Commerce: Definition, Importance & Branches

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  • 0:03 What Is Commerce?
  • 2:09 The Importance of Commerce
  • 2:46 The Branches of Commerce
  • 5:31 Lesson Summary
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Lesson Transcript
Instructor: Elizabeth Wamicha

Elizabeth teaches undergraduate courses in Business and Information Technology for the last 7 years. She is currently on course to completing a Doctorate in Information Systems

In this lesson, we learn what commerce is all about. We also learn the branches of commerce as well as the nature and functions of each branch. The lesson also examines the relationship between commerce, trade, and industry.

What Is Commerce?

In order to better explain what commerce is, let us take the example of Mega Bakers, a baking shop that bakes and delivers bread and other products to their customers. Commerce for this company would be the process of exchanging its baked products for money. Commerce would also encompass the logistics of getting the raw materials to the bakery and of distributing the finished product to their customers.

So what exactly is commerce? Well, it is described as the effective process of exchanging products or services using some monetary aspect as well as the logistical process of transforming raw materials into usable products or services. Commerce in the proper sense is said to occur if the scale of this exchange is large enough to include logistics and transportation of these products or services across various boundaries. In order for commerce to occur effectively, trade and industry have to take place together in a harmonious way. What exactly are trade and commerce, you may ask? Well:

  • Trade within the context of commerce is the process of buying and selling goods and services through the use of some medium of exchange. In our case, trade would be the process that Mega Bakers use to sell its bread and other items from its bakery. In this regard, let's define another form of trade: barter trade or barter transactions. These are transactions where, rather than using money as the medium of exchange, the buyer and seller use a cashless medium. Barter transactions have to be agreed upon by both parties in order to be successful.

  • Industry within the context of commerce is any activity of an economic nature that involves how businesses process raw materials into final usable products and services. Using our Mega Bakers example, industry would be the process used to transform ingredients into bread that is ready for sale.

Trade and industry are, therefore, subsets of commerce.

The Importance of Commerce

Commerce is a very important part of any business. Why, you say? Well, because it attempts to satisfy human needs and wants. It also contributes to linking producers of certain products and services with the customers who require them. Since commerce requires a lot of processes to be completed, it easily generates various employment opportunities in other areas such as transport and logistics, banking, and retail. Commerce overall is an essential component of national development and wealth creation. The following section further discusses the branches of commerce.

The Branches of Commerce

The branches of commerce comprise two fundamental categories: trade and aids to trade. Let us now look at these two categories.

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