Business Studies Chapter 10 Internal Trade

2. Wholesale Trade.

1. Movement of goods takes place within the boundaries of the country.

2. All payments are received and made in the national currency.

3. Traders take the help of various modes of transport to effect transfer of goods to ultimate consumers.

1. He is an essential link between producers in retailers.

2. He generally specialises in the purchase and sale of items of a particular line.

3. He deals in bulk quantities of goods only.

4. He invests large amount of capital in the stock of goods he deals in.

5. He provides advance to the producers for the manufacture of goods and services.

6. He provides credit facilities to the retailers.

7. He trades with a very low margin of profit.

1. Buying and Assembling of Goods.

2. Physical Distribution.

3. Warehousing.

4. Transportation.

5. Promotion.

6. Financing.

7. Grading and packaging.

8. Risk Bearing.

1. Goods are sold in small lots.

2. Goods are sold to ultimate consumers for final consumption.

3. Sales are made generally on a small scale and in a localized area.

4. A large variety of goods are generally sold.

5. There is generally personal contact between the retailer and the consumers.

They are run on a large scale. Some of the important features of super bazaar are low cost, self-service, central location etc. They offer a reasonable choice to the consumers resulting in large turnover of goods. There is a facility of credit sales to customers.

1. Manufacturer’s shops.

2. Middlemen’s shops.

3. One priced shops or fixed price shops.

1. Merchant Wholesaler : He can also be termed as pure wholesaler, he neither manufactures goods nor sells goods directly to the consumers. He purchases goods in bulk from various manufacturers and sells them to the retailers.

2. Manufacturer Wholesaler : In case the wholesaler is a manufacturer too, he is called a manufacturer wholesaler. He may purchase goods of other manufacturers also. He sells his as well as other manufacturers goods to retailers.

3. Retailer Wholesaler : In case the wholesaler combines with his business of wholesaler, the functions of a retailer also, he is called as a retailer wholesaler. He thus purchases goods in bulk from manufacturers and sells them directly to the consumers.

Fixed Shops : Fixed shop retailers have a fixed place of business. They do not move from one place to another. Fixed shop retailers may be small scale or large scale retailers.

Multiple shops deals in a limited variety of products. Same line of products are available in every shop which is run by a manager. There is uniformity in the outward selling and interior display of products of all the stores.

1. Specialization : Multiple shops specialize in only one or a couple of lines of goods.

2. Nearest to consumers : They aim to providing convenience of shopping by establishing I branches near the customer’s residence.

3. Centralized Management and Decentralized selling : Management and control are centralized, while selling is decentralized.

Most producers do not sell their goods directly to the final users. Goods passes through a number of hands before they reach the ultimate consumer. A chain is formed and goods are passed on to a wholesaler who in turn sells them to the consumer/retailer. Both wholesaler and retailer are important links in the chain. Thus, wholesale trade and retail trade form part of the procern of internal trade.

1. Small scale retailers.

2. Large scale retailers.

Small scale retailers are very large in number but they account for a small portion of the total retail business. A small scale retail concern is owned and operated by a proprietor. It has the advantages of simplicity, flexibility, low operation cost, personal contact and services direct motivation etc. They are of two types :

1. Mobile traders.
2. Fixed shops.

Types of Mobile traders :

1. Hawkers and Peddlers : They sell from door to door carrying the goods on their heads or animal carts or a hand carts.

2. Cheap Jacks : They hire small shops in residential localities for a temporary period.

3. Market Traders : These retailers sell their goods at different weekly, fortnighly or monthly markets.

4. Steet Traders : These traders sell goods on pavements and busy street in big cities or towns. They also operate near bus stop, railway station, Cinema halls and other public places.

1. Street stall holders : Such type of stalls are located at street crossings or in the busy street. They have limited space and operate on a very small scale.

2. Secondhand goods dealers : These dealers are engaged in the purchase and sale of second hand or used goods like books, clothes, furniture etc. They get their supplies from public and private actis or from door to door buying.

3. General stores or variety stores : These are small and independent retail stores set up in residential area. They keep all kinds of products required by the local residents for their daily use.

4. Speciality shops : These shops deal in specific line of goods and they are generally located in shopping centres.

5. One price shops.

Types of large scale retailers :

1. Departmental stores.

2. Multiple shops.

3. Mail order house.

4. Consumer cooperative stores.

5. Super Market.

6. Hire purchase and instalment shops.

Street Shops : These shops can be defined in terms of their location. Street shops are those shops which are situated at street crossings or on main roads or on corner of colonies. They may be set up near to markets also. They are also known as street stalls and are located just about anywhere. These retailers display their goods on a table stand or by fixing a shelf on the wall.

1. Assembling : They assemble goods produced by different manufacturers at one place.

2. Transporting : They provide quick and efficient transportation of commodities far and wide.

3. Storing : They store different types of goods and make them available for sale at the right time. Thus, they keep their funds locked up in different commodities during the intervening period.

4. Grading : They help in grading and standardization of goods which help the consumers in making intelligent choice.

5. Financing : They finance the manufacturers as well as the retailers during the period which starts from manufacturing of goods and ends when the goods finally reach the consumers. This they do by purchasing manufactured goods for cash from manufacturers and selling them to retailers on credit. This may rightly be termed as the most important function of the wholesalers.

6. Risk bearing : The wholesalers by purchasing and storing goods in bulk bear the risk due to fall in demand of commodities.

