Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

Unit-III
Wholesalers - Meaning and characteristics, function & Types , Retailers- Meaning and characteristics, function
& Types , Retail Organization, network marketing , e-marketing, services of retailers to Wholesalers and
consumers , Distinction between wholesalers and retailers.
International Trade: Meaning , Nature , Importance , & Limitation , Distinction between internal trade and
international trade Home trade, Export Procedure Enquiry , Receipts of order, clearance for export, foreign
exchange formalities etc.
WHOLESALERS
Wholesaling is concerned with the activities of those persons or establishments which sell to retailers and other
merchants, and/or to industrial institutional and commercial users but who dont sell in significant amount to
ultimate consumers. Wholesalers serve as an important link between manufacturers and retailers. They not only
enable the producers to reach large number of buyers spread over a wide geographical area (through retailers)
but perform a variety of functions in the process of distribution of goods and services. They generally take title
of the goods and bear the business risks by purchasing and selling the goods in their own name.
They purchase in bulk and sell in small lots to retailers or industrial users. They undertake various activities
such as grading of products, packing into smaller lots, storage, transportation, promotion of goods, collection
of market information,
SERVICES OF WHOLESALERS

Wholesalers provide various services to the manufacturers as well as the retailers and provide immense help in
the distribution of goods and services. By making the products available at a place where these are needed and
at a time when these are needed for consumption or use, they provide both time and place utility.
SERVICES TO MANUFACTURERS

The major services offered by wholesalers to the producers of goods and services are given as below:
1. Facilitating large scale production: Wholesalers collect small orders from number of retailers and pass on
the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers
to undertake production on a large scale and take advantage of the economies of scale.
2. Bearing risk: The wholesale merchants deal in goods in their own name, take delivery of the goods and
keep the goods purchased in large lots in their warehouses. In the process they bear lots of risks such as the
risk of fall in prices, theft, pilferage, spoilage, fire, etc. To that extent, they relieve the manufacturers from
bearing these risks.
3. Financial assistance: The wholesalers provide financial assistance to the manufacturers in the sense that
they generally make cash payment for the goods purchased by them. To that extent, the manufacturers need
not block their capital in the stocks. Sometimes they also advance money to the producers for bulk orders
placed by them.
4. Expert advice: As the wholesalers are in direct contact with the retailers, they are in a position to advice the
manufacturers about various aspects including customers tastes and preferences, market conditions,
competitive activities and the features preferred by the buyers. They serve as an important source of market
information on these and related aspects.
5. Help in the marketing function: The wholesalers take care of the distribution of goods to a number of
retailers who, in turn, sell to large number of customers spread over a large geographical area. This relieves
the manufacturers of many of the marketing activities and enable them to concentrate on the production
activity.
1

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

6. Facilitate continuity: The wholesalers facilitate continuity of production activity throughout the year by
purchasing the goods as and when these are produced.
7. Storage: Wholesalers take delivery of goods when these are produced in factory and keep them in their
godowns/warehouses. This reduces the burden of manufacturers of providing for storage facilities for the
finished products.
SERVICES TO RETAILERS

