Trade : Meaning, Importance, Forms & Aids Of Trade

Meaning Of Trade:

Trade is the buying and selling of goods and services. It involves the direct exchange of goods and services for money or other goods, which is called barter. It is the transfer of goods and services from one person or entity to another, following payment or exchange of goods. It is sometimes called Commerce or Financial transaction or even barter. A network that allows trade is called a market.

Trade is an important factor of production, because in its absence, the producer or manufacturer will not do business, since every business is set up to make profit.

Importance Of Trade

1. Trade enhances production of goods and services.

2. It creates employment even for people who cannot read or write.

3. It gives room for variety of items to be produced.

4. It creates relationship between buyers and sellers.

5. It helps in growth of industries.

6. It brings people of diverse culture and languages closely.

7. It brings development to a country.

8. It enhances movement of people from one place to another.

9. It promotes communication.

10. It brings technology closer to people.

11. Through trade, resources (raw materials) are converted into finished products for people to use.

12. It is a business one can start with little capital.

13. It enhances the social well being of citizens by exposing them to variety of quality products including luxury items.

Forms Of Trade

Trade is divided into two main parts: Home Trade And Foreign Trade.

A) Home Trade:

This is the exchange of goods or the buying and selling of goods and services within a country. It is also known as domestic or internal trade and has two sub-divisions, wholesale trade and retail trade.

i. Wholesale Trade: This involves buying goods in large quantity from the manufacturer/producer and selling in small quantities to the retailers. A person who does this is known as a wholesaler.

The wholesaler is often times called the middleman because he is in between the producer and the retailer.

ii. Retail Trade: In this form of home trade, goods are bought in small quantities from the wholesalers or sometimes direct from the manufacturer and sold in units to the public or final consumers.

A retailer is a person who buys goods from the wholesaler or directly from the manufacturer and sells them in small quantities to the final consumers.

B) Foreign Trade:

This is the exchange, buying and selling of goods and services between two or more countries of the world. It is also known as international trade or external trade. Like home trade, Foreign trade is divided into three groups. They are Import trade, Export trade and Entrepôts trade.

i. Import Trade: This is the bringing in of goods and services, knowledge and technology into a country from another country.

ii. Export Trade: This is the selling of a country’s home made goods and services to other countries of the world.

iii. Entrepot: This type of trade involves the importing and re-exporting of goods, It is a trade of buying goods from a country and the goods are not sold in the country of import, but rather exported to other countries. For example, you import a goods into a country, then you also export that goods to another country, that is “Entrepot…

Aids Of Trades

These are factors which enhance the production and Distribution of goods and services. They are called “Aids” because they helps trade (buying and selling) to flourish.

Examples of Aids To Trade are:

  • Banking
  • Transportation
  • Warehousing
  • Insurance
  • Communication
  • Advertising
  • Tourism

Banking: Banking aids trade in the following ways:

  1. It helps in business activities by making money available to businessmen and women.
  2. It grants facilities to customers in the form of loans to do business.
  3. It provides facilities for receipts and payments on behalf of those involved in trade.

Transportation: Transport plays a very crucial role in the world of commerce. It helps to make goods available where they are needed, and also enables people to move to where they buy goods. Transport is divided into land, air, water, and pipeline.

Warehousing: This is the storage of produced goods, ahead of demand (Surplus goods) or unit when needed.

  • Warehousing protects the goods stored against deterioration and spoilage
  • It creates time utility by providing the goods at the right time to consumers.
  • It ensures that goods that have not being sold are kept untouched/untampered

Insurance

Insurance makes it possible for losses which result from different types of business risks to be recovered. Such risk may be fire outbreak, burglary, theft and natural disaster, If only the goods are properly insured.

Communication
Communication aids commerce by bringing two people (buyer and seller) into close contact, irrespective of distance. It enables a person to buy goods from a distance or oversea country without travelling to the area or the country.

Advertising
Advertising aids trade by bringing the existence of new goods and services to the knowledge of members of public or consumers.
Advertising can be carried out through media, magazine, radio, television, newspaper, billboards, handbills etc.

Tourism
It provides accommodation and services for people in business and other engagements. It makes a country popular, it creates employment opportunities.

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