As a means of connecting producers and consumers, commerce serves to remove obstacles to the free flow of products between them. It eliminates the obstacles of the person (through traders), place (through transportation), risk (through insurance), time (through warehousing and storage), financing (through banking), and knowledge (through salesmanship, advertising, etc.) arising in connection with the distribution of goods and services up until they reach the consumers.
Listed below are some of the functions and roles of commerce:
(i) Trading Actors as a Bridge Between Producers and Consumers
In certain cases, the location of the producers and the consumers of commodities is different. Consequently, the manufacturer is unable to sell his goods to customers directly. It is necessary to have individuals who can purchase goods from manufacturers and resell them to final customers. An intermediary between producers and customers has evolved in the form of traders. In order to remove human obstacles, wholesalers, retailers, and commercial agents work.
(ii) Eliminating a place’s obstacles:
The production of goods is possible wherever that offers advantages over a market-based location. By using various modes of transportation, the distance barrier between the location of production and the market where these items may be sold is eliminated. Along with transportation, other services aimed at removing the obstacle of location include packing to safeguard items against damage and theft and insurance to cover the risk of loss during transit and storage.
(iii) Eliminating Storage’s Barrier:
Modern goods are created in anticipation of demand, so they must be kept in storage until that demand materializes. Warehouses carry out the storage function by balancing the time lag between production and consumption, eliminating the obstacle of time and producing time utility.
(iv) Insuring Against Trade Risks:
There are several dangers associated with conducting business. With the assistance of insurance providers, these can be covered. Insurance companies agree to cover the damage in exchange for a modest premium paid upfront.
(v) Economic Activity Financing
Consumers and businesspeople alike may have financial difficulties. The banks and other financial organizations take care of this issue. To satisfy their needs for working capital, businessmen need money. By providing loans, cash credit, and overdraft services, banks assist these people. Additionally, consumers require money to buy luxury goods like refrigerators, cars, and televisions. By providing consumer loans, banks assist customers.
(vi) Disseminating Knowledge Through Advertising
It may be challenging for a manufacturer to convey to potential customers the benefits and distinguishing qualities of his items. Sales tactics and advertising assist in removing the potential customers’ knowledge barrier. It draws their attention to the usefulness of the provided goods and services.