The important services offered by manufacturers to the retailers are listed as below:
1. Availability of goods: Retailers have to maintain adequate stock of varied commodities so that they
can offer variety to their customers. The wholesalers make the products of various manufacturers
readily available to the retailers. This relieves the retailers of the work of collecting goods from several
producers and keeping big inventory of the same.
2. Marketing support: The wholesalers perform various marketing functions and provide support to the
retailers. They undertake advertisements and other sales promotional activities to induce customers to
purchase the goods. The retailers are benefitted as it helps them in increasing the demand for various
new products.
3. Grant of credit: The wholesalers generally extend credit facilities to their regular customers. This
enables the retailers to manage their business with relatively small amount of working capital.
4. Specialised knowledge: The wholesalers specialise in one line of products and know the pulse of the
market. They pass on the benefit of their specialised knowledge to the retailers. They inform the
retailers about the new products, their uses, quality, prices, etc. They may also advise on the decor of
the retail outlet, allocation of shelf space and demonstration of certain products.
5. Risk sharing: The wholesalers purchase in bulk and sell in relatively small quantities to the retailers.
Being able to manage with purchase of merchandise in smaller quantities, retailers are in a position to
avoid the risk of storage, pilferage, obsolescence, reduction in prices and demand fluctuations in respect
of the additional goods that they would have to purchase in case the services of wholesalers are not
available.
TYPES OF WHOLESALERS
It is important for a marketing manager to understand the role wholesalers play in a distribution system,
what functions they provide, and the strategies they use. Each of the ten major types of wholesalers is
discussed below:
1. Merchant wholesalers. These wholesalers own (take title to) the products they sell. For example, a
wholesale lumber yard that buys plywood from the producer is a merchant wholesaler. It actually owns
takes title to the plywood for some period of time before selling to its customers. About four out of five
wholesaling establishments in the United States are merchant wholesalers and they handle about 59
percent of wholesale sales. Merchant wholesalers often specialize by certain types of products or
customers and they service relatively small geographic areas
2. General merchandise wholesalers. These are service wholesalers who carry a wide variety of
nonperishable items such as hardware, electrical supplies, plumbing supplies, furniture, drugs, cosmetics,
and automobile equipment. These wholesalers originally developed to serve the early retailers the
general stores. Now, with their broad line of convenience and shopping products, they serve hardware
stores, drugstores, electric appliance shops, and small department stores.

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

3. Single-line (or general-line) wholesalers. These are service wholesalers who carry a narrower line of
merchandise than general merchandise wholesalers. For example, they might carry only food, wearing
apparel, or certain types of industrial tools or supplies. In consumer products, they serve the single- and
limited-line stores. In business products, they cover a wide geographic area and offer more specialized
service.
4. Specialty wholesalers. These are service wholesalers who carry a very narrow range of products and
offer more
information and
service
than
other
service wholesalers.
A
consumer
products specialty wholesaler might carry only health foods or oriental foods instead of a full line of
groceries. Or a specialty wholesaler might carry only automotive items and sell exclusively to massmerchandisers. Specialty For example, Advanced Marketing is the leading wholesale supplier of books to
membership warehouse clubs. The company offers hardcover best sellers; popular paperbacks, basic
reference books, cookbooks, and travel books
5. Cash-and-carry wholesalers. These wholesalers operate like service wholesalers except that the
customer must pay cash. Some retailers, such as small auto repair shops , are too small to be served
profitably by a service wholesaler. So service wholesalers set a minimum charge or just refuse to grant
credit to a small business that may have trouble paying its bills. Or the wholesaler may set up a cashand-carry department to supply the small retailer for cash on the counter.
6. Drop-shippers. These wholesalers own (take title to) the products they sell but they do not actually
handle, stock, or deliver them. These wholesalers are mainly involved in selling. They get orders
from wholesalers, retailers, or other business users and pass these orders on to producers. Then the
producer ships the order directly to the customers. Because drop-shippers do not have to handle
the products, their operating costs are lower.
7. Truck wholesalers. These wholesalers specialize in delivering products that they stock in their own
trucks. By handling perishable products in general demand tobacco, candy, potato chips, and salad
dressings truck wholesalers may provide almost the same functions as full-service wholesalers. Their
big advantage is that they deliver perishable products that regular wholesalers prefer not to carry.
8. Mail-order wholesalers. These wholesalers sell out of catalogs that may be distributed widely to smaller
industrial customers or retailers who might not be called on by other middlemen.
These wholesalers operate in the hardware, jewelry, sporting goods, and general merchandise lines. For
example, Inmac uses a catalog to sell a complete line of 3,000 different computer accessories and
supplies. Many of these customers especially those in smaller towns dont have a local wholesaler.
9. Producers cooperatives. These wholesalers operate almost as full-service wholesalers with the
"profits" going to the cooperatives customer-members. Cooperatives develop in agricultural markets
where there are many small producers. Examples of such organizations are Sunkist (citrus fruits), Sunmaid
Raisin Growers Association, and Land O Lakes Creameries, Inc.
10. Rack jobbers. These wholesalers specialize in nonfood products sold through grocery stores and
supermarkets and they often display them on their own wire racks. Most grocers dont want to bother
with reordering and maintaining displays of nonfood items (housewares, hardware items, and books and
magazines) because they sell small quantities of so many different kinds of products. Rack jobbers are
almost service wholesalers except that they usually are paid cash for what is sold or delivered.

