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Question-1

What is meant by internal trade?

Solution:
Buying and selling of commodities and services within the country is referred to as internal trade. Whether the products are bought from a neighborhood store in a location or a central market or a departmental store or a mall or even from any door to- door salesperson or from an exhibition, all these are examples of internal trade as the commodities are bought from an individual or establishment within a country.

Question-2

Specify the characteristics of fixed shop retailers

Solution:
(a) when compared with itinerant traders, these have larger resources and operate at a comparatively larger scale. But, there are various size groups of fixed shop retailers.

(b) These retailers may deal in various items, including customer durables as well as non durables; and

(c) This section of retailers has more credibility in the minds of consumers, and they are in a position to give better services to the consumers such as home delivery, guarantees, repairs, credit facilities, availability of spares, etc

Question-3

What purpose is served by wholesalers providing warehousing facilities?

Solution:
Wholesale merchants take delivery of commodities when these are produced in factory and keep it in their warehouses. This relieves the producers from providing storage facilities for their finished goods.

Question-4

How does market information provided by the wholesalers benefit the manufacturers?

Solution:

Facilitating large scale production

Bearing risk

Financial assistance

Expert advice

Help in the marketing function

Facilitate continuity

Storage

 

Question-5

How does the wholesaler help the manufacturer in availing the economies of scale?

Solution:
Wholesalers gather small orders from many retailers and place the pool of such orders to manufacturers and purchase bulk quantities. This helps the producers to carry out production on a big scale and take advantage of the economies of scale.

Question-6

Distinguish between single line stores and specialty stores.

Solution:

S. No

Single line stores

Specialty stores

1.

These are those shops which deal in a specific line of products

These retail shops specialize in the sale of a specific type of products

2.

Deal mainly in goods of less expensive variety.

They keep a large variety of products of the same line.

 

Question-7

How would you differentiate between street traders and street shops?

Solution:

S. No

Street traders

Street shops

1.

These traders are the small retailers who are usually found at locations where large floating population gathers

Street stall holders are usually found at street crossings or other places where there is heavy flow of traffic.

2.

They sell customer products of common use.

They deal mainly in goods of less expensive variety.

 

Question-8

Explain the services offered by wholesalers to manufacturers

Solution:
The main services presented by wholesalers to the producers of commodities and services are as shown below:

 

(i) Facilitating large scale production:

Wholesalers gather small orders from many retailers and place the pool of such orders to manufacturers and purchase bulk quantities. This helps the producers to carry out production on a big scale and take advantage of the economies of scale.

(ii) Bearing risk: The wholesalers deal in commodities with their own name, take delivery of the commodities and keep them purchased in large quantities in their warehouses and hence In this process they bear lots of risks such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc.

(iii) Financial assistance: The wholesale merchants present financial help to the manufacturers in the sense that they normally make cash payment for the commodities bought by them. A few times they also advance money for the bulk orders which have been placed by them.

(iv) Expert advice: As the wholesale merchants have direct contacts with the retailers, they help by advising the producers about various aspects including customer’s tastes and preferences, market conditions, competitive activities and the features desired by the purchasers. And hence they are an important source of market information on these and related issues.

(v) Help in the marketing function:

The wholesale merchants take care of the distribution of commodities to many retailers who, in turn, sell to large number of buyers spread over a large location. This helps the producers to take care of the production activity alone.

(vi) Facilitate continuity: The wholesale merchants enable continuity of production activity for the whole year by buying the goods as and when they are manufactured.

(vii) Storage: Wholesale merchants take delivery of commodities when these are produced in factory and keep it in their warehouses. This relieves the producers from providing storage facilities for their finished goods.

Question-9

What are the services offered by retailers to wholesalers and consumers?

Solution:
(i) Regular availability of products: The central service of a retailer to customers is to maintain regular availability of different products from various producers. This helps the buyers to choose products according to their desires from a range of products and buy them when needed.

(ii) New products information: By arranging for effective display of products and through their personal selling efforts, retailers give necessary information about the arrival, special features, etc., of newcomers to the consumers and serve as an important factor in the decision making process for the buying of those goods.

(iii) Convenience in buying: Retailers normally buy goods in a large scale and sell them in a small scale, according to the needs of their consumers. Also, they are usually located very near to the residential areas and mostly remain open. This gives great convenience to the consumers in purchasing products of their needs.

(iv) Wide selection: Retailers normally keep stock of various products of different producers. This helps the customers to make their choice out of a wide variety of goods.

(v) After-sales services: Retailers give vital after-sales services in the form of home delivery, supply of spare parts and attending to customers and this becomes an important factor in the buyers’ decision for repeat purchase of the goods.

