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Commerce is the large-scale organized system of activities, functions, procedures and institutions that directly or indirectly contribute to the smooth, unhindered distribution and transfer of goods and services on a substantial scale and at the right time, place, quantity, quality and price through various channels from the original producers to the final consumers within local, regional, national or international economies. The diversity in the distribution of natural resources, differences of human needs and wants, and division of labour along with comparative advantage are the principal factors that give rise to commercial exchanges.
Commerce consists of trade and aids to trade (i.e. auxiliary commercial services) taking place along the entire supply chain. Trade is the exchange of goods (including raw materials, intermediate and finished goods) and services between buyers and sellers in return for a price at traditional (or online) marketplaces. It is categorized into domestic trade, including retail and wholesale as well as local, regional and inter-regional transactions and foreign trade, encompassing import, export and entrepôt/re-export trades. Trade also involves the exchange of currencies, commodities and securities in specialized exchange markets. On the other hand, auxiliary commercial activities (aids to trade) which can facilitate trade include commercial intermediaries, banking and financial services, transportation, packaging, warehousing, communication, advertising and insurance. Their purpose is to remove hindrances related to direct personal contact, payments, savings, funding, separation of place and time, product protection and preservation, knowledge and risk.
The broader framework of commerce incorporates additional elements and factors such as laws and regulations (including intellectual property rights and antitrust laws), policies, tariffs and trade barriers, consumers and consumer trends, producers and production strategies, supply chains and their management, financial transactions (including those in financial markets), market dynamics (including supply and demand), technological innovation, competition and entrepreneurship, trade agreements, multinational corporations and small and medium-sized enterprisess (SMEs), and macroeconomic factors (like economic stability).
Commerce drives economic growth, development and prosperity, promotes regional and international interdependence, fosters cultural exchange, creates jobs, improves people's standard of living by giving them access to a wider variety of goods and services, and encourages innovation and competition for better products. On the other hand, commerce can worsen economic inequality by concentrating wealth (and power) into the hands of a small number of individuals, and by prioritizing short-term profit over long-term sustainability and ethical, social, and environmental considerations, leading to environmental degradation, labor exploitation and disregard for consumer safety. Unregulated, it can lead to excessive consumption (generating undesirable waste) and unsustainable exploitation of nature (causing resource depletion). Harnessing commerce's benefits for the society while mitigating its drawbacks remains vital for policymakers, businesses and other stakeholders.
Commerce traces its origins to ancient localized barter systems, leading to the establishment of periodic marketplaces, and culminating in the development of currencies for efficient trade. In medieval times, trade routes (like the Silk Road) with pivotal commercial hubs (like Venice) connected regions and continents, enabling long-distance trade and cultural exchange. From the 15th to the early 20th century, European colonial powers dominated global commerce on an unprecedented scale. In the 19th century, modern banking and stock exchanges along with the industrial revolution fundamentally reshaped commerce. In the post-colonial 20th century, free market principles gained ground, multinational corporations and consumer economies thrived in U.S.-led capitalist countries and free trade agreements (like GATT and WTO) emerged, whereas communist economies encountered trade restrictions, limiting consumer choice. Notably, developing countries saw their share in world trade rise from a quarter to a third by the century's end. 21st century commerce is increasingly technology-driven (see e-commerce), globalized, intricately regulated, ethically responsible and sustainability-focused, with multilateral economic integrations (like the European Union) or coalitions (like BRICS) leading to its reconfiguration.
The English-language word commerce has been derived from the Latin word commercium, from com ("together") and merx ("merchandise").
Relation to business and trade
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Commerce is not business per se. Business can be defined as an organization or activity typically operating in the primary (dealing with the extraction and sourcing of raw materials) and secondary sector (dealing with manufacturing intermediate or finished goods) of the economy whose goal is to sell raw materials or manufactured goods for profit. In the tertiary sector, there are businesses which sell services for profit. Commerce deals with the movement and distribution of raw materials as well as finished or intermediate (but valuable) goods from the manufacturers to the end customers on a large scale. It is not concerned with the extraction of raw materials and the manufacturing of goods. However, commercial firms can be considered business entities operating in the tertiary sector of the economy providing commercial services.