7. Dispersing : They help in dispersal of goods in different markets through retailers.

1. Benefit of large orders : The wholesalers place large orders for goods of more or less standard type with the manufacturers. The manufacturers, therefore, have not to collect small orders from a large number of retailers.

2. Benefit of market trends : The wholesaler informs in time the manufacturers about the likely changes in the direction and pattern of command on account of changes in fashion, tastes etc. this help the manufacturers in regulating their production programmes.

3. Benefit of even place of production : The wholesalers place advance ordess during periods when the manufacturer have not much work to do on account of slackness in demand. This helps the manufacturers in maintaining an even pace of production.

4. Benefit of marketing functions : The wholesalers performs the marketing function too. This saves the manufacturers form the problems of storing the goods. Thus, they can concentrate more on their production function.

1. Benefit of selection : A retailer has to keep a wide variety of goods to meet the requirements of his customers. He can collect these goods from one or more wholesalers without going to the manufacturers.

2. Benefit of storage : A retailer cannot buy goods in bulk to maintain a steady supply of goods to market because of financial and storage difficulties. The whoelsaler takes upon himself the function of storing the goods and releasing them in small lots to retailers who can replace and replenish their stocks easily.

3. Benefit of specialization : The wholesalers generally specialises in a few variety of goods. They buy them from the manufacturers who can sell them the best quality of goods at the cheapest price. The retailers buy their requirements from the wholesalers, and therefore, they are benefited by their specialization.

4. Benefit of lower risk : The wholesalers assume most of the risk connected with marketing such as fluctuations in prices, spoilage of goods etc. The retailers risk is, therefore, confined to smallest stock kept in his shop.

5. Benefit of credit : The wholesalers supply goods to retailers generally on credit. Thus, the retailers can work with less working capital.

1. They require huge investment. In India there is great dearth of capital.

2. Departmental stores charge high prices than retailers, Majority of Indian population is poor. Therefore, they cannot pay higher prices.

3. Departmental stores require a higher order or organization, salesmanship and advertisement. In India salesmanship and advertising science is still in infancy.

4. In India we do not have enough people who can make large purchases of various types of goods.

1. Bulk purchasing : Super bazaars purchase their requirements in bulk, hence they make economies at different stages of purchases.

2. Economical : Super bazaars are “self-services” stores. They do not employ sales assistants or helpers. This results in considerable savings in cost.

3. Independent judgement : In super bazzars there are no salesman, hence, the buyer can exercise his independent judgement in purchasing the goods.

4. Services to customers : Super bazaars have usually the services of canteens, banks, post office etc. in their premises. This is of considerable assistance to the customers.

5. Large turnover : Economical pricing and greater freedom to buyers develop the buyers confidence in the bazaar. This significantly increases the turnover of the bazaar.

6. No bad debts : All sales are cash sales in super bazaar. Hence, there are neither collection costs nor bad debts.

1. Heavy capital investment : A super bazaar deals in a variety of goods. It has to keep different varieties of products and has to be housed at central place. This all requires heavy capital investment.
2. Impersonal affair : Everything in super bazaar is very impersonal. There are no sales personnel, no helpers etc. and hence no personal rapport is established between the buyers and the sellers.

3. No credit facilities : In the absence of credit facilities, the sales decline which causes fall in overall profit of the bazaar.

1. Manufacturing type mail order business : The manufacturer of goods himself adopts the policy of selling goods by post for the simple reason that he wants to eliminate the middlemen and minimize the cost of sales. This will also maintain the supply of original goods.

2. Departmental type mail order business : Departmental stores in addition to selling goods through their stores may supply goods by post directly to the customers on demand. This will increase the sales and satisfy the need of distant customers.

3. Middlemen type mail order business : It is the common type of mail order business, where the seller is neither a manufacturing concern nor a departmental stores. The seller is not the producer/ manufacturer of goods. He makes advertisement, receives orders and execute the order by making purchases of the product from the market.

1. Light and valuable goods, goods must not be heavy and bulky.

2. Goods capable of being described through statements and pictures.

3. Goods incapable of being destroyed in transit.

4. Goods having continuous demand.

5. Goods which can be standardized and graded.

1. They are small traders operating with limited resources.

2. They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables.

3. The emphasis of such traders is on providing greater customer service by making the products available at the very door-steps of the customers; and

4. As they do not have any fixed business establishment to operate form, these retailers have to keep their limited inventory of merchandise either at home or at some other place.

1. Compared with the itinerant traders, normally they have greater resources and operate at relatively large scale. However, there are different size groups of fixed shop retailers, varying from very small to very large.

2. These retailers may be dealing in different products, including consumer durable as well as non-durable goods.

3. This category of retails has greater credibility in the minds of customers, and they are in a position to provide greater services to the customers such as home delivery, guarantees, repairs, credit facilities, availability of spares, etc.

1. These shops relocated in fairly populous localities, where sufficient number of customers can be approached. The idea is to serve the customers at a point which is nearest to their residence or work place, rather than attracting them to a central place.

2. The manufacturing/procurement of merchandise for all the retail units is centralized at the head office, from where the goods are detached to each of these shops according to their requirements. This results in savings in the cost of operation of these stores.

Features of Departmental Store : 1. Larger size : It is a retail organisation run on a large scale.

2. Attractive appearance : It is an urban institution and is located in the heart of a big city so as to attract a large number of consumers.

3. Wide choice : It deals in wide variety of goods and seeks to provide all the requirements e.g., from “Pin to Plane” in one building.

4. Centralised purchase : All departments are under centralised management and control.

5. Elimination of Middlemen : It buys its entire requirements of merchandise directly from the manufacturers. Hence it is in a position to eliminate the middlemen.