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

FUNCTIONS OF WHOLESALERS

Following are the functions, which a wholesaler usually performs.

1. Collection of goods: A wholesaler collects goods from manufacturers or producers in large quantities.
2. Storage of goods: A wholesaler collects the goods and stores them safely in warehouses, till they are sold
out. Perishable goods like fruits, vegetables, etc. are stored in cold storage.
3. Distribution: A wholesaler sells goods to different retailers. In this way, he also performs the function of
distribution.
4. Financing: The wholesaler provides financial support to producers and manufacturers by sending money in
advance to them. He also sells goods to the retailer on credit. Thus, at both ends the wholesaler acts as a
financier.
5. Risk taking: The wholesaler buys finished goods from the producer and keeps them in the warehouses till
they are sold. Therefore, he assumes the risks arising out of changes in demand, rise in price, spoilage or
destruction of goods.
RETAILERS
A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate
consumers. He/she normally buys goods in large quantities from wholesalers and sells them in small quantities
to the ultimate consumers. He/she represents the final stage in the distribution where goods are transferred
from the hands of traders to final consumers or users. Retailing is, thus, that branch of business which is
devoted to the sale of goods and services to the ultimate consumers, for their personal, non-business use. They
have a much stronger personal relationship with the consumers and deal directly with the people of varied
tastes and temperaments. They form the last link in the chain of distribution and give the final selling price to
the product.
SERVICES OF RETAILERS -: Retailers serve as an important link between the producers and final
consumers in the distribution of products and services in this process. They provide useful services to the
consumers, wholesalers and manufacturers.
SERVICES TO MANUFACTURERS AND WHOLESALERS-: The invaluable services that the retailers
render to the wholesalers and producers are given as here under:
1. Help in distribution of goods: A retailers 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.
2. 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.
3. Enabling large-scale operations: On account of retailers 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.
4. 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.
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Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

5. Help in promotion: From time-totime, 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
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 ways and, thereby, help in promoting the sale of the
products.
Services to Consumers -: Some of the important services of retailers from the point of view of consumers are
as follows :
1. 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.
2. 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.
3. Convenience in 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.
4. Wide selection: Retailers generally keep stock of a variety of products of different manufacturers. This
enables the consumers to make their choice out of a wide selection of goods.
5. After-sales services: 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.
6. 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.
TYPES OF RETAILING TRADE
There are many types of retailers in India. For proper understanding, it would be useful, to classify them into
certain common categories. Different classifications have been used by experts to categorise retailers into
different types. For example, on the basis of size of business, they may be categorised into large, medium and
small retailers. On the basis of type of ownership, they may be categorized into sole trader, partnership
firm, cooperative store and company. Similarly, on the basis of merchandise handled, the different
classifications may be speciality store, supermarket and departmental store. Another common basis of
classification is whether or not they have a fixed place of business. On this basis, there are two categories of
retailers:
(a) Itinerant retailers, and
(b) Fixed shop retailers
TYPES OF RETAILING TRADE
A. ITINERANT RETAILERS-: Itinerant retailers are traders who do not have a fixed place of business to operate
from. They keep on moving with their wares from street to street or place to place, in search of customers.
CHARACTERISTICS

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

a) They are small traders operating with limited resources;

b) They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and
so on;
c) The emphasis of such traders is on providing greater customer service by making the products available at
the very doorstep of the customers; and
d) As they do not have any fixed business establishment to operate from, these retailers have to keep their
limited inventory of merchandise either at home or at some other place.
Some of the most common types of itinerant retailers operating in India are as below:
1. Peddlers and hawkers: Peddlers and hawkers are probably amongst the oldest form of retailers in the
market place who 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 from
place to place to sell their merchandise at the doorstep of the customers. They generally deal in non
standardized and low-value products such as toys, vegetables and fruits, fabrics, carpets, snacks and ice
creams, etc
2. Market traders: Market traders are the small retailers who open their shops at different places on fixed
days or dates, such as every Saturday or alternate Saturdays, and so on. These traders may be dealing in
one particular line of merchandise, say fabrics or ready-made garments, toys, or crockery, or alternatively,
they may be general merchants. They are mainly catering to lower-income group 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 railway stations and bus stands, and sell
consumer items of common use, such as stationery items, eatables, readymade garments, newspapers and
magazines. They are different from market traders in the sense that they do not change their place of
business so frequently.
4. Cheap jacks: Cheap jacks are petty retailers who have independentshops 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 consumers in terms of making the
products available where needed.
B. FIXED SHOP RETAILERS-: This is the most common type of retailing in the market place. As is evident
from the name, these are retail shops who maintain permanent establishment to sell their merchandise.
They, therefore, do not move from place to place to serve their customers. Some of the other characteristics
of such traders are:
Characteristics

