📌 Snapshot
- How goods reach you: wholesalers, retailers, store types and GST explained in comparison tables for CUET.
- The services wholesalers and retailers give, and why a factory cannot simply sell everything itself.
- Itinerant and fixed shop retailers, and the six large store formats compared on credit, range and service.
- GST with a worked tax credit example, plus the role of chambers of commerce and the terms of trade.
📖 Detailed Notes
Written and reviewed by Rohit Singh, Computer Science & Commerce faculty at UniDrill (MCA, Osmania University · 6 years teaching). Based on NCERT Business Studies Class XI, Chapter 10.
Who stands between the factory and your hand?
A packet of biscuits is baked in a factory in one city and you buy it from a corner shop in another. The factory makes lakhs of packets a day, but you want only one. Somebody has to buy in huge lots, store, break the lots into small packs, carry them to thousands of shops and keep the shelf stocked. Those people are the wholesalers and retailers, and what they do is internal trade.
Trade and its two kinds
Trade is the buying and selling of goods and services to earn a profit. Based on where buyers and sellers are located, it is of two kinds.
| Basis | Internal trade | External trade |
|---|---|---|
| Meaning | Buying and selling within the boundaries of a nation | Buying and selling between two or more countries |
| Customs or import duty | Not levied | Levied |
| Payment | Usually in the country's legal tender | Usually in a foreign currency |
Internal trade is split into wholesale trade and retail trade. Both wholesalers and retailers are marketing intermediaries: they get goods distributed fairly, quickly and at reasonable cost.
Wholesale trade
Wholesale trade is the purchase and sale of goods and services in large quantities, for resale or intermediate use. The wholesaler takes title to the goods, bears the business risk, buys in bulk and sells in small lots to retailers and industrial users.
| Services to manufacturers | What the wholesaler does |
|---|---|
| Facilitating large scale production | Collects orders from many retailers so the factory can produce in volume |
| Bearing risk | Takes the risk of price falls, theft, spoilage and fire after buying |
| Financial assistance | Pays for goods bought, so the manufacturer gets cash quickly |
| Expert advice | Passes on market knowledge about what customers want |
| Help in marketing | Takes over the work of selling to many small buyers |
| Continuity in production | Regular orders keep the factory running |
| Storage | Holds stock until it is wanted, creating time utility |
| Services to retailers | What the wholesaler does |
|---|---|
| Availability of goods | Keeps a wide range ready so the retailer need not stock heavily |
| Marketing support | Advertises and promotes the products |
| Grant of credit | Lets retailers buy now and pay later |
| Specialised knowledge | Advises on new products, trends and quality |
| Risk sharing | Takes on the risk of storage and price changes |
Why it works this way. Without wholesalers a factory would have to deal with thousands of tiny shops, each ordering a few packets. Wholesalers collect that into a few big orders, so the manufacturer saves on selling, transport and credit control, and the retailer does not have to order from a hundred factories.
Retail trade
Retail trade is the sale of goods and services directly to ultimate consumers, in small quantities, for personal and not business use. The retailer is the last link in the chain of distribution.
| Services to manufacturers and wholesalers | Services to consumers |
|---|---|
| Help in distribution, creating place utility | Regular availability of goods |
| Personal selling | Information about new products |
| Enabling large scale operations | Convenience in buying |
| Collecting market information | Wide selection |
| Help in promotion | After sales service |
| Credit facilities |
Types of retailers
Retailers can be grouped by size, ownership, merchandise or whether they have a fixed place of business. On the last basis the family tree looks like this.
Retail trade in one line: Retailers → Itinerant (no fixed place) or Fixed shop → small shopkeepers or large stores.
Itinerant retailers have no fixed place of business, work with limited resources and mostly sell daily use items.
| Type | How they work | Example |
|---|---|---|
| Peddlers and hawkers | Move from place to place carrying goods on a bicycle, hand cart or head | The vegetable seller calling out in your lane |
| Market traders | Open shops at different places on fixed days or dates | A weekly bazaar stall |
| Street traders (pavement vendors) | Set up where a floating population gathers, such as railway stations and bus stands | Water bottle seller on a platform |
| Cheap jacks | Petty retailers with independent shops of a temporary nature in a business locality, who change locality less often than hawkers | A trader who moves to a new market after a few weeks |
Pause and predict: a woman sells fruit from a push cart outside a railway station. Is she a hawker or a street trader?
