What is a market?

A market can be defined as a set-up where engagement between two or more parties takes place for exchanging products and services. In brief, a place where buying and selling of products are done between two or more parties is known as a market.

Generally, buyers and sellers are the parties that participate in the market. The seller offers goods and services in exchange for money and buyers take ownership of the goods by paying money.

What is a physical market?

A physical market is a marketplace in which commodities like food items, computers, physical gold are exchanged with cash or deliverables immediately. The physical market is also known as the cash market as cash is exchanged immediately.

 

Summary

• A market can be defined as a set-up where engagement between two or more parties takes place for exchanging products and services.
• A physical market is a marketplace in which commodities like food items, computers, physical gold are exchanged with cash or deliverables immediately.
• The physical market is also known as the cash market as cash is exchanged immediately.
• Physical and online markets are the two most common types of markets.

Frequently Asked Questions (FAQs)

What are the types of markets?

Different types of markets have been created based on products offered, duration, location, size, the geography of customers, legality and so on. The two most common form of markets are a virtual and physical market. Besides them, there are many other types of markets where transactions are executed between two or more parties.

Black market – A black market is an illegal market where transactions that are prohibited or seen as an offence are conducted without the knowledge of regulatory bodies or government agencies. Generally, the participants try to evade the tax by entering illegal activities. Therefore, the majority of the transactions are conducted through cash or mediums that cannot be traced easily, making it harder for the government to track the market and its activities.

The black market even exists in those countries that are planned economies, that is, the production and distribution of goods are controlled by the government or those countries that are developing. When the gap arises between the demand and supply, then black-market participants step in to fill it.

Moreover, black markets are also present in the developed economies and are known as shadow markets. The shadow market becomes active when the demand for certain products rises and prices are not in the control of the government. For example, prices of liquor increase in the economy with the increase in demand. The shadow market then buys liquor wholesale and sells them in the market at inflated prices.

Auction market – In the auction market, a large group of people come to buy and sell specific goods. For making the purchase, bids are placed by the group of interested people, and the bidder with the highest bid gets the product. The auction market includes art and antiques, foreclosed homes and livestocks. Earlier, the majority of the auctions used to take place physically but now many have moved to digital platforms.

Financial market – It stands for the marketplace where bonds, currencies, securities and other financial products and assets are traded. The financial market forms the capitalist society and helps in the formation of capital and creating liquidity in the market. it can be both digital and physical but now the majority of the trades take place digitally.

Nasdaq, TMX Group, LSE, NYSE are some of the examples of financial markets. Foreign exchange market, currency market are other forms of the financial market.

What is the composition of market size?

The market size is dependent upon two factors namely,

• A total number of buyers and sellers.
• Total funds involved in the market annually.

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What benefits are extended by the physical market over the online market?

More visibility – Setting up a physical store is a challenging task and involves high costs in comparison to setting a digital store. However, a physical store extends the benefit of visibility. The visibility is long term as the brand is right in front of them and they are guided about the product. Moreover, the customer gets assistance in making decisions and a sense of security is present in the physical stores. The component of trust is added when a customer knows the place where operations are conducted.

Unique experience – The shopping experience that a customer gets in a physical store, cannot be enjoyed on online platforms. By visiting the stores, the customer is able to explore new products. While walking across the physical store, the customer gets to know new products that are displayed. Other than this, physical stores provide an experience of shopping and enjoying with a group of friends or family. Lastly, the sales of the company also increase when people come in a group.

More sales – The sales in physical outlets are higher than the online stores because they have some edge that online stores do not have. For example, clients can be guided about the location of the product, its features and so on. Even the customers can discover new products with the help of assistance. The displayed items also encourage shopping as the customer is likely to pick more products on the display as customers are exposed to a large range of products.

Assist customers in making purchase decisions – in comparison to the online platform, the customers are in a better and confident position to make a purchase decision. Customers have to go through the complex process of navigating their products and the same problem is solved in a physical store. In many cases, the customer is able to locate a better product than their expectations with the guidance of store management and personnel.

Shipping cost is not present – When a purchase is made through a physical store, then the customer buys the product and leaves for home. It is not true for the online stores as the company is required to deliver the product at the doorsteps of customers that includes shipping costs. When a purchase is made internationally, then the shipping cost is very high. The customers are discouraged to make purchases online because of the high shipping costs.