a) Compared with the itinerant traders, normally they have greater resources and operate at a relatively
large scale. However, there are different size groups of fixed shop retailers, varying from very small to
very large;
b) These retailers may be dealing in different products, including consumer durables as well as
nondurables; and
c) This category of retailers 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,
TYPES OF FIXED-SHOP RETAILERS
The fixed-shop retailers can be classified into two distinct types on the basis of the size of their
operations. These are:

a) Small shop-keepers, and

b) Large retailers.
1

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

a) FIXED SHOP SMALL RETAILERS

1. General stores: General stores are most commonly found in a local market and residential areas. As the
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 variety of products of different types, these retail stores specialize in the sale of a
specific line of products. For example, shops selling childrens garments, mens wear, ladies shoes, toys
and gifts, school uniforms, college books or consumer electronic goods, etc. The speciality shops are
generally located in a central place where a large number of customers can be attracted,
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 drinks, etc. They get their supplies from local suppliers as well as
wholesalers.
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. The shops, selling second hand goods may be located at street
crossings or in busy streets in the form of a stall having very little structure a table or a temporary
platform to display the books or may have reasonably good infrastructure.
5. Single line stores: Single line stores are those shops which deal in a single product line such as readymade
garments, watches, textiles, shoes, automobiles, tyres, computers, books, and stationery. These shops keep
a wide variety of items of the same line and are situated at a central location.
b) FIXED SHOP LARGE STORES

1. Departmental stores A departmental store is a large establishment offering a wide variety of products,
classified into well-defined departments, aimed at satisfying practically every customers need under
one roof. It has a number of departments, each one confining its activities to one kind of product. For
example, there may be separate departments for toiletries, medicines, furniture, groceries, electronics,
clothing and dress material. It is also called as all shopping under one roof. Everything from a pin to
an elephant is the spirit behind a typical department store.
2. Chain Stores or Multiple Shops: Chain stores or multiple shops are networks of retail shops
that are owned and operated by manufacturers or intermediaries. Under this type of
arrangement, a number of shops with similar appearance are established in localities, spread
over different parts of the country. These different types of shops normally deal in
standardised and branded consumer products, which have rapid sales turnover. These shops
are run by the same organization and have identical merchandising strategies, with identical
products and displays.
ADVANTAGES

Multiple shops are offering various advantages to the consumers, which are described as follows:
1. Economies of scale: As there is central procurement/manufacturing, the multiple-shop organization
enjoys the economies of scale.
2. Elimination of middlemen: By selling directly to the consumers, the multiple-shop organization is
able to eliminate unnecessary middlemen in the sale of goods and services.
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Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

3. No bad debts: Since all the sales in these shops are made on cash basis, there are no losses on account
of bad debts.
4. Transfer of goods: The goods not in demand in a particular locality may be transferred to another
locality where it is in demand. This reduces the chances of dead stock in these shops.
5. Diffusion of risk: The losses incurred by one shop may be covered by profits in other shops, reducing
the total risk of an organization.
6. Low cost: Because of centralized a purchasing, elimination of middlemen, centralized promotion of
sales and increased sales, the multiple shops have lower cost of business.
7. Flexibility: Under this system, if a shop is not operating at a profit, the management may decide to
close it or shift it to some other place without really affecting the profitability of the organization as a
whole.
LIMITATIONS