6. Services and amenities : It provides several useful services and amenities such as bank, post office, reeding room, restaurant etc.

7. Free home delivery : It also provides free home delivery.
Special features of consumers cooperative stores :

1. Voluntary membership on the basis of common interest.

2. One member one vote irrespective of the capital contributed by members.

3. Cash sales and credit sales are there if the policy of stores.

4. Surplus earned by the stores is distributed among the members on the basis of purchase made by them.

5. The store is managed by the elected representatives of the member shareholders.

(i) Help in distribution of goods : A retailer’s most important service to the wholesalers and manufacturers is to provide help in the distribution of their products by making these available to the final consumers, who may be scattered over a large geographic area.

(ii) Personal selling : In the process of sale of most consumer goods, some amount of personal selling effort is necessary. By undertaking personal selling efforts, the retailers relieve the producers of this activity and greatly help them in the process of actualizing the sale of the products.

(iii) Enabling Large Scale Operations :

On account of retailer’s services, the manufacturers and wholesalers are freed from the botheration of making individual sales to consumers, in small quantities. This enables them to operate at relatively large scale, and thereby fully concentrate on their other activities.

(iv) Collecting Market Information : As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences and attitudes of customers. Such information is considered very useful in taking important marketing decisions in an organization.

(v) Help in Promotion : From time to time, manufacturers and distributors have to carry on various promotional activities in order to increase the sale of their products. For example, they have to advertise about their products and offer short-term incentives in the form of coupons, free gifts, sales contests, and so on. Retailers participate in these activities in various way and, thereby, help in promoting the sale of the products.

(b) Services to Consumers : Services to consumers are as follows :

(i) Regular Availability of Products : The most important service of a retailer to consumers is to maintain regular availability of various products produced by different manufacturers. This enables the buyers to choose products according to their tastes from a wide variety and buy them when needed.

(ii) New Products Information : By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc. of new products to the customers. This serves as an important factor in the decision making process for the purchase of those goods.

(iii) Convenience of buying : Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers. Also, they are normally situated very near to the residential areas and remain open for long hours. This offers great convenience to the customers in buying products of their requirements.

(iv) Wide Selection : Retailers provide important after sales services in the form of home delivery, supply of spare parts and attending to customers. This becomes an important factor in the buyers’ decision for repeat purchase of the products.

(v) Provide credit facilities : The retailers sometimes provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption and, thereby, their standard of living.

1. They sell almost all articles of everyday use from house to house on their heads or carriers, as may be the case.

2. They purchase goods on days credit and sell practically the whole lot during the day.

3. They do not require much capital as they operate on a very small scale.

4. They sell their products at relatively low prices.

5. They also operate in the vacant front varandahs of fixed shops when the market is closed for the weekly holiday.

6. They provide home delivery to the customers.

1. It deals in a wide range of products, say from pin to plane. it is large in size as compared to other retail organizations.

2. It is generally located at a central place so that people living in different areas of the city may easily reach here for shopping.

3. The purchases are made centrally. But at times, this task may be assigned to the persons incharge of different departments.

4. Decentralized selling is followed by the different departments.

5. There is arrangement of providing certain services to the customers like entertainment, restaurant, free home delivery, etc.

1. Sale of operations : Wholesale trade is carried on a large scale. Hence, the amount of capital invested in wholesale trade is much higher than that in a retail trade.

2. Range of products : A wholesaler specializes in one type of commodity while a retailer has to keep a large variety of products to satisfy the varied requirements of the customers.

3. Link : A wholesaler is a link between producer/manufacturer and retailer while a retailer acts as a intermediary between the wholesaler and the ultimate consumer.

4. Location : A wholesaler need not have a showroom or shop in central place. He may has his godown in a corner of the city and may operate from his house or a small shop in the market where he may accept order and supply goods to the various retialers. While retailer generally has a shop or showroom in the heart of the city so that he can attract large number of customers.

5. Margin : The margin in case of a wholesaler is smaller as compared to a retailer since the former has high turnover as compared to the later.

6. Decoration : The wholesaler does not require any decoration of his shop or display of goods while incase of a retailers, decoration of shop, is must.

7. Quantity : In wholesale trade, buying and selling of goods is in large quantity while in ret6.ail trade it is comparatively in small lots.

8. Credit sales : The credit sale is a common feature in wholesale trade as compared to retail trade.

1. Paddlers and hawkers : Paddlers and hawkers are probably amongst the oldest form of retailers in the market place who have not lost their utility even during the modern days. They are small producers or petty traders who carry the products on a bicycle, a hand cart, and move from place to place to sell their merchandise at the door-steps of the customers. They generally deal in non-standardized and low-value products such as toys, vegetables and fruits, fabrics etc. They are also found in streets of residential areas, place of exhibitions or meals, and outside the schools, during the lunch break.

2. Market Traders : Market traders are the small retails who open their shops at different places on fixed days or dates, such as every Saturday or alternate Saturdays, and so on. These trades may be dealing in one particular line of merchandise, say bricks or ready made garments, toys or crockery, or alternatively, they may be general merchants. They are mainly catering to lower-income groups of customers and deal in low-priced consumer items of daily use.

3. Street traders (Pavement Vendors) : Street traders are the small retailers who are commonly found at places where huge floating population gathers, for example, near railways stations and bus stands, and sell consumer items of common use, such as stationary items, eatables, ready-made garments, newspapers and magazines.

