash transactions. In short, a retailing system is known as mail-order, when business sells goods to customers through mail and-also receives payment through mail.
Characteristics :
(1) Business, is dependent on. advertisements only.
(2) No personal contact with customer is made.
(3) No middleman is required.
(4) No importance of a particular place for the sale of business.
(5) Getting order, dispatching goods and getting payment-all these functions are done through post.
(6) No need to invest finance for show-room and decoration of shop. So, business rugs with low capital.
(7) This system is favourable for low weight, durable, costly and standardised products only.
(8) It is in vogue where educated and rich customers are present.
(9) No possibility of bad debt because goods are sent through V.P.P.
II (B) Small shops :
Small shops are set up to do business with low capital and to make sales at local level. Generally small shops satisfy various needs whereas shops, satisfying specific needs are call special shops. Vending machines have also become special shops as required products can be purchased by inserting the amount of specified price of the products into the machine.
3. Other methods
(1) Direct Selling
Certain producers are selling their goods directly to the customers. It means they do not engage middlemen. After informing customers about products through publicity they establish direct contact with the customers through their own salesmen. These salesmen even arrange for the demonstration of the products and then they sell the products to the customers e.g. The producers of Acqua Guard sell their water-filter directly to the customers by making door-to-door visits instead of putting it in any store for sale. Sometimes, customers place orders through phone or the postman with the description of specifications of their needs.
This system is used for the sales of credit cards, membership of a club, books, etc. The catalogue is made informative and attractive. Care is taken to see that customers feel easy while placing orders. Sales are made through SMS (Short Message Service) or mobile phone.
Characteristics :
(1) Information regarding products is sent to the customers through publicity media (e.g. through radio, television or by posting catalogues).
(2) This system is useful only for well-known brands and reputed producers, e.g. books, credit-card.
(3) This system is without middlemen.
(2) Telemarketing :
Information regarding products is given to the potential customers through telephones. Additional information is given in personal visits after setting a date while talking to persons on the phone. This type bf selling is known as telemarketing.
Salesmen establish contacts by preparing a list from the phone-directory. This system is used for the subscription of magazine, membership of club and credit-card and many other products like them. Customers save time while purchasing. Trading expenses are reduced. Private sector banks and multinational companies have made this system popular in India. As many companies give trouble to the customers (persons) on phone they may not respond properly and feel agitated.
Customers are attracted by the live demonstration of the products in different serials on television. The reputed producers can employ this method, for their well-known brands. There is every possibility of getting no co-operation from customers or of finding it unsuitable for new merchant or entrepreneur. Due to the absence of middlemen products can be supplied at a reasonable (low) price.
(3) Internet Marketing :
When customers visit the website of a certain producer through the computer and select a product and then compare the prices and verify them and then place the order and the goods are supplied according to the instructions of customers, this sales system is known as internet marketing. Certain companies advertise on E-mail addresses and then try to sell the products.
Now, most of the producers give their website addresses in their advertisements for obtaining additional information of products. Professional and much busy customers can use this system to save time. This system is useful for import-export trade and also to get additional information by saving time and money. Orders can be placed through E-mail.
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