What Are Aids To Trade In Commerce? Meaning and List

What are the Aids To Trade in Commerce? Meaning

Trade or exchange of goods involves several difficulties, which are removed by auxiliaries or supplementary supports known as Aids to Trade.

Here, aids to trade refers to all those involved 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. These important auxiliaries ensure a 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:

1. Transport

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:

1. Land:
   1. Road
   2. Railyway
2. Water:
   1. River
   2. Sea
   3. Canals
3. Air:
   1. Airway

2. Communication

Communication means transmitting or exchange of information from one person to another.

Communication 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, the facility of credit, etc.

Modern means of communication like telephone, telex, telegraph, internet, email, teleconference, etc., play an important role in establishing contact between businessmen, producers and consumers.

Communication is the first crucial step in initiating a trading activity.

3. Warehousing

Warehousing is an act of carefully storing goods in warehouses to sell or distribute them later.

Warehousing is essential because 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 until they are demanded.

So warehousing creates time utility by supplying the goods at the right time to the consumer.

4. Insurance

Insurance reduces the problem of risks involved in the trade. Businesses are subjected 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 such risks. Insurance tries to reduce many risks by spreading them out over a greater number of people. The rate of an insurance premium depends upon the types of risk and the period for which the risk is covered.

5. Banking

Banking solves the problem of finance. Businessmen receive money and also pays money in large amounts. It is risky to carry a large amount of cash from one place to another. Here comes Banking as a solution. Banking and financial institutions solve the problem of payment and facilitate a smooth exchange between buyer and seller. The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also advance loans in the form of overdraft, cash-credit and discounting of bills of exchange, etc.

6. Advertising

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 consumers to know about the various brands manufactured by several manufacturers. The media used to advertise products are Radio, Newspapers, Magazines, TV, the Internet, Billboard, etc.

7. Salesmanship

Salesmanship is a skillful art of selling commercial goods.

Salesmanship facilitates personal selling. Many times, the 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

Mercantile agents are the middlemen who form a link or connection between the buyers and the sellers. They remove the personal difficulties of both. 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. They remove this difficulty of personal contact and aid in connecting parties involved in trade.

There are several types of mercantile agents such as brokers, commission agents, auctioneers, underwriters, insurers, etc.

9. Trade Promotion Organizations in a Country

Trade Promotion Organizations (TPOs) attend to difficulties involved in the promotion and development of trade at the national level. These organizations are established by the business community to protect and promote their commercial interest. They play a promotional and developmental role for its 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 to flourish in many ways.

The examples include the Indian Chamber of Commerce (ICC), Export Promotion Councils, Indian Institute of Packaging (IIP), etc.

10. Global Organizations for International Trade

Global Organizations attend the promotion and development of trade at international level. Their main objective is to promote international trade. These institutes help exporters and importers by collecting information about international marketing trends.

The examples of such global organizations are World Bank, International Monetary Fund (IMF), World Trade Organization (WTO), etc.

Conclusion

Without Aids to Trade, objectives, operation, and functionality of any trade are nearly impossible to achieve. Hence, these auxiliaries are crucial for commerce and economy.