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The Role of Middlemen in the Channel Distribution

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Kate Vkha

on 2 March 2015

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Transcript of The Role of Middlemen in the Channel Distribution

Help & Matching
Help in production functions : The producer can concentrate on the production function, leaving the marketing problem to middlemen.

Matching Demand & Supply : The intermediaries function is to assemble the goods from many producers in a way that a customer can purchase easily
Example of middlemen: Wholesalers,retailers,agents and brokers.

Intermediaries are important in the market as both the consumers and producers gain a lot from the roles of middlemen who ensure to match supply and demand.
Most middlemen take title to the goods and services and trade in their own name :

Helps diffusing the risks between the manufacturer and middlemen and helps to meet the customer demand as he is in physical possession of the goods
Promotion & Financing
Promoting the product in middleman territory

Financing manufacturing operation by providing the necessary working capital in the form of advance payments for goods and services
Function : To deliver goods to the consumers when and where they want them.

Why do producers give the selling jobs to intermediaries? Why don't they distribute the goods themselves?
The Role of Middlemen in Distribution Channels

Kateryna Varukha

Middleman: person who negotiates with large companies on behalf of personal clients

Distribution Channel: The path through which goods and services travel from the vendor to the consumer or payments for those products travel from the consumer to the vendor
Info & Price
Types & Impact
Adulteration & Hurdling
Storage & Transportation
High number
Other disadvantages
Provide information about the market to the manufacturer (demography, preferences, new competitor,etc.)

A middleman's function is to maintain price stability in the market.
Adulteration: Creation of artificial products to compete with the original product

Hurdling: Creating an artificial scarcity
The lack of storage facilities: Can result to the low value of product

Poor transportation facility : Troubles encountered in transportation.
Excessive number of middlemen between the manufacturers and the consumers = charges, commission.
High price Superfluous

Limited risk taking

Anti-social activities

Limiting consumers' choice
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