The market was of great importance in the life of Khiva; it consisted of two covered narrow streets with a number of specialized shops and workshops on both sides of the streets. The Khiva market was quite busy, and was considered by many the equal of the market in Bukhara. As power was centralized the Khiva Khanate, it became possible to think about increasing home and foreign trade. The small bazaar could not meet the needs of the population and in the 1930s and its area was considerably widened. For it they chose an area in the eastern outskirts of the city where there was a lake. The inhabitants of Khiva worked hard for forty-five days to cover the lake and there they erected a new row of shops. A special tax was traditionally levied for using the bazaar. The caravans started from Khiva in different directions with various goods, although the roads were not always safe. Concerning one of the caravans, the historian Munis wrote: Two hundred merchants of Khorezm fitted out a big caravan with numerous expensive goods in 1219 H. (1804-1805). When the caravan went out of Men/ in the direction of Meshed and reached Serakhsa region it was attacked by the Salir tribe that lived there. The Khiva merchants offered the attacking groups a determined resistance.
Munis also told of another such incident: The people of the caravan formed a fortification made of bales and dirt and began to defend themselves. For three days it was difficult for Chaudors to overcome them despite their best efforts. On the fifth day the Chaudors began talking about peace — asking about buying shrouds for the dead — and the caravan continued on its way, rid of danger that threatened it.
The merchants came with their goods from neighboring and foreign countries to the caravanserais of Khiva. They brought a variety of goods to Khiva and the other countries along the route.
At the beginning of the nineteenth century, the role of Khiva grew considerably in international trade. Carpets were exported to Turkey, China, and other countries from Khiva. Trading with Iraq occupied an important place, According to Anthony Jenkinson, Khivans were also receiving goods for sale: «The most important goods they sell here are those which are brought from Bukhara or Persia (Iran).»
Some merchants visited Khiva many times. They were well known among the Khiva social circles.
One of the merchants, Kazakh by nationality, Sultan Taooke, who came to Khiva in 1763 on trade, was enthroned for a time as a puppet khan, though he soon returned home.
Among those items brought to the bazaar, the goods of craftsmen, including production of the small shops of neighboring villages, and products of agriculture and stockbreeding took an important place. The goods sold in the Khiva bazaar were intended for all the townspeople and the villagers of the neighboring districts. Some goods were in demand among the wealthy population, and part of cotton and silk fabrics were sent out of the Khanate limits. The Khiva merchants supplied Persia, Afghanistan, India and other countries with goods. They mainly bought inexpensive coarse calico, metal items and shoes.
The goods were brought from different places: wolf furs, fox furs, cattle furs from Kazakh Khanates, Tekin carpets, pure-bred horses from Turkmenia. Rough kinds of coarse calico, yarn, and leather were also brought from the neighboring districts. Dealers emerged, who concentrated on reselling the goods of their suppliers and kept small producers of whole districts under their own terms.
From the end of the sixteenth century trade with Russia was stimulated. The strengthening of commercial and diplomatic relations, exchanging letters and presents among sovereigns of Moscow and Khiva, followed it. When the Russians conquered Astrakhan in 1557, Khiva merchants appeared there within two years.
Ambassadors involved in diplomatic missions were busy with their trade at the same time. The Khiva ambassadors usually took fabrics, which were the main items of trade with Russia. Carpets, dry fruits, and plant dyes were also among those things exported from Khiva to Russia. The Russian ambassadors were sent to buy the goods of Khiva. V.A. Dautov and M.Yu. Kasimov, for example, who were sent to Khiva and Bukhara from Moscow were charged to buy leather and dyed items. Part of the fabrics exported to Russia was subjected to additional processing; the cloth was dyed to America until 1861. However, civil war broke out in the U.S. from 1861 until 1865 causing a sharp decline in the amount of cotton delivered, The cotton fabric industry was thrown into a crisis, causing many factories to close and thereby creating mass unemployment. The official Russian journals and newspapers in Moscow and Petersburg supported the interests of textile industry entrepreneurs and declared the necessity of tsarism in Central Asia in order to support the industry with raw cotton.
By this time, the international and home situation in Russia caused the government to renew its interest in spreading to the heart of Central Asia. The region attracted the attention of Russian government and entrepreneurial circles not only because it was a source of textile raw materials, but also for the vast market for Russian industrial goods it represented.