What commerce is: meaning, branches and scope: WASSCE Commerce

A bag of rice grown in Torma Bum is no use to a family in Freetown until someone buys it, stores it, moves it, insures it, pays for it and tells buyers it is for sale. All of that activity is commerce. This lesson explains what commerce is, what it covers and how its branches fit together.

Learning objectives

By the end of this lesson you should be able to:

define commerce and distinguish it from trade and industry
describe the branches of commerce: trade and aids to trade
explain the scope of commerce
explain the relationship between commerce, industry and direct services

What is commerce?

Definition

Commerce is the branch of production concerned with the distribution and exchange of goods and services. It covers trade (buying and selling) and all the aids to trade (transport, communication, banking, insurance, warehousing and advertising) that help goods move from producers to consumers.

Production is not complete until goods reach the final consumer. A farmer can grow rice, and a mill can husk it, but until it is carried, stored, financed, advertised and sold, no one can eat it. Commerce links producers and consumers.

Common mistake

Commerce is wider than trade. Trade is only the buying and selling of goods; commerce includes trade and every service that helps trade to take place.

The branches of commerce

A tree diagram: commerce divides into trade and aids to trade; trade divides into home trade (retail and wholesale) and foreign trade (import, export and entrepôt); aids to trade are transport, communication, banking, insurance, warehousing and advertising

Figure 1. The branches of commerce. WASSCE Tutor diagram.

1. Trade

Trade is the buying and selling of goods and services.

Branch	Meaning	Example in Sierra Leone
Home (domestic) trade	Trade within one country	Selling cassava from Moyamba in Freetown markets
– Retail trade	Selling in small quantities to final consumers	A provision shop, a market woman, a supermarket
– Wholesale trade	Buying in bulk from producers and selling in smaller lots to retailers	Wholesalers on Kissy Road or in Bo selling cartons to shops
Foreign (international) trade	Trade between countries
– Import trade	Buying goods from other countries	Rice, fuel, vehicles
– Export trade	Selling goods to other countries	Iron ore, cocoa, coffee, diamonds
– Entrepôt (re-export) trade	Importing goods and re-exporting them to another country	Goods passing through a port to a neighbouring country

2. Aids to trade

Aids to trade are services that make trade easier by removing its hindrances:

Aid	The hindrance it removes
Transport	Distance between producers and consumers (the hindrance of place)
Warehousing	The gap between production and consumption (the hindrance of time)
Insurance	The risk of loss through fire, theft or accident
Banking	Lack of finance and the difficulty of making payments
Advertising	Ignorance: consumers not knowing what is available
Communication	Traders being far apart and needing to exchange information

The scope of commerce

The scope of commerce means the range of activities it covers. It includes:

Trade: retail, wholesale, import, export and entrepôt.
The aids to trade: transport, communication, banking, insurance, warehousing, advertising and marketing.
Business units that carry on commerce: sole traders, partnerships, companies, cooperatives and public enterprises.
Business documents and terms used in buying and selling.
Business finance: capital, the stock exchange and credit.
The legal and ethical framework: contracts, consumer protection and government regulation.
Modern methods: e-commerce, mobile money and online marketing.

Commerce, industry and direct services

Production is usually divided into three groups of occupations:

Group	What it does	Examples
Industry	Extracts raw materials, manufactures goods and builds	Mining, farming, fishing, rice milling, block making, construction
Commerce	Distributes goods and services and helps exchange	Traders, transporters, bankers, insurers
Direct services	Gives personal services directly to people	Teachers, nurses, doctors, police, lawyers

The three depend on one another. Industry makes goods; commerce distributes them; direct services keep the workers of both educated, healthy and safe.

Worked example

Tracing commerce in a single sale. A trader in Makeni orders 50 cartons of soap from a wholesaler in Freetown.

She telephones the order (communication).
The wholesaler stores the soap until it is ordered (warehousing).
A lorry carries it to Makeni (transport), and the goods are covered against accident on the way (insurance).
She pays by bank transfer or mobile money (banking).
The soap maker's radio advertisement makes customers ask for it (advertising).
She sells bars to households (retail trade), having bought from a wholesaler (wholesale trade).

Every branch of commerce has played a part in one transaction.

In Sierra Leone

Big Market and Dove Cut in Freetown, the weekly lumo markets in the provinces and the busy streets of Abacha Street and Kissy Road show commerce at work every day: wholesalers break bulk, retailers sell to households, transporters move goods and mobile money agents handle payments.

Key points

Commerce is the distribution and exchange of goods and services: trade plus aids to trade.
Trade is home trade (retail, wholesale) and foreign trade (import, export, entrepôt).
Aids to trade remove the hindrances of place, time, risk, finance, ignorance and distance between traders.
Industry makes goods, commerce distributes them, direct services serve people directly.

WASSCE examination focus

WAEC tests this

WASSCE commonly asks you to define commerce, to draw or describe the branches of commerce, to explain how each aid to trade helps trade, and to distinguish commerce from trade or industry. Drawing the branches as a tree diagram and labelling each part earns marks quickly.

Quick check

Why is commerce wider than trade?
What is entrepôt trade?
Which aid to trade removes the hindrance of time?
Give one example each of industry, commerce and a direct service.

Answers: 1. Commerce includes trade and the aids to trade that make trade possible. 2. Importing goods and re-exporting them to another country. 3. Warehousing. 4. Industry: mining or rice milling. Commerce: retail trade or banking. Direct service: teaching or nursing.

What commerce is: meaning, branches and scope