Trade

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Trade is buying and selling goods and services. In trade, the ownership of a good is transferred from the seller to the buyer. This transfer of ownership happens in exchange for money. There are two main types of trade.

  1. Domestic trade
  2. International trade
Categories of Trade

Domestic trade

Domestic trade is the trade that occurs within a country. This is also known as home trade.  There are two main types of domestic trade.

  1. Retail trade
  2. Wholesale trade
Retail trade

Retail trade involves selling goods for final consumption. The retailer is the person who engages in retail trade. For instance, when a student purchases stationery items from a bookshop, we can identify that bookshop engages in retail trade. Because this bookshop sells stationery items for the final consumption of students.

Characteristics of retail trade 

  1. Selling goods for the final consumption
  2. Selling different types of goods
  3. Retail price is relatively higher than the wholesale price
  4. Close proximity to consumers

Advantages of retail trade 

  1. Introducing new goods to consumers
  2. Informing consumer feedback to producers
  3. Selling different types of goods
  4. Fulfilling daily needs and wants of consumers

Types of retail trade 

  1. Fixed large scale retailers
  2. Fixed small scale retailers
  3. Small scale mobile retailers
Wholesale trade

Wholesale trade involves selling goods for the purpose of reselling.

Characteristics of wholesale trade 

  1. Sell goods for the purpose of reselling
  2. Selling limited types of goods.
  3. The wholesale price is lower compared to the retail price
  4. Trade discounts are given
  5. Often selling large quantities of goods

Advantages of wholesale trade 

  1. Wholesale price is relatively low compared to retail price
  2. Trade discounts are given
Differences between retail trade and wholesale trade
Retail tradeWholesale trade
Selling goods for the final consumptionSelling goods for the purpose of reselling
Selling different types of goodsSelling limited types of goods.
Retail price is higher compared to wholesale priceWholesale price is lower compared to the retail price
Trade discounts are not givenTrade discounts are given
Retailers have direct contact with the consumers.Wholesalers do not have direct contact with consumers.
International trade

International trade is the trade that occurs between two or more countries. This is also known as foreign trade. A country requires both domestic trade and international trade to fulfill its needs and wants. This is because no country is self-sufficient with all the goods and services required. Moreover, a country needs to sell its excess production to other countries and generate income. Thus, international trade plays a significant role in developing a country’s economy.

There are two types of international trade.

  1. Import trade
  2. Export trade

Import trade is bringing goods from a foreign country or countries.

Example:  Purchasing crude oil from Iran by Sri Lanka

Export trade is selling domestic goods to a foreign country or countries.

Example: Selling apparels to the United States by Sri Lanka

Categories: Accounting

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