1. Limited selection of goods: The multiple shops deal only in limited range of products, mostly those
produced by the marketers. They do not sell products of other manufacturers. In that way the
consumers get only a limited choice of goods.
2. Lack of initiative: The personnel managing the multiple shops have to obey the instructions received
from the head office. This makes them habitual of looking up to the head office for guidance on all
matters, and takes away the initiative from them to use their creative skills to satisfy the customers.
3. Lack of personal touch: Lack of initiative in the employees sometimes leads to indifference and lack
of personal touch in them.
4. Difficult to change demand: If the demand for the merchandise handled by multiple shops change
rapidly, the management may have to sustain huge losses because of large stocks lying unsold at the
central depot.
NETWORK MARKETING -: It is a business model that relies on a network of distributors to grow a business.
Network marketing typically involves using three basic types of systematic strategies to make money:
Lead Generation: To locate new prospects;
Recruiting: Adding customers and/or business partners to your network; and
Building and Management: Methods you use to train, motivate, and manage your recruits.
TYPES OF NETWORK MARKETING

There are many types of network marketing including two-tier programs and multi-level marketing, but many
of the more solid marketing companies, like Avon, are single-tier.
1. Single-Tier Network Marketing: You sign up with an affiliate program to sell their product or service.
You do not need to recruit other distributors and are only paid if you make a direct sale. Avon, is a company
that uses single-tier networking marketing.In some online affiliate programs you are only paid for traffic
you have referred to the affiliate's website. Pay-per-click (PPC) and pay-per-lead (PPL) affiliate programs
are other examples of single-tier networking.
2. Two-Tier Network Marketing: This terms applies to network marketing that pays you for direct sales (or
traffic you refer to a website) and for direct sales or referred traffic made by affiliates or distributors you
recruit to work under you. An example of a two-tier program is Ken Envoy's Site Sell.
3. Multi-Level Marketing (MLM): Is a distribution-based marketing network that is two or more tiers
"deep." Some MLM programs allow you to make money five or more tiers deep. Examples of MLM
businesses include The Trump Network, Magnetic Sponsoring, and Amway.

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

E- MARKETING -: E marketing or electronic marketing refers to the application of marketing principles and

techniques via electronic media and more specifically the Internet. The terms e-Marketing, Internet
marketing and online marketing, are frequently interchanged, and can often be considered synonymous.
E-Marketing is the process of marketing a brand using the Internet. It includes both direct response
marketing and indirect marketing elements and uses a range of technologies to help connect businesses to their
customers.
By such a definition, E- Marketing encompasses all the activities a business conducts via the worldwide web
with the aim of attracting new business, retaining current business and developing its brand identity.
ADVANTAGES

1. In any business organization, advertisement cost constitutes a major expense in the operations of the
business organization. However, Internet marketing has promised to significantly reduce the cost of
advertisement. For example accumulating email addresses and sending newsletters through the Internet is
relatively cheaper compared to traditional marketing strategies.
2. Due to the popularity of the Internet in the modern world, almost all organizations have a website. Making
good use of the website can significantly reduce the cost of advertisement.
3. The ability of the organization to track the rate of return on investment. For example, click-through
feedbacks as well as responses to emails from customers enable the organization to rate the effectiveness of
their marketing strategies.
4. The instant delivery of the message enables organizations to make their marketing campaigns faster and
facilitates immediate responses or communications between the customer care department and the
customers.
5. It enables an organization to personalize messages or more effectively select the targeted clientele. For
example, different electronic marketing strategies can be employed for the youths, professionals and other
categories of customers.
6. It can easily and effectively be integrated with the traditional marketing strategies. For example, a brief
advertisement on the print media can guide a potential customer to the companys website for more
detailed information on the product.
DISADVANTAGES

1. Electronic marketing is limited by the ability of the consumer to access and use Internet services. Although
there is an increased popularity of Internet services in the modern world, a large number of consumers are
unable to use or have no access to Internet services.
2. It is important to note that spam filters that have become very essential to majority of the users are a major
limitation to the effectiveness of e-marketing. There are concerns over the high number of commercial
messages being filtered because the spam filters consider them illegitimate.
3. It has intensified competition which is a major barrier to new entrants in the global market.
Difference between Wholesalers and Retailers
Wholesalers
Retailers

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

1. They are connecting links between the

manufacturers and the retailers.
2. They purchase goods in large
quantities from the manufacturers.
3. They deal in limited number of
products.
4. They need more capital to start their
business.
5. The display of goods and decoration
of premises is not necessary for them.
6. Their business operations extend to
different cities and places.
7. They do not directly deal with the
customers.
8. They do not extend free home delivery
and after sales services.
9. They provide more credit facilities to
retailers.
10. They may not possess expert knowledge regarding selling techniques.
11. They enjoy the economies of bulk
buying, freights and price etc.
12. They are not usually classified in
different types.
13. Their services can be dispensed with
or can be eliminated from the chain of
distribution.

