What is Middlemen— Intermediaries?
In essence, a channel of distribution includes the original producer, the final buyer and any middlemen— either wholesaler or retailer. The term middlemen refer to those institutions or individuals in the channel which either take little to the goods or negotiate or sell in the capacity of an agent or broker.
Thus, from the marketing point of view the middlemen and intermediaries are the same. On the basis of taking titles to goods, these middlemen are divided into merchant-middlemen, and agent-middlemen. Merchant middlemen obviously take a title and later effect sales on their own accord. Agent middlemen on the contrary do not take title to goods. They simply get an order from the buyers and pass it on to the producer and seller.
On the basis of the position of the middlemen in the channel of distribution, they are also classified into wholesalers and retailers. Wholesalers are closer to the manufacturers while retailers have a close touch with customers. The various lands of middlemen are:
- They are middlemen who do not take any title to goods but have possession of goods and take active part in the marketing mechanism rendering all services required. They represent either seller or buyer and not both.
- Brokers. Brokers are agents who have no direct and physical control of the goods in which they deal. They represent either the buyer or the seller or both in negotiating purchases and sales for their principals. Brokers’ powers as to price and terms of sale are usually limited by the principal.
- Dealers. Dealers are persons who buy or resale products at either retail or wholesale basis.
- Distributors. It is a general term used to mean wholesalers.
- Jobbers. The term is used in certain trade and localities to designate special types of wholesalers. They are usually found in stock markets.
- Rack Jobbers. A wide selling business unit that markets specialized lines of merchandise to certain types of retail stores and also provides special services such as arrangements, maintenance and stocking of products in display racks. The rack jobber, usually but not always puts his merchandise in the store of the retailer on consignment. Rack-jobbers are most common in the food business.
- Resident Buyer. An agent or a person who specializes in buying on a fee or commission basis chiefly for retailers are known as Resident Buyer.
- Retailers. A merchant or occasionally an agent whose business is selling directly to the ultimate consumer.
- Wholesaler. A business unit which buys goods from the producer and resells merchandise to retailers and other merchants and/ or to industrial, institutional and commercial users but which does not sell significant amounts to ultimate consumers. Generally these merchants render a wide variety of services to their customers.
- Commission Houses. These are also referred to as commission merchants or commission-agents. These agents usually exercise physical control over the goods and negotiate the sale of the goods they handle. The commission house usually enjoys more powers over the prices, methods and terms of sales than the brokers. But they are also bound to obey instructions, issued by the principal. They generally arrange delivery, extend necessary credit, collect the sale price deducts their fees (commission) and remit the balance to the principal.
- Facilitating Agency. These agencies perform or assist in the performance of one or more of marketing functions, but they do not take title to goods nor negotiate purchase or sale. Common types of this kind are— Banks, insurance company, railways, advertising agencies etc.
- Consumer Cooperative. A retail business owned and operated by ultimate consumers to purchase and distribute goods and services primarily to the members. Such societies are generally referred to as purchase cooperatives also and registered under the Cooperative Societies Act of the land.
- Industrial Store. A retail store owned and operated by a company to sell primarily to its employees. Non-governmental establishments are often referred to as ‘Company Stores’.
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