The trade is an economic activity of the tertiary sector which is based on the exchange and transport of goods and services between different people or nations. The term is also referred to the set of merchants in a country or an area, or to the establishment or place where products are bought and sold. This takes place in a field of fairs, exhibitions and markets, whose activity tends to display the finished product and favor its dissemination and sale, which we know as marketing.
What is trade
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When talking about what trade is, it refers to any activity that involves the exchange of goods or services through the purchase and sale, where the seller and the buyer benefit and other intermediate elements that are involved in the process intervene.
Its etymology comes from the Latin "commercium", which means "purchase and sale of merchandise", while it is derived from the word "merx" and "mercis" which mean "merchandise". The term is also used to refer to any establishment or store, places where acts of commerce are carried out.
This has been favored by job specializations, since one area of the industry needs others to supply and produce, and vice versa; hence, trade has such an important place for the economic engine of a nation and the world. According to each region and the resources it has, each locality will be strengthened in some specific production aspect, with whose production they will be able to do business with other regions.
This is related to a company, who will be the one that sells the merchandise or promotes the service, and the final consumer, who will enjoy the benefits of what was acquired. The one who directs the company will determine the means of production, such as capital, human resources, logistics and distribution elements, among others.
Trade history
This activity is as old as humanity, it arose when some people produced more than they needed; however, they lacked other basic products. They went to local markets, and there they began to exchange their leftovers with other people; that is, to practice bartering.
Origin of trade
Towards the end of the Stone Age, in the Neolithic (between about 9,000 to 4,000 years BC), trade began to be practiced in this way, when agriculture originated for subsistence.
The objective of this in principle was to meet the elemental requirements of man, such as food and clothing, with which they focused their work on covering them.
Given this and due to the growth and development of society, in addition to the harvests obtained through agriculture that were increasingly more numerous thanks to technology, new demands were emerging that had to be covered, so with these first steps, the origin of the commerce that we know today was promoted.
The evolution of trade
The exchange of goods was perfected thanks to the development of merchandise transport, which gave rise to what is known today as imports and exports, which were carried out through transatlantic trips.
Barter was impractical, since several of the goods to be exchanged were perishable, or one of the parties was not interested in the good that the other offered. Given this, they began to exchange for valuables, such as precious stones.
Later, when the money was created, the process became simpler, since the exchange could be carried out more fairly according to the value of what was traded, thus avoiding that one of the parties involved was left at a disadvantage compared to the other.. The products that were mostly marketed since the beginning of this phenomenon were food and clothing, to which the entire population had access, leaving other types of luxury products for the rich and privileged groups.
In addition to those that imported, many businesses emerged, most of them were small, which sold merchandise in their localities, and later, with the arrival of the industrial revolution, when mass production in series began, trade was boosted.
Later, with the phenomenon of globalization, trade advanced to new levels, where free trade zones were created and production costs could be lowered. The internet facilitated the means of payment and purchase, because thanks to the global network, goods and services can be purchased at the distance of a click.
Elements of trade
In commercial activity, several elements are involved that make this process possible: the manufacturer, the distributor and the consumer. In addition, a statute that imposes its rules for the protection of all those involved.
The manufacturer
Within the trade, it is the initial element, since it is who is in charge of manufacturing the products that will be marketed from raw materials. These are mass-produced to meet the demand for them before an extensive universe of buyers.
In the product that they manufacture, the information of its manufacturer, such as the place and the name, must be placed. These data are outlined on the product's packaging, as well as the information on the quality and certification standards under which it has been submitted, which aims to give consumer protection and credibility to the manufacturer.
Thanks to the automation of the assembly processes, manufacturing is practical and time and costs are saved in production, since labor costs are reduced, thus obtaining higher profits and higher quality in products.
The distributor
The distributor is the one who buys directly from the manufacturer and may take and distribute the merchandise produced by the manufacturer to the retailers, who sell said products to the final consumer. Because it is an intermediary, the products that are purchased through them will have an additional surcharge on their factory cost.