Commerce is different from trade as well. Trade is the transaction (buying and selling) of goods and services that makes a profit for the seller and satisfies the want or need of the buyer. When trade is carried out within a country, it is called home or domestic trade, which can be wholesale or retail. A wholesaler buys from the producer in bulk and sells to the retailer who then sells again to the final consumer in smaller quantities. Trade between a country and the rest of the world is called foreign or international trade, which consists of import trade and export trade, both being wholesale in general.
Commerce not only includes trade as defined above, but also the auxiliary services or aids to trade and means that facilitate such trade. Auxiliary services aid trade by providing services which such as transportation, communication, warehousing, insurance, banking, financial markets, advertising, packaging, and the services of commercial agents and agencies. In other words, commerce encompasses a wide array of political, economical, technological, logistical, legal, regulatory, social and cultural aspects of trade on a large scale. From a marketing perspective, commerce creates time and place utility by making goods and services available to the customers at the right place and at the right time by changing their location or placement.
Described in this manner, trade is a part of commerce and commerce is an aspect of business.
Historian Peter Watson and Ramesh Manickam date the history of long-distance commerce from circa 150,000 years ago. In historic times, the introduction of currency as a standardized money facilitated the exchange of goods and services.
Commerce was a costly endeavor in the antiquities because of the risky nature of transportation, which restricted it to local markets. Commerce then expanded along with the improvement of transportation systems over time. In the Middle Ages, long-distance and large-scale commerce was still limited within continents. Banking systems developed in medieval Europe, facilitating financial transactions across national boundaries. Markets became a feature of town life, and were regulated by town authorities. With the advent of the age of exploration and oceangoing ships, commerce took an international, trans-continental stature.
Currently the reliability of international trans-oceanic shipping and mailing systems and the facility of the Internet has made commerce possible between cities, regions and countries situated anywhere in the world. In the 21st century, Internet-based electronic commerce (where financial information is transferred over Internet), and its subcategories such as wireless mobile commerce and social network-based social commerce have been and continue to get adopted widely.
Legislative bodies and ministries or ministerial departments of commerce regulate, promote and manage domestic and foreign commercial activities within a country. International commerce can be regulated by bilateral treaties between countries. After the second world war and the rise of free trade among nations, multilateral arrangements such as the GATT and later the World Trade Organization became the principal systems regulating global commerce. The International Chamber of Commerce (ICC) is another important organization which sets rules and resolves disputes in international commerce.
Where national government bodies undertake commercial activity with or inside other states, this commercial activity may fall outside the protection of the international rules which govern legal relationships between independent states: see, for example, the "commercial activity exception" applicable under the United States' Foreign Sovereign Immunities Act of 1976.
- Bachelor of Business Administration
- Bachelor of Commerce
- Doctor of Commerce
- Commerce clause
- Commercial law
- Eco commerce
- Financial planning (business)
- Market (economics)
- Mass production
- Master of Commerce
- Roman commerce
- Value (economics)
- James Stephenson (1942), Principles and Practice of Commerce, London: Sir Issac Pitman & Sons, Ltd, p. 95
- James Stephenson (1942), Principles and Practice of Commerce, London: Sir Issac Pitman & Sons, Ltd, p. 14
- Jonathan Law, ed. (2016), A Dictionary of Business and Management (6th ed.), Oxofrd University Press, p. 26
- IMF Staff (November 2001). "Global Trade Liberalization and the Developing Countries". International Monetary Fund.
- Bas Hooijmaaijers (2021), "China, the BRICS, and the limitations of reshaping global economic governance", The Pacific Review, 34 (1): 29–55
- Mary Trigwell-Jones (2016), Cambridge O Level Commerce Coursebook, Cambridge University Press, p. 19
- Hans Biedermann, James Hulbert (trans.), Dictionary of Symbolism - Cultural Icons and the Meanings behind Them, p. 54.
- Fernand Braudel (1982). Civilization and Capitalism, 15th-18th Century: The wheels of commerce. University of California Press. p. 30. ISBN 978-0-520-08115-4.
Taken over by towns, the markets grew apace with them.