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What is Commerce? Meaning and Importance of Commerce

square Meaning of Commerce


Commerce is a branch of business. It is concerned with the exchange of goods and services. It includes all those activities, which directly or indirectly facilitate that exchange.

commerce meaning definition importance

Image Credits © Senator Mark Begich.

Commerce looks after the distribution aspect of the business. Whatever is produced it must be consumed, to facilitate this consumption there must be a proper distribution channel. Here comes the need for commerce which is concerned with the smooth buying and selling of goods and services.







square Definition of Commerce


According to James Stephenson,

"Commerce is an organized system for the exchange of goods between the members of the industrial world."

In a broader sense,

"Commerce is that part of business which is concerned with the exchange of goods and services and includes all those activities which directly or indirectly facilitate that exchange."


square Importance of Commerce


The importance of trade and commerce are mentioned in following points :-


1. Commerce tries to satisfy increasing human wants


Human wants are never-ending. They can be classified as 'Basic wants' and 'Secondary wants'. Commerce has made distribution and movement of goods possible from one part of the world to the other. Today we can buy anything produced anywhere in the world. This has, in turn, enabled man to satisfy his innumerable wants and thereby promoting social welfare.


2. Commerce helps to increase our standard of living


Standard of living refers to the quality of life enjoyed by the members of society. When man consumes more products his standard of living improves. To consume a variety of goods he must be able to secure them first. Commerce helps us to get what we want at the right time, right place and at the right price and thus helps in improving our standard of living.


3. Commerce links producers and consumers


Production is meant for ultimate consumption. Commerce makes possible to link producers and consumers through retailers and wholesalers and also through the aids to trade. Consumers get information about different goods through advertisements and salesmanship. The manufacturers are regularly informed about the likes and dislikes of consumers through marketing research. Thus commerce creates contact between the centers of production and consumption and links them.


4. Commerce generates employment opportunities


The growth of commerce, industry, and trade bring about the growth of agencies of the trade such as banking, transport, warehousing, advertising, etc. These agencies need people to look after their functioning. Increase in production results in increasing demand, which further results in boosting employment opportunities. Thus the development of commerce generates more and more employment opportunities for millions of people in a country.







5. Commerce increases national income and wealth


When production increases, the national income also increases. In a developed country, manufacturing industries and commerce together account for nearly 80% of total national income. It also helps to earn foreign exchange by way of exports and duties levied on imports. Thus, commerce increases the national income and wealth of a nation.


6. Commerce helps in expansion of aids to trade


With the growth in trade and commerce, there is a growing need for expansion and modernization of aids to trade. Aids to trade such as banking, communication, advertising and publicity, transport, insurance, etc., are expanded and modernized for the smooth conduct of commerce.


7. Commerce helps in growth of industrial development


Commerce looks after the smooth distribution of goods and services made available by the industry. Without commerce, the industry will find it difficult to keep the pace of production. It helps to increase demand for goods on one hand and on the other hand, it helps industries by getting them the necessary raw materials and other services. Hence, commerce helps in attaining better division of labor and industrial progress.


8. Commerce encourages international trade


Through commerce, we can secure a fair and equitable distribution of goods throughout the world. With the help of transport and communication development, countries can exchange their surplus commodities and earn foreign exchange, which is very useful for importing machinery and sophisticated technology. It ensures the faster economic growth of the country.


9. Commerce benefits underdeveloped countries


Underdeveloped countries can import skilled labor and technical know-how from developed countries. While advanced countries can import raw materials from underdeveloped countries. This helps in laying down the seeds of industrialization in the underdeveloped countries.


10. Commerce helps during emergencies


During emergencies like floods, earthquakes, and wars, commerce helps in reaching the essential requirements like foodstuff, medicines and relief measures to the affected areas.







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