Check your answer: A street trader. She works where a floating population gathers. A hawker would keep moving from lane to lane.
Fixed shop retailers have a permanent establishment, are more credible and offer services such as home delivery, guarantees, repairs, credit and spare parts. The small ones include general stores, speciality shops, street stall holders, second hand goods shops and single line stores.
The large retail formats
| Format | What it is | Key features | Main limit |
|---|---|---|---|
| Departmental store | A large store offering a wide variety under one roof in well defined departments ("everything from a pin to an elephant") | Centralised purchasing, decentralised selling, credit and home delivery for regular customers | High operating costs, and an inconvenient location for daily purchases |
| Multiple shop (chain store) | A network of shops owned by a manufacturer or intermediary selling standardised, branded, fast moving goods | Centralised buying, run by branch managers, cash sales only | Limited variety and little flexibility |
| Mail order house | Sells by post with no personal contact | Payment in advance, by VPP or through a bank. Suited to graded, light, standard goods in ready demand | Needs a literate public. No personal touch |
| Consumer cooperative store | Owned, managed and controlled by consumers | At least 10 persons, registered under the Cooperative Societies Act, elected committee, one member one vote, limited liability | Shortage of funds because membership is limited |
| Super market | A large store with a wide assortment on a low price appeal | Self service, cash only, no free home delivery or credit, no salespersons to persuade customers | No personal attention or credit |
| Vending machine | A machine that dispenses pre packed goods | Suited to low priced, uniform, high turnover items | Limited to a small range of goods |
An ATM is a well known example of the vending machine idea in banking.
Departmental store versus multiple shop. Students lose marks on this comparison more than any other in the chapter.
| Basis | Departmental store | Multiple shop |
|---|---|---|
| Location | One large store at a central place | Many shops in different localities, near customers |
| Range of products | Very wide variety | Limited, standardised, branded |
| Services | Many services, including home delivery | Fewer services |
| Pricing | Higher operating costs push prices up | Fixed, uniform prices across branches |
| Credit | May give credit to regular customers | Strictly cash only |
| Customers | Mainly the upper and middle class | Middle and lower income groups |
Centralised purchasing is not a difference, because both formats buy centrally.
Super market versus departmental store. Both sell a wide range under one roof, but a super market is self service and cash only, with no credit or free home delivery, while a departmental store gives personal service, credit and home delivery.
Pause and predict: a store sells a large variety of groceries on a self service basis, accepts only cash, has no credit and does not deliver. Which format is it?
Check your answer: A super market. Self service, cash only and no free delivery are the pointers. A departmental store would offer credit and delivery.
Beyond the textbook. For the exam: a mail order house sells by post, and its main limits are the need for a literate public and the lack of personal contact. In reality: online shopping has taken over this role. The core idea of selling without personal contact is the same, but cash on delivery, return policies and instant payment have removed the old fears about advance payment and delays. The exam question will still use the postal description.
Terms of trade. Price quotations often carry short codes that say who pays for what.
| Term | Full form | Meaning |
|---|---|---|
| COD | Cash on delivery | The buyer pays when the goods are delivered |
| FOB | Free on board | The seller bears the cost up to loading the goods on the ship |
| FOR | Free on rail | The seller bears the cost up to loading on the railway wagon |
| CIF | Cost, insurance and freight | The price includes the goods, insurance and freight to the destination |
| E&OE | Errors and omissions excepted | The seller may correct mistakes in the quotation or invoice |
Goods and Services Tax (GST)
Before 2017, a product could be taxed many times on its way to you. Each state and the Centre taxed it separately, and one tax was often charged on another. This is the cascading effect. GST replaced it with a single, destination based tax on the supply of goods and services, from manufacturer to consumer. It was implemented on 1 July 2017 under the idea of "One Nation, One Tax", and replaced 17 indirect taxes (8 central and 9 state) and 23 cesses.
| Tax | When it applies | Who collects |
|---|---|---|
| CGST (Central GST) | Supply within a state | The Centre |
| SGST (State GST) | Supply within a state | The state government |
| IGST (Integrated GST) | Supply between states | The Centre, which shares it with the destination state |
Destination based means the tax goes to the state where the goods are consumed, not where they are made.
Key features of GST: it applies to the supply of goods and services, it is a destination based consumption tax, it has four standard slabs of 5%, 12%, 18% and 28%, exports and supplies to Special Economic Zones are zero rated, and input tax credit avoids the cascading effect.