4. Cheap jacks : Cheap jacks are such petty retailers who have independent shops of a temporary nature in a business locality. They keep on changing their business from one locality to another, depending upon the potentiality of the area. However, the change of place is not as frequent as in the case of hawkers or market traders. They also deal in consumer items and provide service to consumer in terms of making the products available where needed.

1. Paddlers and hawkers : Paddlers and hawkers are probably amongst the oldest form of retailers in the market place who have not lost their utility even during the modern days. They are small producers or petty traders who carry the products on a bicycle, a hand cart, and move from place to place to sell their merchandise at the door-steps of the customers. They generally deal in non-standardized and low-value products such as toys, vegetables and fruits, fabrics etc. They are also found in streets of residential areas, place of exhibitions or meals, and outside the schools, during the lunch break.

2. Market Traders : Market traders are the small retails who open their shops at different places on fixed days or dates, such as every Saturday or alternate Saturdays, and so on. These trades may be dealing in one particular line of merchandise, say bricks or ready made garments, toys or crockery, or alternatively, they may be general merchants. They are mainly catering to lower-income groups of customers and deal in low-priced consumer items of daily use.

3. Street traders (Pavement Vendors) : Street traders are the small retailers who are commonly found at places where huge floating population gathers, for example, near railways stations and bus stands, and sell consumer items of common use, such as stationary items, eatables, ready-made garments, newspapers and magazines.

4. Cheap jacks : Cheap jacks are such petty retailers who have independent shops of a temporary nature in a business locality. They keep on changing their business from one locality to another, depending upon the potentiality of the area. However, the change of place is not as frequent as in the case of hawkers or market traders. They also deal in consumer items and provide service to consumer in terms of making the products available where needed.

1. General Stores : General stores are most commonly found in local market and residential area. As their name indicates, these shops carry stock of a variety of products needed to satisfy the day-to-day needs of the consumers residing in nearby localities. Such stores remain open for long hours at convenient timings and often provide credit facilities to some of their regular customers.

2. Speciality shops : This type of retail store is, of late, becoming very popular, particularly in urban areas. Instead of selling a veriety of products of different types, these retail stores specialize in the sale of a specific line of products.

3. Street stall holders : These small vendors are commonly found at street crossings or other places where flow of traffic is heavy. They attract floating customers and deal mainly in goods of cheap variety like hosiery products, toys, cigarettes, soft drink. etc. They get their supplies from local supplies as well a wholesalers. The total areas covered by a stall is very limited and, therefore, they handle goods on a very small scale. Their main advantages is in providing convenient service to the customers in buying some of the items of their needs.

4. Secondhand goods shop : These shops deal in secondhand or used goods, like books, clothes, automobiles, furniture and other household goods. Generally persons with modest means purchase goods from such shops. The goods are sold at lower prices. Such shops may also stock rare objects of historical value and antique items which are sold at rather heavy prices to people who has special interest for such antique goods.

5. Single Line Store : Single line stores are those shops which deal in a single product line such as readymade garments, watches, textiles, shoes, automobiles, tyes, computer, books, and stationary. These shops keep a wide variety of items of the same line and are situated at a central location. Most of these stores are organised as independent retail outlets in the form of sole trades or partnership firms.

1. Attract large number of customers :

As these stores are usually located at central places, they attract large number of customers during the best part of the day.

2. Convenience of buying : By offering large variety of goods under one roof, the department stores provide great convenience to customers in buying almost all goods of their requirements at one place. As a result, they do not have to run from one place to the other, to complete their shopping.

3. Attractive services : A department store aims at providing maximum services to the customers. Some of the services offered by it include home delivery of goods, execution of telephone order, grant of credit facilities and provision for rest-room, etc.

4. Economy of large-scale operations : As they stores are organized on a very large scale, the benefits of large-scale operations, particularly, in respect of purchase of goods, are available to them.

5. Promotion of sales : The department stores are in a position to spend considerable amount of money on advertising and other promotional activities, which help in boosting their sales.

Limitations :

1. Lack of personal attention : Because of the large-scale operations, it is very difficult to provide adequate personal attention to the customers in a departmental store.

2. High operating cost : As the departmental stores give more emphasis on providing services, their operating costs tend to be on the higher side. These costs, in turn, make the prices of the goods high. They are, therefore, not attractive to the lower-income group of people.

3. High possibility of loss : As a result of high operating costs and large-scale operations, the chances of incurring losses in a departmental store are high. For example, if there is any change in the tastes of customers or latest fashions, it necessitates selling of such out-of-fashion articles in clearance sale, to reduce the huge inventory of goods built up.

4. Inconvenient location : As a department store is generally situated at a central location, it is not convenient for the purchase of goods that are needed at short notice.

Usefulness or advantages of Mail Order Houses :

Mail order business is beneficial to both sellers and buyers in the following ways :

1. Convenience : The customer can buy the goods without spending his time and money in travelling to the seller’s place. He gets home delivery of goods and can arrange for payment after giving the order. He can easily buy goods not available in the local market. He often gets a money back guarantee and can return the goods which are not up to the mark. Customers get an opportunity to select goods from a large range.

2. Low operating costs : A mail order house can be located at any place. It is not necessary to maintain showrooms, well-decorated and furnished shops, or a large sales force. There are no bad debts. Thus, the overhead costs of mail order business are low. Risk is also very low. Cross-freights are eliminated because goods can be despatched directly from the manufacturers to customers.

3. Small investment : The seller need not keep stocks as he can procure the goods after receiving orders. Therefore, mail order business can be operated with a small investment and with little risk.

