Commerce is a branch of production which is concerned with the distribution, exchange of goods and services and all activities which assist or facilitate trade, e.g. banking, insurance, transportation communication, tourism etc. It is the process of buying, selling and distributing goods and services.
The process of living involves three major activities which are production, consumption and exchange. The central focus of commerce is exchange. In a commercial sense, exchange would concentrate on the transfer of goods and services from their producers to the customers. Commerce is therefore concerned with trade and activities which assist trade. This include the distribution of raw materials to manufacturers and finished products from the factory to the consumers. Commerce creates time and place utilities. Commerce developed as a result of specialization. Commerce embraces trade and the ancillaries to trade.
What is Trade
Trade is one of the two main diversions of commerce. It is the most important aspects of commerce. Trade is the act of buying and selling of goods and services. Trade is generally classified into two: Home Trade and Foreign Trade.
Home Trade
Home trade is a branch of commerce which comprises wholesaling (Wholesale Trade) and retailing (Retail Trade). Home trade is the act of buying and selling of goods and services within a geographical area of a nation. It can be referred to as domestic or internal trade. Goods are sold within the country, hence the same currency is used.
Wholesaling
Wholesaling is the process of buying goods in large quantity or bulk from the producers and making them available to the retailer in small quantities. The wholesaler, therefore serves as the intermediary between the producer and retailer.
Retailing
Retailing in concerned mainly with the buying of goods in small quantities from the wholesalers and making it available in units to the consumers. Retail trade is the business activity of selling goods and services to the final consumers. The retailer is the final link in the chain of distribution.
Foreign Trade
Foreign trade is the trade between nations. It is the process of buying and selling of goods and services between two or more countries. Foreign trade which is also referred to as international trade can be bilateral or multilateral. It involves the use of different currencies. International trade is divided into export, import and entrepot.
Export
Export is the sale of goods (raw materials and finished goods) to other countries. The goods or services are paid for a foreign currencies. Export trade can be visible or invisible e.g. in Nigeria, cocoa and palm oil represent visible trade while invisible trade include banking, aviation etc.
Import
Import is the act of buying of goods and services from other countries. Goods are imported either in response to direct orders or on consignment. Import can be visible or invisible. Examples of imported goods in Nigeria include electronics, automobiles, etc.
Entrepot
Entrepot is the process of importing goods and services for re-exporting to other countries. It is also referred to as re-export trade.
Difference between Home Trade and Foreign Trade
Home Trade:
-
It involves the use of local currency
-
Trade occurs over short distances
-
There are no artificial barriers
-
Factores of production can be easily moved out
-
Trade occurs within a country
Foreign Trade
-
Foreign currencies are used
-
Trade occurs over long distances
-
There are artificial barriers
-
They cannot be easily moved out
-
Trade occurs among countries
Aids to Trade
Aids to trade are the ancillaries to trade. They are activities which facilitate trade i.e. make trade possible. Aids to trade are banking, insurance, transport, advertising, warehousing, communication and tourism.