6 Main Types of Trading and the Importance of Each
Types of Trading – Understand why trade is one of the most important economic sectors for any country and learn about the six main types. And even more: see how technology supports your management.
We can hardly talk about the history of a place or a society without dealing with the types of trade. After all, this has been around since the earliest days of human civilization, when groups traded goods for money or food.
E-commerce has recently appeared, nothing more than electronic commerce, with digital solutions and tools. Today, marketing refers to the purchases and sales of goods and services that involve a monetary value. But there are also several subsets when we talk about this type of business. Do you want an example?
If you want to understand the different aspects of Trading and the main types, you are in the right place! We will talk about each of them and their main differences.
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Table of Contents
Types of Trading – What do the Trade Types Represent?
In short, commerce refers to exchanging goods, services or something of value between companies or people. From a broad perspective, countries are concerned with managing it to increase the well-being of citizens, providing jobs, producing goods, and providing services.
From the exchange of goods to the creation of foreign exchange and the establishment of trade routes, people have been looking for ways to trade goods and services. It also involves building a distribution process.
At this point, it is essential to clarify a general question: does not trade have the same meaning as a business? It is a subset, that is, a type of business. It brings us to its main features:
- Buying or selling a single item is known as a transaction, while all transactions for that item in an economy are known as trade;
- Most trade is done internationally and represents the buying and selling of goods between nations;
- Trade is not related to the industrial or business production process but only to the stage of distribution of goods and services.
Trade leads to the prosperity of nations and raises the standard of living. But, if left unchecked or unregulated, it can lead to severe problems.
Types of Trading – How Important is Trade Implementation and Management?
When properly managed, trading activity can enhance a country’s market outlook globally. However, when trade is unregulated, large companies can become very powerful and damage the domestic market.
Many nations have established government agencies responsible for promoting and managing trade. Large organizations also regulate international trade. For example, the World Trade Organization (WTO ) sets rules for tariffs related to importing and exporting goods between countries.
The rules intend to facilitate trade and establish equal conditions for member countries. The same thing happens in Latin America through Mercosur.
It shows the importance of having a basic set of strategies to manage the trade. But each organization also relies on its actions to succeed in this highly competitive environment.
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6 Main Types of Trading You Need to Know
Of course, we overview what Trading is and how it works. But it is already clear that there are different types of trade, with differing approaches and goals.
In practice, each type of trade has advantages and disadvantages, similar and different characteristics, and structural differences.
Here we will introduce the six main types of Trading. Of course, you already know them, but you may not have noticed that they act in different ways. Let’s find out!
Wholesale trade, also called the wholesale sector, is one in which companies sell products in large quantities. It is the type of trade that a company sells to other companies, who will resell the products.
Due to this characteristic, the wholesaler works with a much more affordable sale value than the retailer.
This sector includes product distributors, industries and manufacturers, book publishers, and others.
Retail, also known as retail trade, is a form of marketing based on small-scale sales. The model is aimed at the ordinary consumer public since the business sells fewer products, unlike the wholesaler we know before.
In Brazil, the sector is considered the backbone of the economy. That’s because it represents more than 20% of the country’s Gross Domestic Product (GDP). According to data from the Brazilian Society of Retailers and Consumers, between 2017 and 2018, around R $ 1.34 billion were handled.
The highlight of retail is that companies make products available to customers, who can easily access and choose what they want to buy. See examples of categories that operate in this type of trade:
The highlight of retail or retail is that companies make products available to customers, who can easily access and choose what they want to buy. See examples of categories operating in retail:
- Supermarkets and hypermarkets;
- Furniture, decoration and office supply stores;
- Fuel station;
- Department Stores, Apparel and Sporting Goods;
- Pet supply stores;
- Vehicle dealers;
- Electronics stores.
Electronic commerce is a variant of commerce in which products are sold over the Internet. In this case, we can define it as any business or commercial transaction that involves the transfer of financial information online.
Unlike traditional trade between two parties, it allows individual consumers to exchange value for goods and services with little or no barriers.
Electronic commerce has also changed the way economies conduct trade. In the past, sales between different regions presented many logistical obstacles, both on the buyer and the seller. However, this barrier is in the past with the appearance of several companies that facilitate these logistics.
It has created an environment where any business can benefit from e-commerce. In other words, even small business owners have the opportunity to sell to customers from anywhere and fulfil international orders.
4. Specialized Trade
Specialized trade focuses on selling a single product or in a single segment. Some examples are stores that sell only natural foods, footwear, and sporting goods.
Due to this feature, companies also classify as retailers or even wholesalers. There is also electronic commerce to make products available in different places.
5. Independent Trading
Are you familiar with the city’s fruit markets, hot dog stands, bakeries, and other such businesses? They fall within the independent trade, where a person establishes his commercial structure.
This type of business comprises small companies with fewer employees or an exclusive one. The vast majority even have their relatives.
6. Foreign Trade
Foreign trade is a mutual exchange of services and goods across regions and international borders. There are varieties such as import and export, essential concepts for the national economy.
We can say that foreign trade is the oldest and most important form of the international division of labour. It is because trade relations with other countries offer advantages to all countries and also to the parties involved in the process, such as:
- Companies win new markets;
- There is an increase in trading volume;
- The number of jobs is also growing.
Foreign trade can acquire foreign goods not produced in the country with the same quality or unavailable on the national scene.
An example involving Brazil is the export of beef and pork. As the country is strong in livestock development, other countries focus on Trading instead of creating local production from scratch.
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