4. Elimination of middlemen : Through mail order business, a manufacturer can directly sell goods to his customers. He need not depend upon middlemen. Direct contact with customers provides control over distribution channel and helps him in understanding customers preferences.

5. Country-wide market : Sales are not limited to local population. A businessman can sell goods to a large number of customers scattered throughout the country. Far off markets can be exploited with the help of postal facilities. The post office acts as the carrier of goods and the collector of sale proceeds. Temporary depressions in local markets do not result in complete loss of business.

6. Flexibility : The type of goods and the media of advertising can be adjusted easily to suit changing fashions. The mailing list can also be changed with shifts in population, etc. Sales are not dependent on the capacity of salemen as sales appeals are designed by experts.

Goods handled by mail order business : Mail order business is not possible in all types of goods. In order to be handled by mail order house, goods must satisfy the following conditions :

1. They should not be easily perishable, i.e., they must not get easily spoiled or deteriorated during the course of transit by post or rail parcel. Goods should be durable.

2. Goods should be standardised or gradable in quality.

3. They should be identified by a brand name or trade mark.

4. They should not be too heavy or bulky to be sent by mail.

5. They should be relatively valuable in proportion to their weight so that the delivery costs are lower than the price of the article.

6. Goods should enjoy popular demand over wide areas so that there is no need of convincing the prospective consumers about their usefulness.

7. They must fetch sufficient price to leave sufficient margin of profit.

8. Goods which can be explained through descriptive writing without the need for demonstration or specialised skills in handling and use.

Books, drugs, sports articles, watches, toys, cutlery, readymade garments, cosmetics, jewellery, fountain pens, toilet preparations are the articles usually sold through mail.

1. Hire purchase trading, and

2. Deferred payment system.

(a) In case of a hire purchase deal, the buyer enters into an agreement with the seller. Under the agreement he is given the possession of the goods on the payment of first instalment. The balance is payable in monthly, quarterly or yearly instalments. The buyer can use the article but ownership remains with the seller until all the instalments are paid. In other words, the ownership of goods passes to him only after the last instalment has been paid. If the buyer fails to pay any instalment, the seller has the right to take back the goods and the instalments paid, before default will be forfeited as hire charges. The articles may be insured to protect the interest of the seller.

(b) Deferred payment system or instalment system is different from hire-purchase system. Under the instalment system, both the possession and the legal ownership of the goods pass on to the buyer immediately after the payment of the first instatlment. Each instalment is treated as part payment (not hire charges) of the price of the goods sold. In case, the buyer makes a default in the payment of any instalment, the seller cannot take back the goods. He can only take legal action for the recovery of the balance amount.

Following are the essentials of successful hire-purchase trading :

(a) Goods to be sold should be chosen carefully as all types of goods are not suitable for such trading. Goods must be of high price, durable, standardised, with a steady demand and easily identified, so that they can be taken back whenever necessary.

(b) Customers should be selected carefully to minimise bad debt losses. People with fixed and regular incomes are desirable.

(c) The period of payment and the number of instalments should by such that full payment is received before the article becomes obsolete.

(d) Articles should be insured against fire, theft, etc.

1. Transfer of ownership : Under instalment system, the buyer becomes legal owner of goods at the time of agreement. But in case of hire-purchase, the buyer does not get ownership right on goods. He gets only the possession of goods and the right to use them. He remains the hirer of goods, until all instalments are paid.

2. Remedies available : Under instalment system, the seller has no right to recover the goods, but can only sue for payment. Under hire-purchase, the seller is entitled to take back the goods in case of default in payment by the buyer. Instalments paid are forfeited.

3. Return of goods : Articles sold can be returned by the hire purchaser by terminating the contract. He cannot be compelled to pay further instalments. But the buyer under the instalment system cannot terminate the contract or return the article. He is bound to pay all the instalments.

4. Treatment of instalments : Instalments paid under hire-purchase are considered as hire charges till the last instalment is paid. Under the instalment system, every instalment paid by the buyer is considered as part payment towards the price of the article.

5. Right of resale : Hire-purchaser cannot sell the article till the last instalment is paid by him. Under the instalment system the buyer has the right to sell the article at any time he likes.

6. Nature of sale transaction : Hire-purchase is a conditional sale and becomes a full-fledged transaction only after full payment. Instalment system is an outright sale and only the payment is deferred.

7. Prices : The price charged under the instalment system is higher because the seller faces a greater risk than under the hire-purchase system.

1. The article is durable. It should have life much longer than the period over which the instalments are to be paid. The article should be portable.

2., The price of the article is sufficiently high to justify its purchase through instalments.

3. The article is easily identifiable so that it may be taken back from the buyer, if he makes default in making the payment under the hire-purchase system.

4. The article is standardised so that it can be easily reckoned in trade and resold, if necessary.

5. The article enjoys regular demand and is not subject to frequent changes in fashion and taste.

Hire-purchase and instalment systems are popular in case of consumer durable goods like refrigerator, television, radio, automobiles, video, furniture as well as a industrial goods like office equipment, plant and machinery, etc.

1. People with limited means can purchase and enjoy costly articles. They can pay through easy instalments out of future earnings. In this way common man can improve his standard of living.

2. The system encourages thrift or saving among buyers. They remain under an obligation to pay instalments regularly after taking possession of the article.

3. Hire-purchase system is a useful device to push up the sales of costly articles. Due to the facility of credit and easy instalments, large number of customers can be attracted to purchase the goods. Mass selling encourages mass production.