1. They are connecting links between the wholesalers

and the customers.
2. They purchase goods in small quantities from the
wholesalers.
3. They deal in variety of products for meeting the
varied needs of consumers.
4. They can start business with limited capital.
5. They lay more emphasis on window display and
proper decoration of business premises in order to
attract the customers.
6. They usually localise at a particular place, area or
city.
7. They have a direct link with the customers.
8. They provide free home delivery and after sales
services to the consumers.
9. They provide lesser credit facilities to the consumers
and usually sell goods on cash basis.
10. They must possess expert knowledge in the art of
selling.
11. They do not avail such economies.
12. They can be divided into categories viz., small scale
and large scale retailers.
13. They are integral component of the distribution
chain and cannot be eliminated.

TRADE
Trade refers to buying and selling of goods and services for money or money's worth. It involves transfer or
exchange of goods and services for money or money's worth. The manufacturers or producer produces the
goods, then moves on to the wholesaler, then to retailer and finally to the ultimate consumer.
Trade is essential for satisfaction of human wants, Trade is conducted not only for the sake of earning profit; it
also provides service to the consumers. Trade is an important social activity because the society needs
uninterrupted supply of goods forever increasing and ever changing but never ending human wants. Trade has
taken birth with the beginning of human life and shall continue as long as human life exists on the earth. It
enhances the standard of living of consumers. Thus we can say that trade is a very important social activity.
Different Types of Trade-: Trade can be divided into following two types, viz.,
1. Internal or Home or Domestic trade.
2. External or Foreign or International trade
1. Internal Trade-: Internal trade is also known as Home trade. It is conducted within the political and
geographical boundaries of a country. It can be at local level, regional level or national level. Hence trade
carried on among traders of Delhi, Mumbai, etc. is called home trade. Internal trade can be further subdivided into two groups, viz.,
1

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

a. Wholesale Trade: It involves buying in large quantities from producers or manufacturers and selling in
lots to retailers for resale to consumers. The wholesaler is a link between manufacturer and retailer. A
wholesaler occupies prominent position since manufacturers as well as retailers both are dependent
upon him. Wholesaler act as a intermediary between producers and retailers.
b. Retail Trade: It involves buying in smaller lots from the wholesalers and selling in very small
quantities to the consumers for personal use. The retailer is the last link in the chain of distribution. He
establishes a link between wholesalers and consumers. There are different types of retailers small as
well as large. A small scale retailer includes hawkers, pedlars, general shops, etc.
2. External Trade-: External trade also called as foreign trade. It refers to buying and selling between two or
more countries. For instance, If Mr. RAM who is a trader from Mumbai sells his goods to Mr. MOHAN
another trader from New York then this is an example of foreign trade. External trade can be further subdivided into three groups, viz.,
a) Export Trade: When a trader from home country sells his goods to a trader located in another country,
it is called export trade. For e.g. a trader from India sells his goods to a trader located in China.
b) Import Trade: When a trader in home country obtains or purchase goods from a trader located in
another country, it is called import trade. For e.g. a trader from India purchase goods from a trader
located in China.
c) Entrepot Trade: When goods are imported from one country and then re-exported after doing some
processing, it is called entrepot trade. In brief, it can be also called as re-export of processed imported
goods. For e.g. an Indian trader (from India) purchase some raw material or spare parts from a Japanese
trader (from Japan), then assembles it i.e. convert into finished goods and then re-export to an American
trader (in U.S.A).is known as Entrepot Trade.
RELEVANCE / NEED/ IMPORTANCE OF FOREIGN TRADE
a) Division of labour and specialization-: Foreign trade leads to division of labour and specialization at the
world level. Some countries have abundant natural resources. They should export raw materials and import
finished goods from countries which are advanced in skilled manpower. This gives benefits to all the
countries and thereby leading to division of labour and specialization.
b) Optimum allocation and utilization of resources-: Due to specialization, unproductive lines can be
eliminated and wastage of resources avoided. In other words, resources are channelized for the production
of only those goods which would give highest returns. Thus there is rational allocation and utilization of
resources at the international level due to foreign trade.
c) Equality of prices-: Prices can be stabilized by foreign trade. It helps to keep the demand and supply
position stable, which in turn stabilises the prices, making allowances for transport and other marketing
expenses.
d) Availability of multiple choices-: Foreign trade helps in providing a better choice to the consumers. It
helps in making available new varieties to consumers all over the world.
e) Ensures quality and standard goods-: Foreign trade is highly competitive. To maintain and increase the
demand for goods, the exporting countries have to keep up the quality of goods. Thus quality and
standardized goods are produced.
f) Raises standard of living of the people-: Imports can facilitate standard of living of the people. This is
because people can have a choice of new and better varieties of goods and services. By consuming new and
better varieties of goods, people can improve their standard of living.
g) Generate employment opportunities-: Foreign trade helps in generating employment opportunities, by
increasing the mobility of labour and resources. It generates direct employment in import sector and
1

