Commerce · Ch 3 — Classification of Business Activities
Trade — Meaning and Types
Trade — Meaning and Types
4. Trade — Meaning and Types
Trade is the activity of buying and selling goods and services with the object of making a profit, and of transferring their ownership from the seller to the buyer. Trade is classified on the basis of the geographical area it covers into Internal Trade and External Trade.
(A) Internal Trade (Home Trade / Domestic Trade) — buying and selling of goods and services carried on WITHIN the boundaries of one country, with payment made and received in the country's own currency. Internal trade is of two kinds:
- Wholesale Trade — buying goods in large quantities directly from producers/manufacturers and selling them in comparatively smaller lots to retailers (not usually to the final consumer). A wholesaler performs several important functions: buying in bulk, storing/warehousing large stocks, breaking bulk into smaller units convenient for retailers, financing retailers (often on credit), bearing the risk of price fluctuation and spoilage while goods are held in stock, and providing market information back to manufacturers.
- Retail Trade — buying goods from wholesalers (or sometimes directly from manufacturers) and selling them in small quantities directly to the final consumer for personal use. A retailer performs functions such as: holding a wide variety of goods for immediate consumer choice, providing personal attention and product information to the buyer, extending convenient/nearby access and after-sales service, and often extending small amounts of credit to regular customers.
| Basis | Wholesale Trade | Retail Trade |
|---|---|---|
| Quantity dealt in | Large/bulk quantities | Small quantities |
| Sells to | Retailers (mainly) | Final consumers |
| Capital required | Comparatively larger | Comparatively smaller |
| Location | Often near production centres/markets | Close to residential/consumer areas |
| Direct contact with consumer | Rare | Regular and direct |
(B) External Trade (Foreign Trade / International Trade) — buying and selling of goods and services between two or more different countries, involving foreign exchange. External trade is of three kinds:
- Import Trade — buying goods from another country and bringing them into one's own country for use or sale. Example: an Indian company buying crude petroleum from a foreign supplier.
- Export Trade — selling and sending goods from one's own country to another country. Example: an Indian company selling textiles to a buyer abroad. …
Buying and selling of goods and services carried on within the boundaries o …
Buying goods in bulk from producers and selling in smaller lots, mainly …
Buying goods (usually from wholesalers) and selling them in small quantities directly to th …
Buying and selling of goods and services between two or more differe …
Importing goods from one country specifically to re-export them, without substantial further processing, …