Activities that facilitate buying and selling of goods (trade) are known as Auxiliaries to Trade. It not only facilitates smooth flow of goods and services between the seller and the buyer but also provides the necessary support to the entire business for its successful functioning.
Following are the different Auxiliaries to Trade:
i. Transport:
‐ Transport helps:
in the movement of raw‐materials up to the factory site
in the movement of finished goods from the factory to the markets
Thus, transport helps in creating place utility by making the goods available wherever they are required.
ii. Warehousing:
A trader needs to store the goods on account of the following reasons:
‐ Goods purchased in bulk by a trader are sold in smaller quantities to the customers as and when demanded.
‐ Goods produced in one season may be demanded throughout the year. For e.g. agricultural produce.
‐ Goods produced throughout the year may be demanded only in one season. For e.g. Sweaters in winter.
‐ Warehousing helps a trader to store the goods till they are demanded.
‐ Warehouse is a place or building used for safe storage of goods.
‐ Thus, warehousing creates time utility by making the goods available whenever they are required.
iii. Insurance:
‐ A business is exposed to the risk of damage (of goods) on account of floods, fire, robbery etc.
‐ To safeguard against such causes of damage, a business can take an insurance policy from an insurance company.
‐ Here, the business is required to pay premium to the insurance company for the coverage of risk.
‐ In the event of loss, the insurance company will pay compensation that would be equivalent to the amount of loss suffered.
iv. Banking:
‐ A business requires continuous flow of money for its smooth working.
‐ A businessman may not be able to invest large sums as capital and thus face the difficulty of finance.
‐ Banking provides finance to the businessman.
‐ Banking offers the following services to traders:
capital funding for the business through loan facili
working capital to fund day‐to‐day operations through overdraft and cash credit facilities
other value‐added services such as cheques, demand drafts, debit card, credit card etc.
v. Advertising:
‐ There is a multitude of products available in the market. However, the consumers lack the necessary awareness about the products available for sale.
‐ For increasing sales, it is important for a seller to make the consumers aware about his product.
‐ However, the consumers are spread over a wide area. Hence, the seller faces difficulty in communication. This difficulty is solved through advertising.
‐ Advertising communicates all the required information about the product, to the prospective consumers and creates in them a strong desire to purchase the product.
‐ This results in increased amount of sales. However, a company should provide correct information through advertising to maintain the level of trading activities in the long term.
‐ The various mediums used for the purpose of advertising are newspapers, radio, television, cinema theatres, wall posters and hoardings at prominent places.
vi. Mercantile Agents:
‐ Consumers are spread over a wide area, thus it is difficult to have a direct contact between the producer and consumer.
‐ Mercantile agents are middlemen who form a link between the seller and the large number of buyers.
‐ Mercantile agents remove the difficulty of personal contact and complete the transaction on behalf of the seller.
‐ Thus the mercantile agents bridge the gap between the seller and the buyer.
‐ There are several types of mercantile agents such as brokers, commission agents, auctioneers, underwriters, insurers etc.
vii. Communication:
‐ In today’s world, the distance between two traders is very vast.
‐ It becomes difficult to establish a direct contact between two traders.
‐ This difficulty of distance makes it complex for a retailer to place an order with a wholesaler located at a far off place.
‐ This difficulty is solved by various means of communication. Communication refers to exchange of information from one person to another.
‐ Communication can be in the form of oral or written communication. With the modern communication facilities, a retailer can simply visit the website of the wholesaler and place an order.
‐ Modern means of communication like telephone, telex, telegraph, email, teleconference etc., play an important role in establishing contact between businessman, producers and consumers.
‐ These modern means of communication save time and money.