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

h)
i)
j)
k)
l)

indirect employment in other sector of the economy. Such as Industry, Service Sector (insurance, banking,
transport, communication), etc.
Facilitate economic development-: Imports facilitate economic development of a nation. This is because
with the import of capital goods and technology, a country can generate growth in all sectors of the
economy, i.e. agriculture, industry and service sector.
Assistance during natural calamities-: During natural calamities such as earthquakes, floods, famines,
etc., the affected countries face the problem of shortage of essential goods. Foreign trade enables a country
to import food grains and medicines from other countries to help the affected people.
Maintains balance of payment position-: Every country has to maintain its balance of payment position.
Since, every country has to import, which results in outflow of foreign exchange, it also deals in export for
the inflow of foreign exchange.
Brings reputation and helps earn goodwill-: A country which is involved in exports earns goodwill in the
international market. For e.g. Japan has earned a lot of goodwill in foreign markets due to its exports of
quality electronic goods.
Promotes World Peace-: Foreign trade brings countries closer. It facilitates transfer of technology and
other assistance from developed countries to developing countries. It brings different countries closer due
to economic relations arising out of trade agreements. Thus, foreign trade creates a friendly atmosphere for
avoiding wars and conflicts. It promotes world peace as such countries try to maintain friendly relations
among themselves.
Difference between Internal Trade & External Trade / International Business
Basis

Internal Trade

External Trade / International Business

International trade refers to buying and

selling of goods beyond the geographical
limits of a country.

Risk

International trade refers to

buying and selling of goods
within the geographical limits
of a country.
Only one country is involved.
Payment are made and
received in home currency
only.
Less degree of risk is involved

Procedure
Involved
Government
Restrictions

Very less procedure and

formalities required.
Internal trade is not restricted,
except on few goods.

License Required

License is not compulsory in

internal trade.

Meaning

Countries Involved
Currency

Minimum Two countries are involved

Payment are made and received in
mutually agreed foreign currency only.
High degree of risk is involved, such as
transit risk, risk of fluctuation of currency
& demand, etc
Long procedures and many formalities
are required for conducting external trade.
External trade is strictly monitor by the
government and prior approval is
required before external transaction.
License is compulsory in internal trade.

