Internal Trade or Home Trade

Internal Trade or Home Trade

Trade is a fundamental economic perception involving the buying and selling of goods and services, with return paid by a buyer to a seller, or the exchange of goods or services between parties.

Internal trade is also known as Home trade. It is conducted within the political and geographical boundaries of a country. It can be at a local level or national level. That means when buying and selling of goods and services take place within the geographical limits of a country. The significance of home trade in a country is that it facilitates barter of goods within the country. By doing this it also makes sure that factors of production reach to the correct places so that the financial system of the country can grow. So while import and export are significant for the financial system of a nation, most of its GDP involvement comes from internal trade.

It can be divided into two groups –

Internal Trade types

  • Wholesale trade

It involves in large quantities from producers or manufacturers are selling in lots to retailers for resale to consumers. The wholesalers are between the manufacturer and the retailer. A wholesaler occupies prominent position since manufacturers, as well as retailers both, are dependent upon them. Wholesaler act as an intermediary between producers and retailers. The functions that wholesalers execute in fact advantage both the producer and the seller.

A wholesaler provides many valuable services to the producer as well as the retailer. They sell in lesser quantities to retailers, which refrains the retailers from requiring storage room. A wholesaler usually deals with one type of industry, e.g., machinery, textile, stationery.

  • 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 distributions. He establishes a link between wholesalers and consumers. It refers to the sale of goods in small lots to the final consumers.

A retailer buys goods from a wholesaler and sells them to the consumer. Retailers do not mainly have to be from one business i.e. they can trade in a diversity of products at a similar time. There are different types of retailer. Like hawkers, peddlers, general shops.

The major features of internal trade are:

  • The buying and selling of goods and services take place within a country.
  • The payment is made and received in the home country only.
  • There are no or very few formalities to be completed by the traders.

Advantages

  • It provides a foundation for international growth.
  • It helps to create more jobs within the country.
  • It spreads out the risk a brand and business must assume.
  • It facilitates the exchange of goods within the country.
  • It encourages market competitiveness.
  • International exchange rates can be beneficial to a business.
  • It ensures the availability of raw materials and helps in the growth of an industry.

Disadvantages

  • There is always a political risk involved in international trade.
  • A large amount of capital is required to start and run the trade.
  • There can be severe exchange rate risks.
  • It may not be possible to obtain professional management due to lack of funds.
  • International trade also presents cultural complications.
  • Lack of resources or funds can restrict the growth of a business.
  • It increases the risk of proprietary information theft.

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