Internal Trade and Wholesale Trade

What is Trade?

Trade means the transfer of goods or services from one person or organization to another, often this transaction happens in exchange for money. Economists refer this system or network to that which allows trade as a market. 

Trades are of many forms one is - Domestic trade or the Internal Trade which is different from international trade, this is the exchange of domestic goods within the boundaries of the country. Another is wholesaling trade, which is a subdivision of Internal Trade, this is the distributing or sale of goods or merchandise to the retailers. In our upcoming section we will learn in detail about this Internal and Wholesale Trade.

Note: An early form of trade was the barter system where the direct exchange of goods and services for other goods and services existed.


Internal Trade

Buying and selling of goods and services or trading with these goods and services which happens within the boundaries of a nation are called internal trade. 

  • Internal Trade takes place between the buyers and the sellers in the same locality, may it be a village, town or even a city. 

  • This may also occur between two or more different states known as interstate trade, but this happens definitely within the same country.  

  • The other name for Internal trade is called the domestic trade or the home trade.

Internal Trade starts from an individual or establishment within a country and also the trade ends within the country itself by consumption by the local consumers of the nation. This trade facilitates domestic consumption only. The payment for this trade is to be made with the legal tender of the country.  

Internal trade can be classified as:

1. Wholesale Trade

Wholesale trade refers to the buying and selling of goods and services in large quantities for the purpose of resale to the end users. 

  • Wholesaling is connected with the activities of those persons or establishments who sell the bulk of goods to the retailers and other merchants who in turn sell it to the consumers. 

  • The wholesale trade does not sell goods to the end users in smaller quantities.

  • Wholesalers act as an important link between the manufacturers and the retailers. 

  • They give access to the producers not only to reach a large number of buyers who are spread over a wide geographical area (through retailers), but also to perform a variety of other functions in the process of distribution of these goods and services. 

They generally take the title of the goods and bear the business risks involved in purchasing and selling the goods in their own name. They purchase in bulk from the producers and sell in small lots to the retailers or to other industrial users. They undertake various other activities to facilitate the sale which the producers are made free from doing the same. 

Features of Internal Trade

The features of Internal Trade are explained in points, in the section down below – 

  • Trade within a nation:

The buying and selling of goods happen within the boundaries of the nation, and is subject to rules and regulation of the country.

  • Free exchange of goods

There is no restriction on the exchange of goods and services between the buyer and seller such that they need to follow the norms of the nation while transacting. 

  • Single currency:

Goods and services are exchanged for a single and common currency. Like in India, Indian Rupees are used as a medium of exchange for buying and selling of goods and services.

  • Simplified trade procedure:

In home trade, there is a simplified trade procedure of buyer who places an order and the seller executes the order and receives his payment.


Difference between Wholesale Trade and Retail Trade

Basis of Comparison

Wholesale Trade

Retail trade

Meaning 

This is a business where goods and services are sold in huge bulk to the retailers and other industrial persons.  

The business which sells goods and services in smaller lots to the end users they are known as the retail trade.

Creates Link between 

They create links between manufacturers and retailers.

Wholesaler and Customer forms the link. 

Price 

Lower

Higher

Competition 

Less Competition

Tough Competition

Volume of Transaction

Large volume

Small Volume 

FAQs (Frequently Asked Questions)

1. What is Meant by Domestic Consumption?

Ans. Domestic Consumption means the consumption which is done by the local consumers within the boundaries of a particular nation. Domestic trade or Internal Trade facilitates domestic consumption. 

Domestic Consumption occurs when the products and services are bought and used in the country.

2. What is Legal Tender?

Ans. Legal tender is the money which recognised by the law of the land, means the law of the nation recognizes this money and approves it as valid payment of debt. It must be accepted for discharging the debt. Currency notes are the legal tender which can be offered as payment for any kind of dues.

Legal tender is defined as the coins or banknotes which is to be accepted in the time of payment of debt.

3. What is Meant by the ‘Title of goods’?

Ans. Under the Sale of Goods Act 1979, the ownership or the title is said to the goods that are passes when the parties to the sale intend it to pass. Ownership is important in cases where the seller has no right to sell the goods. The seller without the title of the goods cannot pass ownership to the buyer after the sale of the good.

4. What are the Other Activities that are Taken up by the Wholesalers Apart From Distributing the Goods to the Retailers?

Ans. Activities such as grading of products, packing the same into smaller lots, storage of the goods, transportation, promotion of goods in the market, collection of market information about the goods and services, collection of small and scattered orders of retailers and distributing the supplies to them.