There are exclusive distributors of a brand, according to which they arrive with the latter, which limits them to selling exclusively from that factory and not distributing similar products from the competition. However, this does not entitle them to use the name of the factory in the exercise of their trade, but they can offer complementary services to buyers, such as technical service of the products sold, sales of spare parts and other services associated with what is marketed.
There are distributors who sell products on a large scale to other distributors and those who sell exclusively to the retail public. The distributor can play an important role in the sale of the good or service, as it will facilitate its scope and position the product in points of sale with greater speed of acquisition for the final consumer.
The company must carefully choose its distribution strategies, what role it will play in it, if they will allow the intervention of other companies to do so (so they must establish statutes that cannot be modified in the long term), or if they will develop their own network.
The distributor will only have decision-making power over the choice of its suppliers, the deals established with them, the conditions in the transactions with them and the selection of a profitable market for the sale of the products to be distributed.
The more effective and larger a distribution network, the easier and faster it will be for a buyer to purchase the product and will have to travel less to do so, resulting in a more expensive distribution process, which will increase the price.
The following are distinguished among the distributors:
- The agents: those who maintain an intimate relationship with the manufacturers and will be established by areas.
- Wholesalers: who are those who purchase products directly from the manufacturer or agents and resell to retailers and other manufacturers.
- Retailers: those who sell the product to the final consumer.
The consumer
It is one that demands a good or service from its suppliers in exchange for money. The consumer can be both a natural person and a legal entity, and these products will be used to satisfy a need in their daily life or for the optimal functioning of their company.
In the same way, this is the one who consumes or makes use of the products that they acquire, which is why it is the objective of the trade and the final link in the chain, and it is towards whom the campaign is directed when promoting a good.
The consumer plays an important role in the chain of commerce, as it is not only limited to purchasing products, but also has the power to influence the producer's decisions to achieve changes in the offers and in the goods that are offered, adjusting to your needs.
The factors that affect the consumer are their preferences, which establish what type of products they need and what brand they like best; and your income level or purchasing power, which will determine what options you have when choosing in the broad commercial market.
It is important to clarify that "consumer" is not the same as "customer", since the latter is the one who acquires the good but does not necessarily "consume" it. For example: a person buying food for his pet.
In addition, the brand knows its client better, since he establishes a relationship with it; while the consumer is someone anonymous, who does not necessarily keep loyalty to the brand.
The Trade Law
The Foreign Trade Law is a statute whose objective is to regulate foreign trade, making the national economy more competitive and integrating into the international market, efficiently using national resources and promoting the well-being of Mexicans.
This commercial code is made up of approximately 400 standards, and serves to determine the guidelines on the origin of an imported good, and must guarantee compliance with the oversight function of foreign trade of goods and require compliance by companies that import and export with the rules required by the international market.
There are non-tariff regulations, they serve to limit the entry and exit of specific goods, to protect the security of the nation, the ecological balance, public health and the economy of the country.
For the regulation of trade between nations, there is what is known as a free trade agreement, which are bilateral agreements to expand the market between countries and continents, which implies an agreement to reduce tariffs on both sides.
The trader
It is the person who is dedicated to commerce, an activity that drives the economy of a town, region or country; but it also refers to the owner of a commercial establishment, which could be independent or located in a commercial center or commercial plaza, whose activity is carried out on a regular or permanent basis.
Its function is to buy and sell merchandise to obtain a profit from said exchange. To be considered merchants, they must comply with certain regulations that will vary according to the place where they are exercising their functions.
These have been distributors as such, since they are the ones who mediate between manufacturers and buyers, make known the benefits of the product, import and export goods and are in charge of offering post-sale services that, many times, the producer cannot cover.
Types of merchant
There are two types of merchants:
- The individual trader or owner of a company, which is the one who carries out trade in his own name, or what is known as natural persons. This type of merchant must have the legal capacity to exercise and make mass commerce their usual activity.
- The collective merchant is one that is associated with one or more people under a contract, in which they share goods or activities to form a commercial company from which both will obtain the benefits of the same. This type of company is constituted by means of a document, which will result in a legal person.
