The Channel
Participants
CHAPTER 2
Learning Objectives
Be familiar with classification of the major participants in marketing
channels
To understand the reasons why manufacturers shift distribution tasks
to intermediaries
Recognize the major tasks performed by major intermediaries
Know about major trends in retail structure
Major Participants in the Marketing
Channel
Producers Intermediaries Final Users
&
Manufacturers
Wholesale Retail Consumers Industries
Intermediaries Intermediaries
* Commercial Channel * Target Markets
Some Keywords
Target Market: is a group of people with some shared characteristics
that a company has identified as potential customers for its products
Wholesalers: consists of businesses that are engaged in selling goods
for resale or business to retail, industrial, commercial, institutional and
professionals
Merchant wholesalers
Agents, brokers and commission merchants
Manufacturers’ sales branches and offices
Why shift distribution tasks to
intermediaries?
Producers
& Intermediaries
Manufacturers
• spread high fixed costs
over large quantities of
• lack expertise diverse products
• lack economies of scale • achieve economies of
scope and economies of
scale
Manufacturer direct
to customers
• Huge order processing
facility
• Huge inventory
• Several warehouse locations
• Transportation of product to
consumers
= cost prohibitive
Major Trends in Wholesale
Structure
1997—2017
89.2% Manufacturer’s sales branches
& offices
90.6% Wholesale trade
67.8% Merchant wholesalers
120.0% Agents, brokers, & commission
merchants
Merchant Wholesalers Specialize in
Performance Distribution Tasks
Provide market coverage
Make sales contacts
Hold inventory
Process orders
Gather market information
Offer customer support
• Operate at high levels of effectiveness and efficiency
• Average cost curves lower than those for their suppliers
Distribution Tasks Serving
Customers
Assure product
availability
Provide customer service
Extend credit & financial
assistance
Offer assortment
convenience
Break bulk
Help customers with
advice &
Distribution Tasks Performed by
Intermediaries
Offer manpower & physical facilities close to consumers’ residences
Offer manpower & physical facilities close to consumers’ residences
Provide pe
rsonal assistance
assistance to
to help
help sell
sell products
products
Provide pe rsonal
Interpret and relay consumer demand
Interpret and relay consumer demand
Divide large quantities into consumer-sized lots
Divide large quantities into consumer-sized lots
Offer storage
Offer storage
Remove risk by ordering in advance of the season
Remove risk by ordering in advance of the season
