Commerce refers to the exchange and distribution of goods and services, which involves buying and selling—essentially, trading.
While commerce is often similar to “trade,” it encompasses much more. In wider terms, commerce includes all activities associated with distributing and exchanging goods and services.
These activities are facilitated through transport, communication, warehousing, financing, advertising, and insurance.
Commerce ensures that goods and services reach consumers in the right place, in the desired condition, at the appropriate time, and in the required quantity. Although buying and selling are central to commerce, they extend beyond these transactions. Commerce represents the comprehensive set of services and activities that make the distribution and exchange of goods and services possible.
SCOPE OF COMMERCE
Commerce is all about trade or buying and selling. But that is not all, as commerce also involves other services that enable the distribution and exchange to take place. Therefore, the scope of commerce activities include;
I. Trading
II. Transporting
III. Warehousing
IV. Banking
V. Insurance
VI. Advertising
VII. Communication
VIII. Tourism
The scope of commerce can also be illustrated with a diagram as shown below:
CHARACTERISTICS OF COMMERCE
The main characteristics of commerce include:
I. Productive activities that focus on providing (indirect) services rather than extracting or transforming goods: Unlike primary activities, which involve extraction, and secondary activities, which involves converting goods, commercial activities focus on services that do not produce tangible physical goods or alter them. Instead, these activities facilitate the movement of goods from one place to another. In addition, commercial services differ from direct services as they are not provided directly to consumers without involving goods.
II. The connection between primary and secondary producers and consumers: Commerce encompasses all the processes that connect primary and secondary producers with consumers or buyers. It involves activities that transport goods from their place of production to their place of consumption. Commerce serves as the sole link between primary and secondary producers, as well as between consumers and these producers, ensuring that goods can only reach consumers through its mechanisms.
III. Essential role in supporting other forms of production: Commerce is vital for the functioning of other production processes, including primary production, secondary production, and the provision of direct services. It relies on activities that facilitate trade, such as transportation, communication, warehousing, advertising, banking, and insurance. These trade-supporting activities also serve as critical enablers for primary and secondary production and direct services. However, the reverse is not necessarily true—primary and secondary production, as well as direct services, are not always essential for commercial activities, particularly those focused on facilitating trade, to occur.
IV. Greater reliance on short-term resources and capital: Unlike primary and secondary production, commerce typically requires less permanent capital, fixed assets, or facilities such as machinery, tools, and equipment. Instead, it primarily depends on a substantial inventory of goods and receivables from debtors. Consequently, the financial needs of commercial businesses are predominantly short-term, relying more on short-term bank loans rather than long-term financing options like debentures.
V. Wide-ranging scope and extensive foundation: Commerce encompasses several productive activities, including domestic trade, import and export, transportation, communication, warehousing, advertising, banking, finance, and insurance. Additionally, engaging in commercial activities demands a broad understanding of various fields such as marketing and commercial law. Unlike direct services, primary or secondary production, commerce is uniquely diverse and requires a more comprehensive knowledge base for effective execution.
VI. Extensive engagement with the business environment: Commerce involves significant interactions with other activities, as it serves as the bridge connecting primary and secondary producers with consumers. This necessitates ongoing engagement with both groups. For example, the process of buying and selling involves interacting with primary and/or secondary producers to purchase goods and with customers or consumers to sell those goods.
VII. Increased contractual and legal engagements with extensive documentation: Due to the high level of interactions involved, commerce entails a significant number of contractual and legal relationships. These relationships require substantial documentation and paperwork, surpassing what is needed in primary or secondary production and direct services. This includes various documents used in domestic and international trade, such as invoices, letters of inquiry, payment records like letters of credit, and receipts. No other economic activity demands as much documentation and record-keeping as commerce.
FUNCTIONS OF COMMERCE
(i) Enabling mass production: Commerce supports large-scale production, allowing people worldwide to access domestic and international goods and services.
(ii) Raising of capital: It provides funds for personal needs and investments through banks and financial institutions.
(iii) Employment opportunities: Commerce creates numerous opportunities for individuals in roles such as traders, bankers, and insurance agents.
(iv) Warehousing: It facilitates warehousing, enabling goods to be stored until needed, thus balancing market demand and supply.
(v) Exchange of goods and services: Commerce enables the exchange of goods and services through transportation (by road, rail, sea, and air) and telecommunication.
(vi) Improvement in Standard of living: The availability of diverse goods and services contributes to improved living standards and quality of life.
(vii) Linkage of buyers and sellers: Through communication, commerce links buyers and sellers, enabling transactions without requiring physical interaction.
(viii) Risk bearing: The presence of insurance services encourages entrepreneurs to explore and invest in various business ventures.
MEANING OF E-COMMERCE
E-commerce (Electronic Commerce or EC) refers to buying and selling of goods and services on the internet, especially on the World Wide Web. E –commerce can be defined as an activity of buying and selling, marketing, delivery, servicing and paying for products and services over the medium of internet.
The idea of e-commerce came into being due to the fact that the world has been experiencing globalization and technological advancement. In fact, some people even regard e-commerce as doing commerce online, implying that all aspects of business, including business collaboration, holding business meeting through teleconference, etc are all aspects of e-commerce.
FUNCTIONS OF E-COMMERCE
E-commerce applications have experienced rapid growth due to the numerous functions it serves, including the following:
i) Buying and selling of goods: E-commerce enables the sale and purchase of goods, often more cost-effectively and quickly than traditional methods. It complements rather than replaces conventional trading and includes systems for electronic auctions and business tenders to maintain competitiveness.
ii) Advertising: E-commerce encompasses online advertising, which can be done affordably in posting ads on company websites or sending bulk emails (often referred to as spam).
iii) Communication: The online network supporting e-commerce enhances communication and information-sharing. Virtual meetings and teleconferences can also be held for business discussions.
iv) Payment processing and credit management: Online banking supports credit transactions, including credit card use, while electronic funds transfer (EFT) and various plastic cards (credit, debit, stored-value, and ATM cards) enable payments and bill settlements.
v) Transportation: E-commerce facilitates travel arrangements, such as online flight bookings, travel reservations, and hotel accommodations, as well as online payment for these services.
vi) Warehouse management: The use of electronic systems for warehouse management, involving specialized hardware and software, has modernized the process.
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