Commerce · Ch 3 — Domestic Trade
Meaning and Classification of Trade
Meaning and Classification of Trade
1. Meaning and Classification of Trade
Trade is that branch of commerce which is concerned directly with the buying and selling of goods and services for value — it is the mechanism through which goods produced by a manufacturer eventually reach the individual who actually consumes them. Trade is only one of the two limbs of commerce; the other limb, the aids to trade (transport, banking, insurance, warehousing, advertising and communication), was covered in your first-year Business Activities chapter, and exists purely to remove the obstacles — of place, time, finance, risk, information and persons — that stand between a producer and a consumer.
Trade is classified, on the basis of the area it covers, into two broad kinds:
- Internal Trade (also called Home Trade or Domestic Trade) — buying and selling of goods carried on WITHIN the geographical boundaries of one country. It is conducted in the country's own currency and is governed entirely by that country's own trade laws. This is the subject of the present chapter.
- External Trade (also called Foreign Trade or International Trade) — buying and selling of goods carried on ACROSS national boundaries, between parties in two or more different countries, ordinarily settled in a convertible/foreign currency and governed additionally by international trade rules and each country's customs law. External trade is further divided into export trade, import trade and entrepot (re-export) trade, and is taken up in full in the next chapter of this syllabus.
Internal (domestic) trade is itself divided into two stages, based on the scale of the transaction and who the buyer is:
| Basis | Wholesale Trade | Retail Trade |
|---|---|---|
| Meaning | Buying in bulk from producers and selling in smaller lots | Buying from wholesalers and selling in small units to the final consumer |
| Buyer | Retailers, industrial/institutional users, other wholesalers | The individual consumer, for personal or household use |
| Quantity per sale | Large | Small |
| Capital needed | Relatively large | Relatively small (though large-scale retail formats need substantial capital) |
| Location | Near production centres, ports, or wholesale markets | Near residential/commercial areas, close to consumers |
| Contact with the ultimate consumer | Little or none | Direct and personal |
| Credit | Commonly extended to retailers | Usually cash, though credit is sometimes extended to known customers |
| Product range | Usually one or a few related lines, but in bulk | Often a wide variety of unrelated products, each in small quantity |
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The branch of commerce concerned directly with the buying and selling of goods and services for value, moving goods from …
Buying and selling of goods carried on within the geographical boundaries of one country, in its own currency and …
Buying and selling of goods carried on across national boundaries between parties in two or more countries; divided into export, im …