THE MIDDLEMEN IN CHANNELS OF DISTRIBUTION

THE MIDDLEMEN IN CHANNELS OF DISTRIBUTION

The middlemen are the wholesalers and retailers who specialise in performing activities relating to the purchase and sale of goods in the process of their flow from manufacturer to final consumers or buyers.

They are situated in the marketing channel at points between the manufacturer and final consumers.

ADVANTAGES OR SURVIVAL OF MIDDLEMEN


The middlemen have continued to wax stronger in spite of all the strong arguments for their elimination.

The middlemen continue to survive because the functions they perform to both the producers and ultimately to customers cannot be performed by either the manufacturer or the consumers.

Having gone through the functions of the wholesaler and the retailer, it becomes clear that they would continue to flourish.

DISADVANTAGES OR ELIMINATION OF MIDDLEMEN

A school of thought supports the total elimination of the middlemen i.e. wholesaler and retailer, because of the following disadvantages associated with them


Longer channel of distribution:The wholesalers and retailers make the channel of distribution of goods longer.


Creation of artificial scarcity:The wholesalers and retailers normally create artificial scarcity of products through hoarding

Increase in prices:The middlemen also cause unnecessary price increase to the dismay of the final consumer.


Misinformation:The middlemen sometimes misinform the consumers.


Fluctuation of prices:The middlemen can also cause price fluctuation, especially when too many of them are involved in distribution of products.


Disguised unemployment:The presence of wholesalers could encourage large scale disguised unemployment.

REASONS THAT MAY WARRANT THE BY PASSING OF MIDDLEMEN

Some manufacturers by-pass the wholesalers and even the retailers and sell their goods directly to the consumers. This is done for the following reasons.

ft Increase in profits: Manufacturers can increase then profit if they are able to sell their products directly to the consumers.
Ownership of warehouses: Some large retailers have large warehouses and this can make the manufacturer to by-pass the wholesaler.
Cheap products: Consumers are able to buy products at cheaper prices when the activities of both wholesalers and retailers are cut off
Development of mail order system: There may be no need of middlemen in mail order system, since most of the transactions are done by mail.
Packaging and branding done by manufacturer: Most of the packaging and branding can be done by manufacturers thereby making the middlemen irrelevant.
Presence of technical goods: The manufacturer can sell directly to the consumers if the goods produced are highly technical and required special
specification, e.g. computers.
Perishable goods: Middlemen can be eliminated when perishable goods, e.g. tomatoes, are involved because the goods can easily get spoilt.
Branded products: Middlemen can alsobe by-passed when the products are branded for easy identification by the manufacturers.
Small scale production: The manufacturers will prefer to sell directly to the consumers when the scale of production of the goods is very small.

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