A SHORT NOTE ON TRADING
By Malay Sen Gupta, Chairman & Managing Director, MSTC Limited

Ever since the advent of Mercantile economy trading has been in existence. As a matter-of-fact even in the Middle Ages the existence of silk route etc. prove the existence of trade on a large-scale even between continents let alone countries. Indeed it is said that 'maslin' from India had a good market in ancient Rome. Trade has flourished since then and continues to flourish even today though in many ways its nature has changed.

Till about last century communication was difficult and knowledge about availability of products was limited. A trader's function was to locate material at different points, about which the customer may not have had much knowledge, and to bring these goods to the market place, about which the producers might not have had any knowledge. A trader's function was therefore to make available to the market what it needed. The trader therefore supplied to the customer, in a manner of speaking, his specialised knowledge about the source, product, and his ability to arrange the logistics.

In the modern age however some of these roles have changed, or have acquired different dimensions. Firstly in an age dominated by the net, the suppliers and the customers have no difficulty in communicating or even in getting information about each other through banks, credit rating agencies, etc. emergence of a group of professional service providers like shipping agents, clearing and forwarding agents, and handling agents, etc. have now made the job of handling the logistics comparatively simpler. Emergence of insurance companies has also made the job of risk management relatively simple. The question therefore arises as to what role can a trading house hope to play or what value addition can it make?

One obvious service that it can provide is of course to provide a single window service. It can source, and arrange all the formalities and arrange to deliver the goods at the buyers' places. Naturally, the economy of scale operates, and as a bulk buyer a trading house is able to offer a deal which a small buyer may not be able to obtain for himself. It also may not be worth the while of a buyer to do research on sourcing.

However, traders do not only service the buyers. They render a service to the producers as well. This service comprises in three parts. Firstly, the trader is often the first to notice shifts in the pattern of demand. Indisputably, the manufacturer or the producer should also be able to do so, but in the context of a global market it is difficult for any manufacturer to do so on his own. The second service that a trader can provide is that of assortment which helps a buyer make a choice and thus promote trade. The third service that it can render and indeed, is increasingly rendering is that of financing. Management gurus of today advise to concentrate on one's core competencies. The age-old wisdom dictates that one should not put all his eggs in the same basket. A trader by having a large number of commodities in his basket and by operating in a number of markets (and thereby averaging out the effects of the economic cycle) is able to help the manufacturer to overcome the problems of a recession and perhaps also of a depression. Advancing finances and thereby capturing a source of supply has been an age-old practice of the trader. While indisputably the trader looks at his margin he also takes care to see that the source does not dry up. In India, the rice merchants best exemplified this. In today's scenario also the global traders are financing the manufacturers of industrial raw materials and products. Of course this takes place on a large scale only in case of unbranded goods consumed on a large scale that is in case of commodities. Branded goods or products which need to build up a brand equity and hence nurture its brand image obviously call for in-house or exclusive handling and in such cases trading is reduced to being a mere distribution channel.