The GST Council is chaired by the Union Finance Minister. Its quorum is 50%, decisions need a 75% majority, and the States together hold two thirds of the weightage and the Centre one third.
Worked example. Anand Foods buys flour worth Rs. 20,000 and pays GST of 18%, which is Rs. 3,600. It bakes biscuits and sells them to a retailer for Rs. 30,000 plus 18% GST of Rs. 5,400. Under GST, Anand claims credit for the Rs. 3,600 already paid. It pays only Rs. 5,400 minus Rs. 3,600 = Rs. 1,800. Each seller in the chain pays tax only on the value it adds, so tax is never charged on tax.
Beyond the textbook. For the exam: the four slabs are 5%, 12%, 18% and 28%. In reality: the GST Council can change rates, and in September 2025 it simplified the structure to two main rates, 5% and 18%, with a higher rate on a few goods. The principles in this chapter do not change: destination based, one tax, input credit. Answer from the textbook version unless a question states different rates.
Chambers of commerce and industry
Associations such as ASSOCHAM, CII and FICCI speak for business in front of the government. They take up issues that affect internal trade: the movement of goods between states, octroi and local levies, harmonising sales tax or VAT, marketing of agricultural products, weights and measures, prevention of duplication of brands, excise duty, building infrastructure and labour legislation.
A realistic example: the same biscuit, many sellers
Anand Foods sends its biscuits to a wholesaler, Mehta Traders, who buys in lorry loads and stores them (a wholesaler's storage and risk bearing service). Mehta Traders sells smaller lots on credit to four kinds of retailers. A hawker takes cartons to sell on lanes. A general store sells them daily. StepRight, a made-up chain with 60 outlets across cities, sells cash-only branded goods under centralised buying (a multiple shop). A large self service market stocks them next to hundreds of other items (a super market). Anand's accountant adds GST: CGST and SGST if the sale is within the state, IGST if the wholesaler is in another state.
Exam traps
| The trap | Why it's tempting | The truth |
|---|---|---|
| "Internal trade attracts customs duty." | Duty is a familiar trade tax | Internal trade does not. External trade does |
| "Grant of credit is a service to manufacturers." | Wholesalers deal with manufacturers too | It is a service to retailers |
| "A multiple shop gives credit." | Big stores often give credit | Multiple shops sell strictly for cash. Departmental stores may give credit |
| "Centralised purchasing separates departmental stores from multiple shops." | It sounds like a chain feature | Both buy centrally |
| "A super market gives home delivery and credit." | It is a big store like a departmental store | Self service, cash only, no free delivery or credit |
| "Cheap jacks and hawkers are the same." | Both are itinerant | Cheap jacks have temporary shops in a locality. Hawkers keep moving |
| "Exports are taxed at 28%." | 28% is the top slab | Exports and SEZ supplies are zero rated |
| "GST Council decisions need a simple majority." | Most bodies decide this way | A 75% majority is needed, with States holding two thirds of the weightage |
60-second revision
| Topic | Lock this in |
|---|---|
| Internal trade | Within a nation, no customs duty, wholesale plus retail |
| Wholesaler | Large lots for resale. 7 services to manufacturers, 5 to retailers |
| Retailer | Sells to ultimate consumers. 5 services to producers, 6 to consumers |
| Itinerant | Hawkers, market traders, street traders, cheap jacks |
| Departmental store | Many departments, central location, credit, home delivery |
| Multiple shop | Many branches, standard branded goods, cash only |
| Mail order | No contact, advance payment, VPP or bank, needs literacy |
| Consumer cooperative | At least 10 persons, one vote each, shortage of funds |
| Super market | Self service, cash only, low price appeal |
| GST | 1 July 2017, destination based, CGST plus SGST or IGST, slabs 5, 12, 18, 28 |
| GST Council | Finance Minister chairs, quorum 50%, 75% majority, States two thirds |
| Chambers | ASSOCHAM, CII, FICCI |
Where this chapter connects
- Previous: MSME and Business Entrepreneurship covers the small traders and shopkeepers who form much of the retail sector.
- Next: International Business takes the same buying and selling across borders, where duties apply.
- Earlier chapter: Business, Trade and Commerce introduces trade and the aids that support it.
- Class XII link: Marketing treats wholesalers and retailers as channels of distribution.
