Sale or exchange of goods and services is an necessary feature of business. In the procedure of sale or exchange, goods pass through different stages till these are lastly used or consumed by the customers, the last connection in the series from manufacturer to customer. The procedure which fills the space between producers and consumers is identified as commerce. All activities which eliminate the gap between the producer and consumers are recognized as commercial activities. It facilitates the allocation of goods and services among the consumers.
In the words of Evelyn Thomes, “ Commercial activity transaction with the buying and selling of goods, the exchange of commodities and delivery of finished goods.”
According to Dr. Noel Branton, “Commerce comprises a group of specialized activities which together form an essential part of the process of production. It links supplies and consumers by means of trade and activities auxiliary to trade such as transport, banking, insurance and warehousing. The most important links are provided by a series of markets controlled by the price system”
According to W.R. Spriegel, “Commerce is fundamentally concerned with the move of goods and the collecting, grading, warehousing, transporting, insuring and financing to connection with the transfer of goods.”
James Stephenson defines commerce as “The sum of total of these processes which are engaged in the removal of barrier of persons (trade), place (transport and insurance), and time (warehousing) in the exchange (banking) of commodities.”
There is mistaken belief that trade and commerce are one and the same thing. Trade is only concerned with buying and selling of goods, whereas commerce has a wider range. It not only includes the activities pertaining to trade, but it also includes the activities which assist in growth of trade.
Mechanism of Commerce
Commerce can be divided into two parts:
1. Trade: Trade refers to the actual buying and selling of goods for cash or for credit. It adds economic values to the goods produced in industry by distributing these among the consumers. Trade can be further classified into
a) Home Trade : Home trade is a trade which boundaries to the limits of the country. Thus in home trade, buying and selling of goods take place among the people within the nation. It is also known as inside trade or domestic trade. Home trade can be further divided into
i) Wholesale trade : The wholesale trade refers to the large scale buying of goods from producer and selling them in small lots to retailers. Thus, wholesalers are a tie between manufactures and retailers.
ii) Retail Trade : Retail trade means buying of goods by retailers from the wholesalers and selling of these goods to the ultimate consumers. The retailers provide the services in the local market. Thus, retailers are last link in the distribution chain from producer to the consumer.
b) Foreign Trade : Foreign trade means buying and selling of goods between two countries. The theory of comparative costs is the foundation of foreign trade. Every country can obtain the products which cannot be manufactured by it gainfully. The countries having surplus goods, sell their products in the international market. Foreign trade is also termed as external trade or international trade. The foreign trade can be further classified as follows :
i) Export Trade: Export trade means selling of goods to buyers of the foreign countries.
ii) Import Trade : Import trade means buying of goods from the sellers of the foreign countries.
iii) Entrepot Trade : Entrepot trade refers to the import of raw material or semi finished goods for the use of re-exporting them after changing them into finished products.
2. Aids to Trade : Aids to trade refers to the resources which promote the transfer or exchange of goods. There are certain hindrances in the exchange of goods which are removed by the aids to trade, transport, warehousing, insurance, banking, advertisement and salesmanship are the various aids to trade.
Trade removes the barrier of persons.
Transport removes the obstacle of place.
Insurance removes the encumbrance of risk.
Banking removes the difficulty of finance.
Advertisement and salesmanship remove the interruption of knowledge.