4. Hire-purchase system is a boon to small-scale industries and farmers. They can purchase machinery and equipment on instalment basis and need not delay operations for want of funds. They can make payment in instalments out of the earnings from the use of machines and implements.

5. By purchasing goods on hire-purchase basis, well-to-do people can invest their surplus money in more profitable avenue. The seller can obtain loans against the goods sold one hire-purchase basis. At present, banks and finance companies help the hire-purchase sellers by providing finance and collection services. Hire-purchase business help to increase production, employment and national income in the country.

Demerits : The main drawbacks of hire-purchase are as follows :

1. It encourages prodigal expenditure and induces people to live beyond means. People with small means are tempted to purchase luxury products which they cannot afford. In order to pay instalments regularly they have to curtail their expenditure on the necessities of life. People have to mortgage their future income.

2. Prices under hire-purchase are high as the seller charges interest on unpaid amount. He also adds some margin for bad debt risk and collection charges. Many buyers are under severe strain to save compulsorily to pay instalments. Some of them cannot bear the burden and they have to surrender the goods at a later stage.

3. Sellers have to bear a high risk. In case of default in payment, they have the right to take back the goods but the recovered secondhand goods may not fetch sufficient prices’. Under instalment system, the seller has to waste time, money effort to take legal action for the recovery of payment from the defaulter.

4. Hire-purchase facility is available only to people with regular and sufficient income. The vendors do not sell goods on hire-purchase to people with uncertain or fluctuating income and to those having no security to offer for the goods purchased.

5. Large amount of capital investment is required to carry on hire-purchase business. A large part of investment remains locked up in book debts.

1. They cannot get information of change in fashion, style and design etc.

2. They have to locate wholesalers/manufacturers etc. to purchase goods and services which involve waste of time, money and energy.

3. They cannot enjoy variety of products.

4. They have to invest their money as they cannot purchase the things on credit.

5. They cannot provide feedback to manufacturers about the quality of the products.

6. They cannot bargain for the prices of the products.

This shows that the consumer wants value from whatever she/he is buying and at the same time gives a lot of value for branded products. This trend in consumer behaviour challenges the retail practices and structures. Retailers will have to provide more and better for less. The seven rights of retailing : giving the right goods at the right time, place and price, of the right quality and quantity and the right wear have become for more important now-a-days.

Besides this, there is a substantial mismatch between customers expectations and the ability of the supply chain to meet these expectations. Efficiency and effectiveness in retail operations are key issues. Issues relating to supply chain management, store operations and understanding customers are some of the key challenges facing the Indian retail industry.

1. Elimination of intermediaries :

Consumer co-operative stores purchase goods from the manufacturer direct and sell it to consumers so middlemen like wholesalers and retailers are eliminated. It results in supply of original goods at reasonable price.

2. Protecting consumer’s interest : Consumers are protected from the risk of adulterated, duplicate and defective goods. As such customer’s rights are protected.

3. Low operating cost : The society is managed and operated by its members, so it has lesser cost of administration. They need not incur much expenditure on impressive building, effective advertisement and attractive decoration.

4. State patronage : The government also accords financial assistance and other concessions to these societies.

5. Convenient location : The consumer cooperative stores are generally opened at convenient public places where the members and others can easily buy the products as per their requirements.

 1. Arguments is favour of eliminating wholesalers :

(a) Increase in Price : The unnecessary presence of wholesaler between producer and consumers increases the prices of the commodity for the consumers. If there is direct contact between producer and consumers, the price will be lesser.

(b) Monopoly in the distribution : The wholesaler purchases bulk of the product, sometime all the product of the manufacturer, stored in his godwon and practically he becomes the monopolist. Thus, he exploits the consumer by restricted supply of goods.

(c) Creating artificial scarcity : The wholesaler stores the bulk of the commodity in his godown blocks the flow of goods and creators artificial scarcity of goods which result in the rise of price.

2. Argument in favour of continuing wholesaler :

(a) Financing the production : The wholesaler finances the producer by making advance payment. He also help the retailers by selling goods on credit. In his absence financing will suffer.

(b) Encouraging specialisation : The wholesaler collects the goods and classifies them in different grades, standardises and packages them. Specialisation will suffer with the removal of wholesalers.

(c) Supplying variety of goods : The wholesaler deals in one commodity and keeps different varieties of the same commodity. It will not be possible to keep so much varieties by producers other than wholesalers.

Hence, we can say that middlemen are required for the smooth flow of goods and services from producers to consumers but their activities should be controlled either by government machinery or voluntary associations.

Advantages of mail order retailing are as follows :

1. Limited capital : Mail order business can be started with limited capital as there is very little need for investment on shops, displays and large stocks.

2. Middlemen avoided : As middlemen can be avoided under the manufacturing type of mail order business, the cost of marketing is minimized.

3. Cash basis : As the goods are sold on cash, there is no risk of bad debts.

4. Wide scope : Goods can be supplied through mail even to far off places throughout the country. This opportunity widens the scope of the business greatly.

5. Convenience : This form of business can be very convenient for the consumers as goods are delivered at their place by post, and they are not to waste time and effort in going to shops.

6. Handle from any place : This type of business can be handled from any place where the postal services are available.

7. Minimum overhead expenses : As the

overhead expense are minimum in this type of business, it is possible to fix prices at a reasonable level so as to attract large number of customers.

Limitations are as follows :

1. No personal inspection : The buyers do not have the opportunity of personally inspecting the goods before buying.

2. No personal contact : Because of lack of personal contact many customers do not have confidence in this type of trading.

