Types of Trade and Aids to Trade

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Hi, welcome to this hall on the Title: Types Of Trade in commerce.

Table Of Contents

At the end of this article, student should be able to:

  1. Define trade.
  2. List the types of trade
  3. Differences between trade and Commerce.
  4. Explain aids to trade
  5. Explain the relationship or differences between home trade and foreign trade and examples.

What Is Trade?

Definition: Trade is simply the buying and selling of goods and services while commerce is involved in all those activities in the distribution and exchange of goods and services.

Trade is one of the two main divisions of Commerce. It is the most important aspect of Commerce. Trade is the act of buying and selling of goods and services.

DIFFERENCES BETWEEN TRADE AND COMMERCE

The differences is that trade is simply the act of buying and selling of goods and services while commerce is involved in all those activities in the distribution and exchange of goods and services.

TYPES OF TRADE

Trade is divided or classified into two major groups, the types of trade we have are home trade and foreign trade.

1. HOME TRADE

Home trade is a branch of commerce or types of trade in 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.

(a) 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 the retailer

(b) RETAILING: Retailing is concerned mainly with the buying of goods in small quantities from the wholesalers and making it available in units to the consumers. Rated trade is a business activity of selling goods and services to the final consumer. You retailer is the final link in the chain of distribution.

2. FOREIGN TRADE

Foreign trade is the types of trade in Commerce which is the buying and selling of goods and services beyond the geographical boundaries of a country or between one country and the other.

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, imports and entrepot.

  • Export: Export is the Sale of goods (raw materials and finished goods) to other countries. The goods or services are paid for in foreign currencies. Export trade can be visible or invisible, e.g. in Nigeria, cocoa and Palm oil represents visible trade while invisible trade include banking and aviation.
  • Import: This is the act of buying of goods and services from other countries. Goods are imported either in response to direct order or on consignment. Import can be visible or invisible. Examples of imported goods in Nigeria are electronics and automobiles.
  • 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.

DIFFERENCES BETWEEN HOME TRADE AND FOREIGN TRADE

Foreign Trade – Home Trade

  1. Goods are moved beyond geographical boundaries – while in home trade goods are within the same country.
  2. Different currencies are used in foreign trade – while in home trade one currency is used.
  3. There is language barrier in foreign trade – There is no language barrier in home trade.
  4. More complex documentation is required in foreign trade – Less document is required in home trade.
  5. Different weights and measures are in use – The same weight and measures are in use.
  6. Different social standard, rules and regulations are in use – The same social standard, rules and regulations are in use.
  7. Transport cost is higher in foreign trade – Transport cost is lower in home trade.
  8. Foreign trade is subject to restrictions – Goods moves freely within a country in home trade.

AIDS TO TRADE

Aids to trade are the ancillaries to trade. They are commercial activities which facilitate trade (buying and selling) i.e, they make trade possible. They are so fundamental to trade that trading activities cannot progress without them. Aids to trade are banking, insurance, transport, advertising, where housing, communication and tourism.

  1. Banking: This makes trading possible by making funds available. The banks are financial institutions which make funds available to assist people in their daily purchases and capital for embarking on industrial activities. They make funds available in the form of loans and overdraft. Banks also accept savings from the people. Examples of banks are commercial, merchant and mortgage bank.
  2. Transportation: Transportation provides the means of carrying raw materials, finished goods and people from one place to another either by road, sea, rail, pipe or air. Improve means of transportation have brought about a speedy of faster diffusion of ideas and expansion of the industrial area.
  3. Advertising: Advertising is the process of creating awareness in demands of the public about the existence of a product. Advertising may be used to stimulate demand so as to increase sales. It ensures that customers are aware of the existence and availability of a particular product and the are persuaded to buy it. Advertising can take many forms, e.g. press, catalogs, free samples, trade fair, exhibition, window display, television, radio, etc.
  4. Warehousing: Warehousing is a process which ensures that goods produce are stored until they are needed. Warehousing as an important aspect of Commerce is aimed at seeing that there is a regular and steady supply of goods. Since a manufacturer produces goods in advance, they need Warehouse to store the goods ahead of demand. It ensures that there is no fluctuation in the price of goods. Warehouses can be ordinary, bonded, public, etc.
  5. Communication: Communication is the means of sending and receiving information from one place to another. Suppliers and customers can be easily linked together through communication services, telephone, tell us, and internet email. The development of telecommunication systems had also eased and Hastened contact between people within commercial centers and all over the world.
  6. Insurance: Insurance is a security made against loss. It is the protection against loss all liabilities suffered in the day-to-day business operation. In return for premiums, individuals and corporate organizations are composited for losses arising from fire, flood, accident, etc. Insurance is an essential element in local and international trade. The traders who suffer losses are restored to their formal position or status true compensation.
  7. Tourism: Tourism aid trade by providing tourist trading opportunities at tourist centers. Many people from different countries can converge in a country because of it’s tourist attraction. This will definitely increase trading activities.

Revision Questions

  1. Define trade.
  2. What are the differences between trade and Commerce?
  3. Describe the different types of trade.
  4. Describe the relationship or differences between foreign trade and home trade.
  5. List and explain 7 aids to trade
  6. Write short note on (a) Wholesaling (b) Retailing (c) Exports (d) Import.
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