What are we talking about when we talk about ‘modern commerce’?
We can go to a national capital like Bamako in Mali and see many shops, a movie theater, a fancy modern hotel and a few bed and breakfasts, yet it doesn’t feel like a modern commercial city. Why not?
To answer that question we first need to examine what categories of business there are. I find three categories of business and two other related forms. I explain the first three here.
One form of commerce is ‘trade’. Trade was the first and is the most enduring form of business. The guy who sells cigarettes to prisoners in a prison is in trade. The native Illini traders who took Lake Michigan shells to the Mississippian tribe, a thousand years ago, to exchange for pottery were in the trade category of business. A product or service is exchanged for money, or a monetary equivalent. The trader has a markup on the goods and services that allows him to buy or make replacements and have enough surplus to remain in the business. A local flower shop or a local ice creamery are in trade.
The second category is ‘clientry’. The object of clientry is to sell a good or service that generates a lifetime relationship with the client. A clientric form of business would be a dentist, doctor, lawyer, designer, Japanese tea ceremony teacher, banker or investment counselor. A few teachers, like Socrates and Pythagoras ran ancient clientric businesses.
The most recent category of business is ‘industry’. While some ancient furniture makers used mass production techniques, the great innovations in industry came around 1800 when water power and steam power were added to the process. The goal of industry is to reduce the price of the goods or services that are sold. This reduction in costs are usually achieved by economies of scale, including expanding the market. And the application of technology. Any chain business is in the category of industry whether it is the local insurance broker, the coffee shop, the Home Depot, the Nissan outlet or Delta Airlines.
The presence of industry, particularly the head office of some industry, is a sign of modern commerce.
The other two forms related to business are ‘non-profits’ and a government owned business. Non-profits are nothing more than a tax definition of a business that has an ostensible non-business social objective. Non-profits can be trade, clientry or industry. They don’t have an owner and their net surplus’s must be plowed back into the business. Non-profits can be trade as in a local childrens clothing re-sale shop. They can be clientric like the church run kindergarten that provides services for all the family members as they age. Or industrial such as the Red Cross with offices everywhere.
Then there are government businesses like the Army PX which is a department store run by the Army, or the US Postal Service which is a semi-government owned shipping and delivery service. These are weird entities; they can be internally subsidized. They can be efficient or inefficient. They just aren’t really businesses. They are pseudo or imitation businesses.
Being able to recognize the variety of business categories is a first step in recognizing the elements of modern commerce.
If all business looks the same, then the nature of modern commerce is hard to discern. Understanding that trade is aimed at making each sale work, that clientry is aimed at a lifelong relationship and that industry is aimed at reducing costs helps to see what business is really about and that industry is new and novel.
In the first paragraph I mention Bamako, the capitol of Mali. Bamako doesn’t feel like a modern commercial city because: nothing is manufactured there or created there and there are no company headquarters; as would be expected in a modern commercial center.