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

STEPS ADOPTED IN EXPORT PROCEDURES

Exporters should seriously consider having the freight forwarder handle the formidable amount of
documentation that exporting requires; freight forwarders are specialists in this process. The following
documents are commonly used in exporting; which of them are actually used in each case depends on the
requirements of both our government and the government of the importing country
STEP1: Enquiry: The starting point for any Export Transaction is an enquiry.
An enquiry for product should, inter alia, specify the following details or provide the following data
Size details - Std. or oversize or undersize, Drawing, if available, Sample, if possible, Quantity required,
Delivery schedule
Is the price required on FOB or C& F or CIF basis
Mode of Packing, , Mode of Dispatch - Sea, air or Sea/air
Terms of Payment that would be acceptable to the Buyer - If the buyer proposes to open any Letter of Credit,
any specific requirement to be complied with by the Exporter
Is there any requirement of Pre-shipment inspection and if so, by which agency
Any Certificate of Origin required - If so, from what agency.
STEP 2: - Proforma generation: After studying the enquiry in detail, the exporter - be it Manufacturer
Exporter or Merchant Exporter - will provide a Proforma Invoice to the Buyer.
STEP 3: Order placement: If the offer is acceptable to the Buyer in terms of price, delivery and payment
terms, the Buyer will then place an order on the Exporter, giving as much data as possible in terms of
specifications, Part No. Quantity etc. (No standard format is required for such a purchase order)
STEP 4: Order acceptance: It is advisable that the Exporter immediately acknowledges receipt of the order,
giving a schedule for the delivery committed.
STEP 5: Goods readiness & documentation :
Once the goods are ready duly packed in Export worthy cases/cartons (depending upon the mode of
dispatch), the Invoice is prepared by the Exporter.
If the number of packages is more than one, a packing list is a must.
Even If the goods to be exported are excisable, no excise duty need be charged at the time of Export, as
export goods are exempt from Central Excise, but the AR4 procedure is to be followed for claiming such an
exemption. Similarly, no Sales Tax also is payable for export of goods.
STEP 6: Goods removal from works :
There are different procedures for removing Export consignments to the Port, following the AR4
procedure, but it would be advisable to get the consignment sealed by the Central Excise authorities at the
factory premises itself, so that open inspection by Customs authorities at the Port can be avoided.
If export consignments are removed from the factory of manufacture, following the AR4 procedure,
1

Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

claiming exemption of excise duty, there is an obligation cast on the exporter to provide proof of export to the
Central Excise authorities.
STEP 7: Documents for C & F agent :
The Exporter is expected to provide the following documents to the Clearing & Forwarding Agents, who
are entrusted with the task of shipping the consignments, either by air or by sea.
Invoice
Packing List
Declaration in Form SDF (to meet the requirements as per FERA) in duplicate.
AR4 - first and the second copy
Any other declarations, as required by Customs
On account of the introduction of Electronic Data Interchange (EDI) system for processing shipping bills
electronically at most of the locations - both for air or sea consignments - the C&F Agents are required to file
with Customs the shipping documents, through a particular format, which will vary depending on the nature
of the shipment. Broad categories of export shipments are:
Under claim of Drawback of duty
Without claim of Drawback
Export by a 100% EOU
STEP 8: Customs Clearance: After assessment of the shipping bill and examination of the cargo by Customs
(where required), the export consignments are permitted by Customs for ultimate Export. This is what the
concerned Customs officials call the LET EXPORT endorsement on the shipping bill.
STEP 9: Document Forwarding : After completing the shipment formalities, the C & F Agents are expected
to forward to the Exporter the following documents:
Customs signed Export Invoice & Packing List
Duplicate of Form SDF
Exchange control copy of the Shipping Bill, processed electronically
AR4 (original duplicate) duly endorsed by Customs for having effected the Export
Bill of Lading or Airway bill, as the case may be.
STEP 10: Bills Negotiation: With these authenticated shipping documents, the Exporter will have to
negotiate the relevant export bill through authorized dealers of Reserve Bank, viz., Banks.
Under the Generalized System of Preference, imports from developing countries enjoy certain duty
concessions, for which the exporters in the developing countries are expected to furnish the GSP
Certificate of Origin to the Bankers, along with other shipping documents.
Step11: Bank to bank documents forwarding : The negotiating Bank will scrutinize the shipping
documents and forward them to the Banker of the importer, to enable him clear the consignment. It is
expected of such authorized dealers of Reserve Bank to ensure receipt of export proceeds, which factor has to
be intimated to the Reserve Bank by means of periodical Returns.
STEP 12: Customs obligation discharge :
As indicated above, Exporters are also expected to provide proof of export to the Central Excise
authorities, on the basis of the Customs endorsements made on the reverse of AR4s and get their obligation,
on this score, discharged.
STEP 13: Receipt of Bank certificate
Authorized dealers will issue Bank Certificates to the exporter, once the payment is received and only with
the issuance of the Bank Certificate, the export transaction becomes complete.
It is mandatory on the part of the Exporters to negotiate the shipping documents only through authorized
dealers of Reserve Bank, as only through such a system Reserve Bank can ensure receipt of export proceeds
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Paper- Business Studies &

Management UNIT -3
Mr. Rashmiranjan Panigrahi
(Lecturer in Finance & Marketing)

for goods shipped out of this country.