Types of trade
According to the scope of the companies, there are several types of commerce:
Wholesale trade
This type of trade is one that buys from manufacturers or agents and resells them to other distributors or to people who buy in quantities. Your customer will be the merchant with a smaller store, also called retailers.
The wholesaler sells the items in bulk by bundles or boxes, and unit prices are often cheaper than at retailers. In addition, they are usually managed with client portfolios, who will be other smaller-scale distributors, although it may be the case that some direct sales to end users are generated.
Some wholesalers may have the power to classify and pack products before distribution, as in the case of vegetable wholesalers, or of some generic product, in which case the wholesaler may print their own brand.
Retail commerce
The retailer is characterized by selling retail items to end customers, acquiring their merchandise from wholesalers, from whom they buy in volume. It will be the client who pays the taxes that are added to the total value of the product.
This type of trade, like the wholesaler, is part of what is known as internal trade, since it takes place within the same national territory.
Electronic commerce
It involves the buying and selling of items through electronic devices and mass communication networks. The main tool used in this type of commerce is the Internet. E-commerce, as this type of commerce is also known, may well be a sale option for a physical company, or the only sale option for virtual companies or platforms, where millions of users can buy and sell freely., such as MercadoLibre or eBay.
However, this system was only an expansion, since electronic commerce really began in the 70s, when the invention of a versatile way of transferring money emerged. There are several types of electronic commerce, among which can be distinguished:
- Consumer to business, which is when a normal person public in a forum or platform that needs a product, so that several suppliers will be able to offer their merchandise according to the needs of whoever published.
- Business to consumer, where companies, whether physical or virtual, offer their products and services to consumers or end customers through a website.
- Mobile commerce, where the person purchases the good or service over the Internet through their cell phone.
- Business to business, when the purchase and sale of the item occurs between two or more people, almost always dealing with products necessary for the production of other types of merchandise and its subsequent sale.
- Consumer to consumer, in which anyone can freely sell and buy from another user, as a garage sale, but digital.
According to the type of transport
According to your means of transport, four types can be distinguished:
1. Sea or river transport: It is the type of trade that is sent through containers via ship through the oceans or mighty rivers. It is a type of transport widely used especially for foreign trade and long distances, such as from one continent to another due to the large amount of merchandise that can be sent. It covers approximately 80% of international trade.
In addition to long-distance maritime traffic, in this type of transport there is internal maritime cabotage, which offers service between ports in the same country and “short sea shipping” or short-distance maritime traffic.
2. Land transport: Also called “inland”, it is carried out with deliveries of products transported by land, and can be carried out as internal trade within the national territory, as well as outside the borders.
Deliveries can be made within the same national territory, as well as international delivery by road through trucks; Similarly, there is international delivery by rail, which has advantages, since the accident rate by this route is low and its cost is lower than other means of transport.
3. Air transport: It is carried out by transporting all goods by plane, either from one city to another or from one country to another. Its advantage over other means of transport is the speed of delivery that it allows. It is usually used for the delivery of perishable food and high value merchandise, although it is an expensive means of transport in relation to weight.
4. Multimodal transport: It is the one that links the three previous types of transport or two of them.
National trade
National or internal trade is the exchange of products within a country, it can be local and regional. It is organized in two ways: wholesale or wholesale trade, it consists of the commercial process between producers and merchants who buy large quantities; and retail or retail trade is established between retailers and consumers who purchase products in small quantities. This type of trade will be regulated according to the regulations of the country where it is carried out, which will turn it into formal trade.
International Trade
s the type of international trade in goods and services that includes all purchases and sales that a country makes with the rest of the world. It is classified into: export trade (sale of products that a country makes to another nation) and import (purchase of products that a country makes to another nation).
This type of trade gives countries the opportunity to gain space in the market in terms of the specialization of one or more items, so they can be recognized worldwide.
To give it a legal framework, there are international organizations that establish guidelines to control and finalize agreements between the nations that are part of the pacts to be signed between all participants, to lower costs in the exchange of goods.
They will also be able to design strategies in the event of recessions and pressure states in which the economy can be directly affected by an external agent such as war or natural disaster.
