It cannot be said that Adam Smith has developed a systematic commercial theory. But the influence that the classical Schools' economic theories have had on commercial theory cannot be easily ignored. In addition, the commercial theories developed in recent literatures have been derived largely from the value and price theories advanced by the School. Therefore, it is quite natural that the re-consideration of the economic theories should be given to the concepts formulated by the Classical Schools. In general Smith, Say, Ricardo, M'Culloch and Senior did not regard commercial theory as a separate and distinct discipline. (The Classical economists commonly used the term "commerce", instead of the term "marketing".) Smith's explanation of the economics of commerce stems mainly from the concept of "specialization", which is a major consideration in the thought of the Classical economists. Thus, commerce is drawn directly into the picture by the Classical writers and in the words of Smith : "Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society." The theory of commerce is, I believe, essentially a part of economics. However, most students of commerce (marketing) have shown little interest in commercial studies as an economic phenomenon. But recently the need for the economic analysis of distribution has been gradually felt by some students, especially by such English economists as M. Hall and H. Smith. This article aims to contribute to the formulation of a theory of commerce by tracing the development of theories of retail price determination. The first half of this article is devoted to a consideration of the ideas of commerce which were incorporated by A. Smith, J. B. Say and J. R. M'Culloch. Smith emphasizes the functions and the economic significance of the nature and process of commerce on grounds commonly accepted today, though his definition of commerce is very broad. He also justifies the existence of retailers and wholesalers on the basis of services they perform, considering them as the convenient sources of goods to the ultimate consumers. Furthermore he insists that the commercial activity is productive because it creates time and place utilities to commodities, and so retailing is looked upon as part of the process of production. In the latter half, of this article I shall try to explain the approach of the theory of commerce propounded by the Classical School. Smith asserted that perfect competition did prevail even in the retail market and that prices would exactly cover the costs of production, that is to say, retailer's margins would just cover the expences incurred. In fact, the retail trade in those times was carried out under conditions of perfect competition. Accordingly, he argued that it would be folly for government to regulate retail prices or numbers of retailers. In sum Smith acknowledged the following conditions as essential to competition ; 1. Competitors act independently, not jointly. 2. The number of competitors is sufficient to eliminate extraordinary gains. 3. The economic units possess sufficient knowledge of the market opportunities. 4. There is freedom from social restraint in order to act on this knowledge. 5. Sufficient .time elapses for the resources to flow in the directions and quantities desired by their owners. We all recognize that the basic assumption of perfect competition has played a most important role in the establishment and the development of theoretical economics. In this way, the simplifying devices of assumption and abstraction are commonly used to aid generalization, as J. S. Mill indicates this premise is the first step toward the analysis of economic activities. But I should like to emphasize that if traditional economics holds too closely to such assumptions, it cannot fail to meet many difficulties in the advanced stages of analysis of economic reality. This is the reason that modern economists such as J. Robinson and E. H. Chamberline have offered new tools to analyse the complicated problems in the field of commerce by connecting separate area of pure competition with complete monopoly. Under perfect competition. As Smith thought, merchants could not have any active role in the exchange process in retail markets. This means that there is no room for an individual merchant to establish the price of a commodity by himself. Thus it would not be possible to detect the proper field of commerce. Smith's viewpoint of commerce nevertheless contains many implications that facilitate researches in this field.