Business Activities are grouped into two broad categories, i.e. industry and commerce. Commerce is concerned with facilitating the exchange of goods and services in the economy. It is sub-classified as trade and auxiliaries to trade. Many think that trade and commerce are the same terms and can be used interchangeably. But the fact is both the terms are different from each other and carry different meanings. Trade simply means buying and selling of goods and services in return for money or money’s worth.
The scope of commerce is wider than that of trade, which not only refers to the exchange of goods and services but also includes all those activities that are vital for the completion of that exchange. To further comprehend the understanding of these two terms the basic comparison is given below:
Definition of Trade
In trade, the ownership of goods or services is transferred from one person to the another in consideration of cash or cash equivalents. Trade can be done between two parties or more than two parties. When the buying and selling take place between two persons, it is called bilateral trade whereas when it is done between more than two persons, then it is called multilateral trade.
Earlier the trade was little cumbersome since it followed the barter system where goods were exchanged in return of other goods or commodities. It is hard to evaluate the exact value because of the different commodities type involved in the exchange. With the advent of money, this process became more convenient for both the sellers and buyers.
Trade can be domestic as well as foreign. Domestic trade means within the border of the country, and foreign trade means across the borders. Foreign trade is done through investment in securities or funds and can be termed as imports and exports.
Definition of Commerce
Commerce includes all the activities that help in facilitating the exchange of goods and services from the manufacturer or the producer to the ultimate consumers. Majorly the activities are transportation, banking, insurance, advertising, warehousing, etc. that act as an aide in the successful completion of the exchange.
Once the products are manufactured these cannot reach directly to the customer, the same has to pass through a series of activities. The first wholesaler will purchase the product, and with the use of transportation, the goods will be made available to the stores and at the same banking and insurance service will be availed by him to have protection against the loss of goods. The retailer will then sell to the ultimate consumer. All these activities come under the commerce head.
In short, it can be said that commerce is the branch of business that helps to overcome all the hindrances that arise in the facilitation of exchange. Its major function is to satisfy human wants both basic and secondary by making the goods available to different parts of the country. No matter where the goods have been manufactured the commerce has made it possible to reach the world – wide.
Key Differences between Trade and Commerce
Following are the major differences between trade and commerce:
- Trade is selling and buying of goods and services between two or more parties in consideration of cash and cash equivalents.Commerce includes the exchange of goods and services along with activities viz. banking, insurance, advertising, transportation, warehousing, etc. to complement the exchange.
- Trade is a narrow term that merely includes the selling and buying whereas commerce is a wider term that includes exchange as well as the several revenues generating activities that complete the exchange.
- Trade is generally done to satisfy the need of both the seller and the buyer which is more of a social perspective. Whereas the commerce is more economical in nature because of the involvement of several parties whose primary aim is to generate the revenue.
- Trade is generally a single time transaction between the parties that may or may not reoccur. Whereas in commerce the transactions are regular and occur again and again.
- The trade involves two parties the seller and the buyer who facilitates the exchange without employing anyone in between. Whereas in commerce exchange is done with the support of several departments thereby giving them employment opportunities.
- Trade provides a link between the seller and the buyer, the direct parties involved in the exchange. Whereas the commerce provides a link between manufacturer and the ultimate customer, who are not direct parties, with the help of several aides of distribution.
- Trade represents both the side of demand and supply where both the parties know what is demanded and what is to be supplied. Whereas in commerce only the demand side is known i.e. what is demanded in the market and then making that available through various channels of distribution.
- Trade requires more capital because the stock has to be kept ready that is entitled to the sale and also the cash has to be kept ready for the immediate payment. Whereas in commerce the capital required is less because there are different parties involved who have to manage their resources individually without imposing a burden on one.
Hence it can be concluded that trade is the branch of commerce that deals in only the exchange of goods and services whereas commerce are the comprehensive term that includes all the major activities that facilitate the exchange and generates the revenue for all. Thus, we can say commerce is the branch of business that keeps everything together and makes the successful completion of the distribution of goods and services.