What is Commerce?

Commerce is both a local and macro phenomenon. Cities try to increase commerce within their municipality to increase tax revenue and property value. Countries manage trade to grow their economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more, lower unemployment ratesUnemployment RatesThe unemployment rate formula calculates the share of people who are not working or are jobless of the total employed or unemployed labour force and is depicted as a percentage. Unemployment Rate = Unemployed People / Labor Force * 100 read more, and import or export goods and services. More often than not, though, commerce relates to activity across nations.

Key Takeaways

  • Commerce refers to a macroeconomic transaction of goods and services whereas a transaction is one specific item sold at a unique point in time. The US Department of Commerce manages all commerce domestically and abroad There are four types of commerce: Business to Consumer, Business to Business, Consumer to Business, and Consumer to Consumer)

Commerce Explained

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Commerce encompasses the entire distribution system of a business or the whole economy. A product or good must have an adequate distribution channelDistribution ChannelA distribution channel is a network of intermediaries that facilitates product delivery from the manufacturer to the end consumer and transfers payments from the buyer to the producer. In other words, it is the route through which a product travels from the production end to the point of consumption. read more to efficiently get into the hands of the end consumer. Someone must also regulate these distribution channels ; otherwise, a business will be incentivized to continue to grow profit, potentially leading to the downfall of other involved parties. 

In the US, the Department of Commerce manages all trading activity. It exists to promote and manage economic activity and business growth in the country. In addition, it works to ensure fair and reciprocal commerce and trade amongst nations, provides data to support it, creates a constitutionally acceptable trading system, and conducts research and developmentResearch And DevelopmentResearch and Development is an actual pre-planned investigation to gain new scientific or technical knowledge that can be converted into a scheme or formulation for manufacturing/supply/trading, resulting in a business advantage.read more to develop beneficial industry standards. 

Types of Commerce

All trade is either commerce or e-commerce and can be categorized into the four types listed below:

#1 – B2C (Business to Consumer)

In this model, a business directly sells to its end-consumer. It includes most of the purchases we make daily, either online or at a store directly. For example, a coffee shop selling coffee that we walk in to buy is an example of B2CB2CBusiness to Consumer (B2C) is a business model where businesses sell their products and services to end-users or customers. It allows companies to engage in direct commercial activities with consumers, enabling the latter to have greater accessibility to the former’s products and services.read more business model.

#2 – C2C (Consumer to Consumer)

This business model essentially is an online marketplace that allows consumers to sell or exchange their goods and services with one another. An example would be eBay, where it takes a commission or charges fees for buyers and sellers to use the platform and complete transactions. The exchange of products and services is strictly between the users or consumers.

#3 – B2B (Business to Business)

In a B2B model, a business sells its product or service to another business to either use as the end-consumer or resell it to the end-consumer. Starbucks selling large coffee machines ,bulk beans and pastries to a hotel for all their dining experiences would be considered a B2B transaction. 

#4 – C2B (Consumer to Business)

This is a newer business model that allows individuals to sell goods and services to companies. It would include companies like Influence. Co which gives influencers the chance to pitch their services to brands. Another example is Upwork that gives freelancers a platform to share their skills with businesses who are looking for it. 

Example

Let us take a closer look at the Starbucks example mentioned above. Starbucks must get their coffee beans from farmers all over the world. Then they have to purchase these coffee beans from other countries, package the coffee into branded containers, ship the coffee to stores all over the world. Therefore, Starbucks buying beans from farmers would be regarded as a B2B model.

Additionally, the act of creating stores, supplying the coffee and other products in the store, building a point of the salePoint Of The SalePoint of sale (POS) refers to the payment counter in a retail store where customers pay for their purchased goods. For example, the counter at McDonald’s where you place an order and pay for it is an example of a POS. The desktop on which the staff keys in your order and payment details is a part of the POS terminal.read more payment system, staffing the store, advertising the Starbucks coffee, and producing sales are also considered commerce. Therefore, Starbucks selling coffee and other products to consumers would be a B2C model.

This has been a guide to what is Commerce and its meaning. Here we explain how commerce in business works, its types along with examples. You may also have a look at the following articles to learn more –

Commerce is the large-scale exchanges or transactions between agents like cities, countries, or businesses. It involves the trade of goods, services, or anything of value between entities.

Commerce is important for maintaining the flow of commercial goods and products in and out of a country. It regulates the supply and demand of a product or an industry. Commerce is what links producers to traders and consumers. It also ensures the proper living standards of citizens of a place. Overall, it monitors the production and consumption of goods and services and industrial development.

The international trade between two countries can be quoted as an example of commerce. Suppose one country is abundant in a resource or its production, like oil drilling. They can sell the oil to another country that lacks the resource in exchange for money or anything of value.

  • Business ActivitiesBusiness EcosystemBusiness Cycle