3. Delay in delivery : It is not possible for the customers to have immediate delivery of the goods. They have to bear with the delay in delivery through mail.

4. Postal delay : There is great dependence on the postal department in this type of business and chances of undue delay or pilferage of goods in transit is always possible.

5. Limited scope : There is limited scope for this type of business in places which are not well connected through postal services or where people are illiterate.

1. Wide choice to consumers : Even though the retailer functions in a limited are with a small number of customers, he keep himself ready to meet all the requirements of his customers. For this he is required, first of all, to know the different kinds of goods likely to be demanded by them and, secondly, to locate the sources from where such goods could be obtained at competitive prices.

2. Ready stock : The retailer knows the exact requirements of his customers as also the sources from where he could obtain the goods to meet these requirements. As such he keeps a ready stock of all goods so that he is able at all times to supply the goods required by a customer.

3. Transport : Wholesalers are the main source of supply of goods to the retailers. But this requires cheap and dependable means of transport to carry the goods from the wholesaler’s godowns to the retailer. Though the retailers have limited resources and they may not be able to have vehicles of their own for this purpose, nevertheless they ensure quick transport of goods to their shops.

4. Grading : Generally, grading of goods is done by the producers, and sometimes by the wholesalers. But goods which have not been graded by the producer or the wholesaler, are graded by the retailer who also sometimes packs these goods insuitable lots for sale to the consumers.

5. Risk-bearing : Retailers have to maintain a reasonable stocks of goods. The risk of loss of such stocks by fire, theft, spoilage, etc., has to be borne by them.

6. Financing : Even though wholesalers are quite liberal in allowing credit, retailers on their part are also required to meet the cost of goods at least to some extent, as also the expenses on warehousing and advertising. They are also often required to grant credit to their customers. This means that the retailers play an important role in financing the distribution of goods.

7. Market research : Retailers enjoy intimate terms with their customers. For this reason, they are in a position to study the market behaviour. What types of goods are in demand ? What changes are likely in consumers tastes or fashion ? From time to time, they pass on such information to the wholesalers for onward transmission to the manufacturers concerned.

8. Sales promotion : By an attractive display of goods in his shop, the retailer assists in their advertising and publicity. For the producers launching sales promotion campaigns through “Why I like your product” schemes, retailers play an important role by distributing and collecting the entry forms on behalf of the respective producers.

Merits : A consumers co-operative store enjoys the following merits.

1. Economical buying : The store purchases goods in bulk directly from manufacturers. As a result, it is able to get the benefit of trade discounts, home delivery, low freight, credit, etc.

2. Elimination of middlemen : The establishment of consumers co-operative store results in the elimination of middlemen. Members can buy goods of daily use in goods quality and at lower prices.

3. Consumers protection : The store protects its members from hoarding, adulteration and overcharging by greedy retailers. They get a steady supply of unadulterated or better quality goods at the proper time and in required quantity. They have complete control over the store and whatever profits are made by the store ultimately go to them.

4. A consumers co-operative store is easy to form and is democratically managed. Its capital is divided into shares of small denomination so that people of modest means can become its members. Liability of members is limited.

5. Low operating costs : Due to cash sales, there is not bad debt loss. Honorary service by members reduces cost of wages and salaries. No advertising expenditure is required.

6. State patronage : Consumers cooperative stores are exempt from the payment of tax and get special concessions from the government.

7. Social benefits : The store promotes the spirit of mutual help and helps in holding the price line. It provides education in family budgeting, democracy, and encourages thrift or savings. Members who provide honorary service to the store get training in management. It helps in checking monopoly and profiteering.

Demerits : Consumers cooperative stores have not been fully successful due to the following limitations :

1. Uneconomic size : Most of the stores are too small to operate economically. They are weak and their membership is limited.

2. Shortage of funds : The stores lack sufficient capital due to few and poor members. There is little scope for expansion and growth. There is lack of initiative among members to form and run consumers co-operative stores.

1. Low operating cost : A chain store does not have to incur heavy expenditure on rent, customer services and advertising.

2. Economies of scale : They are able to purchase goods at cheaper rates due to centralised buying. Besides, they have large turnover. Centralised purchasing and large turnover provide economies of large scale operations.

3. National image : All multiple shops have a similar layout and distinctive appearance, hence, one single advertisement is sufficient for all the shops. Articles are sold at uniform prices and they enjoy confidence of public.

4. Diversified risks : In multiple shops, unsold stock of one store can be transferred to other store, thus, risk of unsold stocks lying in store is minimised.

5. Elimination of middleman : It provides a direct link between the manufacturer and the ultimate consumer, thus, it helps in eliminating middlemen.

6. Convenient to customers : As the chain stores are over the city or the country. Consumers can buy from the nearest store. Due to standardised quality and fixed prices, they can purchase with confidence.

Demerits :

1. Limited choice of multiple shops :

They do not offer a wide variety of products to customers to suit different tastes or fashions.

2. Lack of personal services : They have a limited appeal due to the absence of free home delivery, parking, credit and other services.

3. Lack of initiative : There is a lack of interest and motivation on the part of paid employees of the stores. Lack of autonomy and the need for frequent reporting to the central office reduces their initiative and creates monotony of work.

4. Red tape : They suffer from the problem of lack of prompt action or decision.

The Chamber of Commerce and Industry was formed as an association of business and industrial houses to promote and protect their common interest and goals. There are other chambers also like ASSOCHAM, Confederation of Indian Industry (CII). These chambers interact with the government at different levels to reorient or put in place polices which reduce hindrances, increase interstate movement of goods in internal trade.

