What is Commerce? Definition and Meaning
What is Commerce? Definition and Meaning, Commerce was a part of human history from the earliest days of civilization when people started trading goods.
It has evolved to include complex trade routes and corporations.
Definition of Commerce
Commerce is generally defined as exchanging goods, services, or something valuable between entities or businesses, as of What is Commerce? Definition and Meaning.
All products and services are made accessible to all who require them by commerce.
For example,
If someone makes bread, they have to make sure it is available at the right times and places.
This includes marketing to inform people about the product and to stock the product at the right locations.
Meaning of Commerce
Commerce is the term used to describe large-scale macroeconomic purchases and sales.
It also involves establishing retail outlets, packaging the product, shipping it, and selling it.
Commerce includes all of these activities.
It establishes the necessary connections between buyers and producers of goods or services and facilitates the sale and purchase of goods or services.
It is responsible for all activities required to ensure a steady and uninterrupted supply of goods and services to consumers.
Commerce includes:
- Buying and selling goods and services; and
- The necessary acts to ensure that there is a constant and uninterrupted flow from production to consumption.
Trade is the first activity that involves buying and selling goods and services.
The second activity is known as ‘Auxiliaries or Aids to trade.
Commerce is classified as:
- Trade, and
- Auxiliaries to Trade
Let us explain in detail these two activities of commerce.
Trade
Commerce is fundamentally about trade and It is simply the act of selling, transferring, or exchanging goods and services.
It helps in making goods and services available for final customers.
It is often difficult for manufacturers who produce large quantities or bulk to sell their products directly to customers.
The reasons could be the distance from the manufacturing site to customers; quantity purchased, payment problems, or other factors.
They hire the services of firms and individuals that buy the products from the manufacturer and then sell them to their customers.
After purchasing the products from the producers, the owner of a local grocery store sells the groceries to their customers.
They may also buy the product from wholesalers, who purchase bulk products from the manufacturers and then sell them to retailers.
It is considered that wholesalers and grocery store owners may be involved in trading.
Therefore, the features of trade can be classified as follows:
- It involves the actual buying and selling of goods,
- It also refers to getting goods to one place and then selling them to another,
- Traders, also called salespeople, are responsible for the distribution of goods,
- Trade helps to balance supply and demand.
For example,
The state of Punjab is producing much rice, but there is not much demand.
Traders buy rice from Punjab and sell it to Orissa and West Bengal, where there is a high demand for it.
The demand-supply ratio is therefore balanced.
Based on area of service, trade is classified as:
- Internal Trade
- External Trade
Internal Trade
Internal trade is when a business occurs within the borders of a country and it means that both buying and selling take place within the country.
For example,
A trader might buy woolen clothes in Mumbai from producers and then sell them to Delhi-based retailers.
A village trader can also purchase products from the city’s wholesale market to sell in their town.
These two examples show that there are two types of internal trade:
- Buying from producers and selling it to retail customers in bulk (called wholesale trade);
- Or it can be purchased directly from wholesalers or producers and sold to customers (called retail trade).
External Trade
The trade between countries is called external trade and The purchase and sale, or cross-border trade of goods and services, is also called external trade.
It may be in the following methods:
- Country A’s company purchases goods from country B to sell in their country,(known as Import trade).
- Country A sells manufactured goods to companies in country B, (known as Export trade).
- Company A buys goods from company B to sell to company C, (called the Entrepot trade).
Aids/Auxiliaries to Trade
In trade, many activities can be done to speed up buying and selling goods (Trade).
These activities include Transportation of products, financial transactions, Warehousing, products insurance, and so on.
For example,
A Mumbai firm might buy goods from Delhi or import them from Singapore.
It must manage all of the following activities in addition to buying and selling products.
These are:
- Transport of goods from Delhi, Singapore, or any country to Mumbai is known as Transportation;
- Once the goods are received at the location, it is important to have a well-organized storage system known as Warehousing;
- Payment transaction through banks to the seller is called Banking;
- Risking damages or loss of products in the transition while importing or storage is known as Insurance;
- Communicating with one another through telecom and postal services is known as Communication;
Advertisement
After investing heavily in the business, a businessperson cannot wait for customers in the modern competitive marketplace.
The manufacturer must inform the customer about the features and specifications of the product to get more customers’ attention, and this is what advertising does.
The advertisement makes it easy for customers to find out about the products on the market.
This information can help a customer decide whether or not to purchase the product.
Advertisement enhances knowledge and decreases information hindrance.
These activities assist in the expediting of trade activities and provide support for them.
These activities are called auxiliaries to trade.
These activities help to accelerate trading and support the business’s success. These are also called the business’s support services.