🎯 Practice MCQs
First 3 questions free · create a free account to unlock the rest — answers & explanations included, no payment needed
Q1. Which of the following statements about internal trade is correct?
▸ Show answer & explanation
Answer: B
Internal trade happens within the boundaries of a nation and attracts no customs duty. Option A describes external trade, and options C and D wrongly limit its scope.
Q2. Which of the following is NOT a service that wholesalers render to manufacturers?
▸ Show answer & explanation
Answer: C
Grant of credit is a service of wholesalers to retailers. The other three are services to manufacturers.
Q3. Match List I with List II. List I: (i) Peddlers and hawkers (ii) Market traders (iii) Street traders (iv) Cheap jacks. List II: (p) Open shops at different places on fixed days or dates (q) Petty retailers with temporary independent shops in a locality (r) Move from place to place carrying goods on a cycle, cart or head (s) Found at railway stations and bus stands
▸ Show answer & explanation
Answer: A
Hawkers keep moving, market traders open on fixed days, street traders work where a floating population gathers, and cheap jacks have temporary shops in a locality. Only option A pairs all four correctly.
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Q4. StepRight has 60 outlets in different cities, buys all its stock centrally from the head office, sells only standardised branded goods and accepts only cash. This is an example of:
▸ Show answer & explanation
Answer: C
Many branches, centralised buying, standard branded goods and cash only sales are the signs of a multiple (chain) shop. A departmental store is one large store, a super market is a self service store and a mail order house sells by post.
Q5. Assertion (A): Mail order business cannot be successful unless education is widespread. Reason (R): Mail order houses reach customers through advertisements, catalogues and price lists sent by post, which only literate people can use.
▸ Show answer & explanation
Answer: A
Written communication reaches only those who can read, so mail order depends on literacy. The reason therefore explains the assertion.
Q6. Under the GST system implemented from 1 July 2017, which statement is INCORRECT?
▸ Show answer & explanation
Answer: C
Exports and supplies to Special Economic Zones are zero rated, not taxed at 28%. The other three statements are correct.
Q7. Which of the following is NOT a characteristic of a super market?
▸ Show answer & explanation
Answer: C
A super market does not offer free home delivery or credit, unlike a departmental store. The other three are its characteristics.
Q8. Mrs. Sharma and 14 neighbours register an organisation under the Cooperative Societies Act. It buys goods directly from manufacturers and sells them to members at reasonable prices, and each member has one vote regardless of shares. A limitation of this type of retail organisation is:
▸ Show answer & explanation
Answer: C
This is a consumer cooperative store, and its main limitation is shortage of funds because it depends on limited membership. Option A is a limit of a departmental store, option B of a multiple shop and option D of a mail order house.
Q9. A baker buys flour worth Rs. 20,000 and pays 18% GST on it. She sells biscuits worth Rs. 30,000 and charges 18% GST to the customer. Using input tax credit, the GST she must pay to the government is:
▸ Show answer & explanation
Answer: C
GST collected is 18% of Rs. 30,000 = Rs. 5,400. GST paid on flour is 18% of Rs. 20,000 = Rs. 3,600. After claiming credit she pays Rs. 5,400 minus Rs. 3,600 = Rs. 1,800. Option A ignores the credit, option B is only the input tax and option D adds the two amounts.
Q10. Statement I: In the GST Council the States together hold two thirds of the weightage and the Centre one third. Statement II: Decisions in the GST Council are taken by a simple majority. Which option is correct?
▸ Show answer & explanation
Answer: B
The weightage split is correct. Decisions need a 75 per cent majority and not a simple majority.
Q11. Match List I with List II. List I: (i) COD (ii) FOB (iii) CIF (iv) E&OE. List II: (p) Price includes cost, insurance and freight (q) Seller may correct errors and omissions (r) Seller bears cost up to loading on the ship (s) Buyer pays on delivery of goods
▸ Show answer & explanation
Answer: A
COD is cash on delivery, FOB is free on board, CIF is cost insurance and freight, and E&OE is errors and omissions excepted. The other options mix the meanings of FOB and CIF.
Q12. Which of the following is a feature of a departmental store but NOT of a multiple shop?
▸ Show answer & explanation
Answer: B
Departmental stores may give credit to regular customers, whereas multiple shops sell strictly for cash. Centralised purchasing is common to both, and options C and D describe multiple shops.
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