(vi) Provide credit facilities: The retailers few times give credit facilities to their regular buyers and this helps the latter to increase their level of consumption and thus their standard of living.

Question-10

Itinerant traders have been an integral part of internal trade in India. Analyze the reasons for their survival in spite of competition from large scale retailers.

Solution:
(i) Peddlers and hawkers: Peddlers and hawkers are most likely amongst the oldest type of retailers in the market place and they have not lost their utility even during modern times. They are small producers or petty traders who carry the products on a bicycle, a hand cart, a cycle-rickshaw or on their heads, and move around a location to sell their products at the doorstep of the consumers. They normally deal in non standardized and low-cost products such as toys, vegetables and fruits, fabrics, carpets, snacks and ice creams, etc. One main merit of this type of retailing is the facility of convenient service to the customers. But, people should be careful in dealing with them, as the goods they sell are not always reliable in terms of quality and price.

(ii) Market traders: They are the small retailers who open their shops at various places on fixed days or dates, such as every Saturday or alternate Saturdays, and similarly. Market traders may deal in one particular line of products, like fabrics or ready-made garments, toys, or crockery, or alternatively, they can be general merchants. They are mainly catering to lower-income group of consumers and deal in low-cost consumer products which are of daily use.

(iii) Street traders (pavement vendors): These traders are the small retailers who are usually found at locations where large floating population gathers, for example, near railway stations and bus stands, and sell customer products of common use, like stationery items, eatables, readymade garments, newspapers and magazines. They differ from market traders in the sense that they do not switch their location of business so frequently.

(iv) Cheap jacks: These are petty retailers who own independent temporary shops in a business location. They keep changing their business from one place to another, depending upon the potential of that place. But still the change of location is not so frequent like hawkers or market traders. They also deal in consumer products and provide service to customers in terms of making the item available where ever required.

Question-11

Discuss the features of a departmental store. How are they different from multiple shops or chain stores.

Solution:
Even though both these types of retail organizations are big establishments, there are a few differences between the two. They are:

(i) Location: A departmental store is situated at a central place, where a huge number of people can be attracted to it. However, the multiple stores are situated at a number of locations for approaching a large number of customers and hence central location is not necessary for a multiple shop.

(ii) Range of products: Departmental store aims to satisfy all the requirements of people under one roof. So they are suppose to carry various products of different types. However, the multiple shops aim to satisfy the needs of the people relating to a limited range of their products only.

(iii) Services offered: The departmental stores give importance on presenting maximum service to their customers. A few facilities, given by them include post office, restaurant and so on. But, the multiple shops provide very a short range facilities confined to guarantees and repairs if the sold out items turn out to be defective.

(iv) Pricing: The multiple shop chains sell products at fixed rates and maintain uniform pricing policies for all their stores. The departmental shops, however, do not show uniform price feature for all the departments; rather they have to frequently offer discounts on certain items and varieties to clear their stock.

(v) Class of customers: The departmental stores cater to the requirements of comparatively high income group of people who care more for the services provided rather than the prices of the item. But multiple shops, on the other hand, cater to various types of consumers, including those belonging to the lower income groups, who are interested in purchasing quality products at reasonable prices.

(vi) Credit facilities: All sales in the multiple shops are made strictly on cash basis but on the contrary, the departmental stores can provide credit facilities to a few of their regular people.

(vii) Flexibility: As the departmental stores deal with a large variety of goods, they have certain flexibility in respect of the line of products marketed. But, there is not much scope for flexibility in the chain stores as they deal only in fixed range of products.

Question-12

Why are consumer co-operative stores considered to be less expensive? What are its relative advantages over other large scale retailers?

Solution:
A consumer cooperative stores are organizations which are owned, handled and managed by consumers themselves. The objective of consumer cooperative stores is to lessen the number of middlemen who increase the cost of production, and hence present service to the members. These stores normally purchase in a large scale, directly from producers or wholesalers and sell them to the consumers at reasonable prices. Because the middleman are eliminated or reduced, the members get good quality goods at cheaper prices. The profits earned by these stores during a year are used for declaring bonus to members according to purchases they make and for strengthening the general reserves and general welfare funds or similar funds for social and educational benefits of the members. To start a such a store, a minimum of ten people should come together and form a voluntary association and get it registered under the Cooperative Societies Act. The management of the store is democratic and entrusted to an elected managing committee where one man one vote is the rule but the liability of the members of a cooperative store is normally bounded to the amount of the capital contributed by them. To have a fair management of funds the accounts of the stores are audited by the Registrar of Cooperative Societies or some person authorized by them.

