What Are the Components of Commerce? – Trade and Auxiliaries to Trade

Commerce is a very important part of modern economic life. It connects producers and consumers and ensures that goods and services reach the right place, at the right time, and in the right condition. In simple words, commerce deals with all those activities that help in the exchange of goods and services.

Commerce has two main components:

1. Trade

2. Auxiliaries to Trade (or Aids to Trade)

Both work together to make business possible and successful.

Meaning of Commerce

Commerce refers to the distribution of goods and services from producers to consumers. It includes not only buying and selling but also all supporting activities that help this process.

Thus, commerce can be clearly divided into:

• Trade – the actual buying and selling

• Auxiliaries to trade – activities that support and facilitate trade

1. Trade

Meaning of Trade

Trade is the core part of commerce. It refers to the exchange of goods and services for money or money’s worth. Without trade, products produced by factories, farms, or service providers cannot reach consumers.

In other words, trade creates a direct link between sellers and buyers.

Types of Trade

Trade can be broadly divided into two main categories:

(a) Internal Trade

Internal trade (also called domestic trade) takes place within the boundaries of a country. Both the buyer and the seller belong to the same country.

Internal trade is further divided into:

i. Wholesale Trade

Wholesale trade involves buying goods in large quantities from manufacturers and selling them in smaller quantities to retailers.
Wholesalers act as a link between producers and retailers.

ii. Retail Trade

Retail trade involves selling goods in small quantities directly to final consumers. Retailers are the last link in the chain of distribution.

(b) External Trade

External trade (also called international trade) takes place between two or more countries. It involves cross-border exchange of goods and services.

External trade is of three types:

i. Import Trade

When a country purchases goods from another country, it is called import trade.

ii. Export Trade

When a country sells goods to another country, it is known as export trade.

iii. Entrepôt (or Re-export) Trade

In this type of trade, goods are first imported from one country and then exported to another country without much processing.

Importance of Trade

Trade plays a vital role in commerce because:

• It connects producers and consumers

• It helps in the movement of surplus goods to places of shortage

• It encourages specialization and large-scale production

• It supports national and international economic growth

However, trade alone cannot operate smoothly without support. This leads to the second component of commerce.

2. Auxiliaries to Trade (Aids to Trade)

Meaning of Auxiliaries to Trade

Auxiliaries to trade are all those activities that help, support, and make trade possible and convenient. These activities remove various difficulties involved in the distribution of goods.

Some common problems in trade are:

• Distance between producer and consumer

• Lack of storage

• Risk of loss

• Need for finance

• Lack of information about products

Auxiliaries to trade solve these problems.

Main Types of Auxiliaries to Trade

The important auxiliaries to trade are:

1. Transport

2. Warehousing

3. Banking and Finance

4. Insurance

5. Advertising

6. Communication

7. Packaging (often included as a supporting service)

Each of these plays a special role.

1. Transport

Transport removes the place barrier between producers and consumers. Goods are often produced in one place and consumed in another.

Transport helps to:

• carry raw materials to factories

• move finished goods to markets

• connect rural and urban areas

Without transport, trade would remain limited to local markets only.

2. Warehousing

Warehousing removes the time barrier. Goods are not always demanded immediately after production.

Warehouses store goods safely until they are needed in the market. Warehousing helps in:

• maintaining regular supply

• stabilizing prices

• protecting goods from damage, theft, and weather

For example, agricultural products are stored after harvest and sold gradually throughout the year.

3. Banking and Finance

Trade requires money at every stage—buying raw materials, paying wages, transporting goods, and holding stocks.

Banking and financial institutions provide:

• loans and credit

• safe payment systems

• money transfer facilities

They remove the financial difficulty of traders and producers and make large-scale business possible.

4. Insurance

Business involves many risks such as:

• fire

• theft

• accidents

• damage during transport

Insurance removes the risk barrier by providing protection against financial loss. By paying a small premium, traders can protect themselves from large and unexpected losses.

Insurance gives confidence to businessmen and encourages them to take up new business activities.

5. Advertising

Advertising removes the information barrier between buyers and sellers. Customers may not know about new products, brands, or services available in the market.

Advertising helps to:

• inform customers about products

• create demand

• increase sales

• build brand image

It plays a major role in competitive markets.

6. Communication

Communication services help in the exchange of information between different parties involved in trade such as producers, wholesalers, retailers, and customers.

Communication helps in:

• placing orders

• confirming deliveries

• sending price information

• handling customer queries

Fast and reliable communication increases the speed and efficiency of business operations.

7. Packaging

Packaging is also considered an important support activity in modern commerce.

It helps in:

• protecting goods during transport and storage

• improving the appearance of products

• providing information such as price, quantity, and usage instructions

Good packaging increases customer attraction and reduces losses due to damage.

Relationship between Trade and Auxiliaries to Trade

Trade and auxiliaries to trade are closely connected. Trade cannot function effectively without the help of supporting services.

For example:

• Goods cannot be sold in distant markets without transport.

• Sellers cannot protect goods without insurance.

• Buyers cannot know about products without advertising.

• Businesses cannot operate smoothly without banking services.

Therefore, auxiliaries to trade act as the backbone of trade.

Conclusion

Commerce consists of two major components—trade and auxiliaries to trade. Trade refers to the buying and selling of goods and services, while auxiliaries to trade include all those activities that make trade smooth, safe, and efficient.

Trade is divided into internal trade and external trade, and auxiliaries to trade include transport, warehousing, banking, insurance, advertising, communication, and packaging.

Together, these components ensure that goods produced in one place reach consumers in another place, at the right time, in the right quantity, and at a reasonable cost. In today’s global and competitive world, the success of commerce depends not only on trade but also on the effective functioning of its supporting services.