Functions of Intermediaries in Distribution Channels

Manufacturer will not be able to reach to consumers without the intermediaries like wholesalers and retailers in between.

 

Wholesalers

Wholesalers connect manufacturers with retailers by buying in bulk and selling in smaller lots. They play a crucial role in distributing products efficiently from producers to retailers or industrial users.

Functions Of Wholesalers

  1. Buying and Selling:

Estimate demand, purchase various goods from manufacturers, and sometimes import goods.

  1. Storage:

Keep purchased goods in warehouses for later supply to retailers, aiding both manufacturers and retailers.

  1. Transportation:

Arrange transport of goods from manufacturers to their warehouses and then to retail stores.

  1. Grading and Packing:

Grade goods by standards, possibly adding brand names, and pack them in convenient lots.

  1. Financing:

Provide financial help to manufacturers by buying goods on cash or giving advances and retailers by selling on credit.

  1. Risk-taking:

Bear risks like price changes, demand fluctuations, spoilage, and bad debts.

  1. Promotion:

Assist in advertising and sales promotion activities for retailers.

 

Retailers

Retailers have special importance in the channel of distribution connecting the wholesalers and ultimate consumers.

Function of Retailers

Their main functions are:

  1. Collection of Goods:

Retailers buy goods from various wholesalers and manufacturers to supply to consumers.

  1. Time Utility:

They stock a variety of products and sell them whenever customers need them.

  1. Transportation:

Retailers transport goods from wholesalers to consumers and sometimes offer free home delivery.

  1. Financing:

They sell goods on credit, increasing consumers' buying power but taking on the risk of bad debts.

  1. Customer Education:

Retailers inform customers about new products and demonstrate their uses.

  1. Spokesperson for Customers:

They communicate customer needs to wholesalers and manufacturers, helping improve product offerings.

 

Difference between Wholesaler and Retailer

Wholesaler and Retailer can be distinguished as under:

  1. Wholesaler buys and sells goods in large quantities.

Retailer resells in small quantities and operates on a small scale.

  1. Wholesaler handles a limited number of items and varieties.

Retailer offers a wide range of items and varieties.

  1. Wholesaler acts as the first link in the distribution chain.

Retailer acts as the second link in the distribution chain.

  1. Wholesaler sells products to retailers and industrial users.

Retailer directly sells to consumers.

  1. Wholesaler receives goods directly from manufacturers.

Retailer gets goods from wholesalers and sometimes manufacturers.

  1. For wholesaler shop location is not crucial.

For retailer shop location near residential areas is crucial.

  1. For wholesaler window displays are not important.

Retailer must have attractive window displays to attract customers.

  1. Wholesaler operates on low profit margins but with fast turnover.

Retailer charges higher prices to cover display costs and higher rent in central locations.

  1. Wholesaler does not offer after-sale services.

Retailer provides after-sale service.

 

Functions of Intermediaries in Distribution Channels

Factors Affecting the Selection of the Channel of Distribution

Whether the business will directly sell to the ultimate consumers, or through wholesalers and retailers or through an agent also, will be affected by various factors as follows:

Product Related Factors:

  1. Price: Low-priced products have longer distribution chains, high-priced products have shorter chains.
  2. Perishability: Perishable goods need fewer intermediaries, often sold by retailers.
  3. Size and Weight: Heavy goods are usually directly distributed by producers.
  4. Technical Nature: Products needing instructions are sold with fewer intermediaries.
  5. Made to Order: Custom products are sold directly, standardized items through intermediaries.
  6. After-Sales Service: Products needing after-sales service are sold directly or via authorized agents.

Consumer Related Factors:

  1. Number of Customers: More customers require intermediaries; fewer customers may be served directly by manufacturers.
  2. Geographic Spread: Widely spread customers need wholesalers and retailers.
  3. Order Size: Bulk orders are handled directly by producers; small orders by wholesalers.
  4. Purchase Objective: Industrial purchases are sold directly; general consumption goods pass through many hands.
  5. Credit Facilities: Products needing credit sales often involve wholesalers and retailers.

Middlemen Related Factors:

  1. Services Provided: Choose middlemen based on the services they offer, especially for new product promotion.
  2. Sales Potential: Select channels that promise higher sales.
  3. Alignment with Policies: Prefer middlemen who follow the producer's policies.
  4. Distribution Costs: Try to opt for the most cost-effective distribution channels.

Company Related Factors:

  1. Production Level: Large producers with more resources use fewer intermediaries; smaller producers use more.
  2. Financial Resources: Wealthier companies need fewer middlemen.
  3. Managerial Experience: Less experienced producers rely more on middlemen.

Other Factors:

  1. Competitors' Channels: Consider competitors' distribution methods.
  2. Social Viewpoint: Keep societal attitudes towards distribution in mind.
  3. Flexibility: Ensure the ability to change agents if needed.

Types of Distribution Channels Class 12

Promotion Mix