The chambers also aims at erecting sound infrastructure and simplying and harmonising the tax strcuture. They work for the following issues:

1. Transportation or Inter-state movement of goods : They work for many activities involved in inter-state movement of goods including registration of vehicles, surface transport policies, construction of highways and roads etc.

2. Octroi and other local levies : Octroi and local taxes are the important sources of revenue of the local government. The chambers tries to should ensure that their imposition not at the cost of smooth transportation and local trade.

3. Harmonisation of sales tax structure and Value Added Tax : These Chambers play an important role in interacting with the government to harmonise the sales tax structure in different states. A rational strcuture of the sales tax and its unifrom rates across states are important for promoting a balance in trade.

4. Marketing of agro products and related issues : The associations of agriculturists and other federations play an important role in the marketing of agro products. Chambers of Commerce helps in streamlining of local subsidies and marketing policies of organisations selling agro products.

5. Weights and Measures and prevention of duplication brands : The Chambers of Commerce and Industry interact with the government to formulate such laws relating to weights and measures and protection of brands that could be beneficial for both producers as well as consumers.

6. Excise duty : The excise policy plays an important role in pricing mechanism and it is the duty of the Chamber to interact with the government to ensure streamlining of excise duties etc.

7. Promoting sound infrstructure : The Chamber of Commerce and Industry in association with government tries to build up heavy investment projects.

8. Labour legislation : The Chambers of Commerce and Industry tries to maintain such kind of labour laws that should be flexible and helpful in running industries, maximising production and generating employment.

1. Manufacturer wholesaler : He combines the activities of manufacturing goods alongwith the wholesale business. He generally, sells the commodities produced by him on wholesale basis. He does so to reduce the overhead expenses on transport and storage to a large extent.

2. Retailer wholesaler : Such a wholesaler combines his business of wholesale with the functions of a retailer. It implies that he purchases commodities in bulk from the manufacturers and sells them to the ultimate consumers directly.

3. Pure wholesaler : He can also be called the merchant wholesaler. He undertakes no business other than dealing on wholesale basis. He purchases the commodities produced by different manufacturers in bulk and sells them on to retailers. The pure wholesalers may be further subdivided into three groups :

1. Mill supply wholesalers : They sell a wide variety of materials required by the mills for the production of consumer goods for the market. These wholesalers purchase materials from a large number of producers with a view to selling them to the mills.

2. Single line wholesalers : They deal in different varieties in a particular line of product, say, readymade shirts for man produced by different companies, and sell goods to many types of buyers.

3. Complete line wholesalers : They deal in a complete line of goods required for a particular purpose. Trading in stationery and groceries, are the examples of this type.

Benefits of franchising to the franchiser are :

1. It allows them to conserve capital.

2. The distribution system is established in the shortest possible time.

3. Marketing costs are lowered.

4. It enables the franchiser to increase his goodwill and reputation.

5. The franchiser gains wider acceptance of its brand name through the franchisee.

6. The franchiser gets feedback about the product popularity from the franchisee.

Benefits of franchising to franchisee are :

1. The franchisee can use the name and trademark of the franchiser from attracting customers.

2. There are greater chances of success of the franchisee because the products of the franchiser are well known.

3. The franchisee can get advice and assistance of the franchiser in training his staff, store layout etc.

4. The franchiser ensures a high degree of quality control. This helps the franchisee to satisfy his customers by offering quality products.

Merits of vending machines are :

1. It is convenient for the customers to buy the goods from the machines.

2. Vending machines provide quick service to the customers.

3. Vending machines develop the habit of ‘self-help’ among the customers.

4. Vending machines can sell goods round the clock.

Demerits of vending machines are :

1. The customers cannot inspect the goods before buying.

2. Vending machines are useful in selling only consumer goods which are edible in nature.

3. Special prices are to be developed by manufacturers which suit the machines.

4. Care has to be taken about replenishing the stock of the machine regularly.

The objectives of FICCI are :

1. To promote healthy interface between the business community and the government.

2. To work for deregulation of economy by persuation the government to lift administrative controls.

3. To create conditions for the globalisation of the Indian economy.

4. To assist members in export promotion, modernisation, pollution control, quality control etc.

5. To assist government in achieving socioeconomic goals of removing poverty and increasing employment.

The objectives of CII are as follows :

1. To identify and strengthen industry’s role in the economic development of the country.

2. To reinforce industry’s commitment to society.

3. To act as a catalyst in bringing about growth and development of Indian industry.

4. To provide up-to-date information and data to industry and government.

5. To promote cooperation with counterpart organisations.

6. To identify and address the special needs of the small sector.

The objectives of ASSOCHAM are as follows : (i) To make the businessman’s voice heard and to ensure that his views are taken into account in the moulding of the nation’s economic life.

2. To maintain a high standard of business ethics by its members.

3. To contribute to the nation’s efforts in planned economic development.

4. To defend and to placed for liberalism in economic management.

5. To modernise business and to encourage foreign business to invest in India.

1. Performa Invoice,
2. Invoice,
3. Debit Note,
4. Credit Note,
5. Lorry Receipt and
6. Railway Receipt.

1. Receipt No. :

2. Date :

3. Name and address of the sender :

4. Unit price :

5. Quantity of goods :

6. Charges for sending the goods :

7. Name and address of the person to whom goods are to be delivered :

8. Goods to be sent from _______ station to _______.

9. Signature of the railway official