Marketing Knowledge: Marketing Distribution Channel and Marketing Middlemen for Competitive Exams

Marketing Distribution Channel and Marketing Middlemen

Most producers do not sell their goods directly to the final users, between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel. A channel of distribution is the path a product takes from the producer or manufacturer to the final user. So, marketing channels are a set of interdependent organisations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

Importance of Distribution Channel:

• They act as communication agent which often guide the consumers in right direction to fulfil their wants.
• A distribution channel is important for understanding the logistics of the business.
• It helps in managing, planning, producing, transporting and storage of products.
• They help to reduce the storage cost.

Types of Marketing Middlemen

Middlemen are broadly classified into two groups

• 1) Merchant Middlemen
• 2) Agent Middlemen

1) Merchant Middlemen: Merchant middlemen normally take title to, and therefore own, the product they handle. The buy and sell for their own gain and derive their income from the margins arising from the sales. i.e., difference between buying price and selling price.There are two categories of merchant middlemen and they are:

i) Wholesalers: They deal with goods in bulk and reap the benefit of economies of sales. They provide goods in relatively small quantities to retailers and provide them with facility of credit purchase. Wholesalers may be defined as the middlemen who operates between the producers (from whom they purchase goods) and the retailers (to whom they sell goods).

ii) Retailers: Retailers are middlemen who procure goods from the wholesalers and sell the product to the end-users or the consumers. They cater to the demand of the customers by providing a variety of products of different companies at one place. They also offer pre and after sales services and communicate to consumers the feature, discount retailer, vending machine and super market are types of retailer.


2) Agent Middlemen: All Agent Middlemen of marketing don't own what they handle i.e., not take title to the goods. They derive their income from the fees they are paid by their client or commissions given. There are three categories of Agent Middlemen they are:

i) Broker: He brings the buyers and sellers together and negotiate between them. He generally specialises in a narrow range of products and posses in-depth knowledge of market condition in his area of specialisation. A broker does not receive payment until the product is sold and has to ensure the best deal for the customer.

ii) Commission Agent: They procure goods on consignment and transport them to bigger markets to sell them for the best price in the market. They deduct the commission and the transportation costs and pay the rest of the money earned to the producer. They generally deal with agricultural products, sea foods, etc.

iii) Auctioneer: An auctioneer is an agent who sells goods by auction i.e., to the highest bidder in public competition. He has no authority to hold the goods sold and can deliver the goods only on receipt of price. He is the agent of the vendor.