Chapter 9

Internal Trade

 <<previous page | index | next page>>

9.1. Introduction

Trade is the commercial activity of sale of goods for a profit. With increased specialization in trading activities, it has become a complex process. Manufacturing activities are greatly supported by well organized trading activities. Traders take care of marketing problems which allows the manufacturer to concentrate on production. Trading activity carried out within a country is known as internal trade and outside the country is known as external trade.

9.2 Internal Trade

Trade which takes place within a country is internal trade. Buyer and seller are within the country. Internal trade is relatively easier because of easy communication, common currency, easy inspection of goods and transportation of goods and same commercial laws. All these issues become very prominent in external trade.

Internal trade can be broadly classified into wholesale trade and retail trade. Wholesaler is the main trader who purchases directly from the manufacturer in bulk and supplies them to retailers for distribution to customers. Most manufacturers directly deal with wholesalers.

9.3 Wholesale Trade

Wholesaler is the first link in the marketing chain. Their main customers are retailers. They supply goods to various retailers who in turn will distribute these goods to consumers. The consumers therefore do not directly deal with the wholesalers even though they are the most important link that ensures smooth supply of goods in the market.

9.3.1 Functions of Wholesaler

The wholesalers perform several functions in the distribution of goods in the market. Their presence is great support to the manufactures on one side and the retailers on the other side. Following are the important functions of wholesalers.

i. Buying and assembling

The wholesaler buys goods from different producers. They collect goods at a convenient place and rearrange them according to the needs of retailers.

ii. Subdividing or breaking the bulk

Wholesalers purchase goods in very large quantities directly form the manufactures. They divide these goods to various retailers. Thus retailer need not keep large inventory of various goods.

iii. Warehousing

Wholesaler arranges warehousing facilities at various places. Thus he will ensure steady supply of goods to various retailers. Warehousing risks are borne by the wholesaler.

iv. Transportation

Wholesalers usually maintain fleet of vehicles for supply of goods. They can ensure quick and efficient service to the retailers. Wholesaler bears the risk in transporting the goods.

v. Financing

Wholesalers extend credit facilities to retailers. This is a way of financing the retail business. They also support manufacturers by placing orders in advance and making prompt payment.

vii. Selling and promoting

Wholesalers employ sales people to promote the products in the market. They also provide efficient after sales service. Their sales promotion works support the business of both retailers and manufacturers.

vii. Risk bearing

Business involves various risks at different stages. There is risk in warehousing, transporting and various other stages. The wholesaler bears most of the risk by keeping bulk quantiy of goods in his warehouse and supplying them to retailers at various places.

viii. Market information

Wholesalers are very alert in the market. Since they carry a lot of goods, sudden changes in market trends affect them severely. They watch every change in fashions, tastes and preferences of customers and advise manufacturers to make required changes in products.

ix. Grading and packaging

Wholesales sometimes sort the products according to quality and customer preferences in various markets. They may label the products and set different prices for different variety of goods.

<<previous page | index | next page>>