Commerce is an umbrella term that defines all processes that take place between the production of goods, transportation, advertisement, and the final sale of the product to the consumer. It is easy to confuse commerce with trade, but the two define two entirely different but related processes.
Many think that trade and commerce are the same terms and can be used interchangeably. However, 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 whereas commerce not only refers to the exchange of goods and services but also includes all those activities that are vital to the completion of that transaction.
Trade is the buying and selling of goods and services for money while commerce defines the exchange of products and services and includes all other services that facilitate that exchange. The following are the primary differences between the two terms;
1. 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.
2. 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 revenue generating activities that complete the exchange.
3. 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 economic in nature because of the involvement of several parties whose primary aim is to generate the revenue.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.