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Types of Markets

Introduction

After understanding what a market is, it’s essential to explore the types of markets. So, let’s dive into the primary ways markets can be classified based on different parameters.

1. Markets Based on the Type of Goods and Services Traded

Markets can differ based on the type of goods or services being traded. Here are some key types: image

  • Commodity Market: These are the markets where raw, unbranded items like grains, pulses, and legumes are traded. Commodities often lack branding and come in large quantities (e.g., sacks of rice or wheat) with minimal perceived quality differences among sellers. Commodity markets are generally focused on price; customers tend to choose based on the lowest available price.

  • Stock Market: Stock market is where shares of companies (stocks), mutual funds, bonds, or commodities like gold are bought and sold. Stock markets play a significant role in investment and finance.

  • FMCG (Fast-Moving Consumer Goods) Market: This type of markets consists of everyday items that people regularly consume and need to replenish, such as toothpaste, soap, shampoo, and detergents. FMCG products are fast-moving due to frequent purchase and usage, making them a large and dynamic market.

  • White Goods Market: White goods refer to durable electronic items and appliances like TVs, refrigerators, washing machines, and microwaves. Unlike FMCG products, white goods are not bought frequently. They are only purchased once every few years.

These markets all involve the exchange of goods, but the type and frequency of purchase vary significantly.

2. Markets Based on the Nature of Transactions

Markets can also be classified based on the type of transactions, primarily distinguishing between Business-to-Consumer (B2C) and Business-to-Business (B2B) transactions: image

  • Retail Market (B2C):
  • In the retail market, a business sells goods or services directly to the consumer.

  • Example: Buying a shampoo sachet or bottle from a store. Here, the store (retailer) is the business, and the shopper is the consumer.

  • Wholesale Market (B2B):

  • This is a market where transactions occur between businesses. In B2B transactions, the end consumer is not involved in the transaction chain. The primary interaction is between manufacturers, wholesalers, and retailers.
  • Example: Manufacturers like Unilever or Procter & Gamble sell their products to distributors or wholesalers, who then supply retailers.

3. Markets Based on Geographical Scope

Markets can also be classified based on geographical scope, which refers to the physical or virtual reach of a market: image

  • Local Market: This is a market serving a specific town or city.
  • State/National Market: This is a market confined to a specific state or country.
  • International/Global Market: These are markets that operate across countries or globally, such as multinational corporations and exports.
  • Digital Marketplaces: Digital marketplaces include online platforms like Amazon and Flipkart, which are not limited by geographical boundaries and can reach consumers worldwide.

In physical markets, geographical boundaries often define the market’s reach, whereas in digital marketplaces, location is irrelevant.

Summary

We discussed three main types of markets based on:

  1. Type of Goods and Services Traded: Includes commodity markets, stock markets, FMCG markets, and white goods markets.
  2. Nature of Transactions: B2C (retail) markets and B2B (wholesale) markets.
  3. Geographical Scope: Local, national, international, and digital markets.
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