Advantages

(i) Ease information: It is easy to start and organize a such type of a store. Any ten persons can get together to begin a voluntary association and get themselves registered with the Registrar of Cooperative Societies by completing the required formalities.

(ii) Limited liability: The liability of the members in a this store is bounded to the extent of the capital invested by them. More than that capital, they are not liable personally to pay for the debts of society, in case the liabilities are more than its assets.

(iii) Democratic management:

These societies are democratically managed with the help of management committees which are selected by its members. And each member has to give only one vote irrespective of the shares held by him/her.

(iv) Lower prices: Such a store buys products directly from the producers or wholesalers and sells them to members and others. Reduction of middlemen results in cheaper rates for the consumer products to the members.

(v) Cash sales: The consumer cooperative stores normally sell goods on cash basis. As a result, the requirement for working capital is reduced.

(vi) Convenient location: These stores are normally opened at convenient public locations where the members and others can easily buy the products as per their needs.

Question-13

Imagine life without your local market. What difficulties would a customer face if there is no retail shop?

Solution:
The following are the services provided by retailers to consumers and if such retail shops are not present, then the customers will not be able to receive the following benefits.

(i) Regular availability of products: The central service of a retailer to customers is to maintain regular availability of different products from various producers. This helps the buyers to choose products according to their desires from a range of products and buy them when needed.

(ii) New products information: By arranging for effective display of products and through their personal selling efforts, retailers give necessary information about the arrival, special features, etc., of newcomers to the consumers and serve as an important factor in the decision making process for the buying of those goods.

(iii) Convenience in buying: Retailers normally buy goods in a large scale and sell them in a small scale, according to the needs of their consumers. Also, they are usually located very near to the residential areas and mostly remain open. This gives great convenience to the consumers in purchasing products of their needs.

(iv) Wide selection: Retailers normally keep stock of various products of different producers. This helps the customers to make their choice out of a wide variety of goods.

(v) After-sales services: Retailers give vital after-sales services in the form of home delivery, supply of spare parts and attending to customers and this becomes an important factor in the buyers’ decision for repeat purchase of the goods.

(vi) Provide credit facilities: The retailers few times give credit facilities to their regular buyers and this helps the latter to increase their level of consumption and thus their standard of living.

Question-14

Explain the usefulness of mail order houses. What type of products are generally handled by them? Specify

Solution:
These are the retail outlets that carry out sales of their goods through mail. There is normally no direct personal contact between the purchasers and the vendors in this form of trading. For getting orders, potential consumers are approached by advertising in newspapers or magazines, circulars, catalogues, samples and bills, and tariff sent to them by post. All the related information about the goods like price, features, delivery terms, terms of payment, etc., are described in the advertisement. On getting the orders, the products are cautiously scrutinized with respect to the specifications asked for by purchasers and are complied with through the post office. They can have various alternatives for getting payments. First, the consumers can be asked to make whole payment in advance. Secondly, the products can be sent by Value Payable Post (VPP). By this arrangement, the products are sent through post and are given to the consumers only on making the complete payment for the same. Third, the products can be delivered through a bank, which is instructed to deliver the items to the customers. Under this arrangement there are no risks of bad debt, as the items are handed over to the purchasers only after he makes complete payment. However, there is a requirement to ensure the purchasers that the items dispatched are in accordance with their specifications. This form of business is not adaptable for all types of items like for example, products that perish or are bulky and cannot be easily managed, are never recommended for mail-house trading. Only the products that can be

(i) graded and standardised,

(ii) easily transported at less expense,

(iii) always have demand in the market,

(iv) are available in large scale all round the year,

(v) involve minimum competition in the market and

(vi) can be described through pictures etc., are suitable for this type of trading.

One more significant note in this regard is that this business cannot be successfully done unless education is wide spread, because only the literate persons can be reached by advertisements and similar types of written communication.

Advantages

(i) Limited capital requirement: This business doesn’t require large expenditure for building and rest of the infrastructural facilities and thus it can be started with relatively less amount of capital.

(ii) Elimination of middle men: The biggest merit of this business from the point of view of customers is that unnecessary middlemen between the buyers and sellers are eliminated and thus results in lot of savings for both to the buyers as well as to the sellers.

(iii) Absence of bad debt: Because the mail order houses don’t provide credit facilities to the customers, there are no chances of any bad debt on account of non payment of cash by the customers.

(iv) Wide reach: By mail-order system the products can be sent to all the locations having postal services and thus opens wide scope for business as a large number of people throughout the country can be served through mail.

(v) Convenience: By the mail-order system products are delivered at the doorstep of the customers and results in great convenience to the customers in purchasing these products.





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