What are the Aids To Trade in Commerce? Meaning
Trade or exchange of goods involves several difficulties, which are removed by auxiliaries known as aids to trade. It refers to all those activities, which directly or indirectly facilitates smooth exchange of goods and services.
Aids to trade includes Transport, Communication, Warehousing, Banking, Insurance, Advertising, Salesmanship, Mercantile agents, Trade promotion organizations in a country and Global organizations for international trade. Auxiliaries ensure smooth flow of goods from producers to the consumers.
What are various Aids To Trade? List ↓
The importance of aids to trade in commerce is explained in following points:
In the modern times there is a vast distance between centers of production and the centers of consumption. This difficulty is removed by an important aid to trade known as transport. Transport creates place utility.
There are several types of transport such as air, water and land transport. The geographical distance between producers and consumers is removed with the help of transport.
The three main modes of transport:
- Land :
- Water :
- Air :
Communication means transmitting or exchange of information from one person to another. It can be oral or in writing. It is necessary to communicate information from one to another to finalize and settle the terms of sales such as prices of goods, discount allowed, facility of credit, etc.
Modern means of communication like telephone, telex, telegraph, email, teleconference, etc., plays an important role in establishing contact between businessmen, producers and consumers.
There is a time gap between production and consumption. In other words, goods, which are produced at one time, are not consumed at the same time. Hence, it becomes necessary to make arrangements for storage or warehousing. Agricultural commodities like wheat and rice are seasonal in nature, but are consumed throughout the year, on the other hand, goods such as umbrellas and woolen clothes are produced throughout the year but are demanded only during particular seasons. Therefore, goods need to be stored in warehouses till they are demanded. So it creates time utility by supplying the goods at the right time to the consumer.
Insurance reduces the problem of risks. The business is subject to risks and uncertainties. These are inevitable in the field of business. Risks may be due to fire, theft, accident or any other natural calamity. Insurance companies who act as risk bearer cover risks. Insurance tries to reduce many risks by spreading them out over a greater number of people. The rate of premium depends upon the type of risks and the period for which the risk is covered.
Banking solves the problem of finance. Businessmen receives money and also pays money in large amounts. It is risky to carry large amount of cash from one place to another. Here comes Banking as a solution. Banking and financial institutions solves the problem of payment and facilitate exchange between buyer and seller. The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also advances loans in the form of overdraft, cash-credit and discounting of bills of exchange.
Advertising fills the knowledge gap and it solves the difficulty of information. Exchange of goods and services possible only if producers can bring the products to the consumers. Advertising and publicity are important media of mass communication. Advertising helps the consumers to know about the various brands manufactured by several manufacturers. The media used to advertise products are Radio, Newspapers, Magazines, TV, Internet, etc.
It facilitates personal selling. Many a times, sales force is required to book orders directly from dealers or customers. Salesmanship is very much required in the sales of services and industrial goods. Again the sales force plays an important role in direct marketing, especially in the case of selling insurance policies
8. Mercantile Agents
It removes personal difficulties. Mercantile agents are the middlemen who form a link between the buyers and the sellers. They do not carry on business in their own name. In the process of distribution, producers and consumers are unable to have direct contact, as consumers are spread over a vast area. Mercantile agents remove this difficulty of personal contact.
There are several types of mercantile agents such as brokers, commission agents, auctioneers, underwriters, insurers, etc.
9. Trade Promotion Organizations in a Country
They attend to difficulties of promotion and development of trade at the national level. These are the organizations established by the business community to protect and promote their interest. They play promotional and developmental role for members. They do market research work, act as a clearing house of information, put their grievances before the government, make representations, and help the business community in many ways.
The examples include Chambers of Commerce, Export Promotion Councils, Indian Institute of Packaging, etc.
10. Global Organizations for International Trade
They attend the promotion and development of trade at international level. The main objective of global organizations is to promote International trade. It helps exporters and importer by collecting information about international marketing trends.
The examples of such global organizations are World Bank, IMF, WTO, etc.