Posted in Marketing and Strategy Terms, Total Reads: 308
Middleman can be defined as a person who acts as an intermediary in process and transaction chain. A middleman normally facilitate interaction between parties for their mutual benefit and he also gets a cut or commission for the same. In simple language a middleman can be defined as a person or company that connects buyers with sellers.
Since a middleman charges commission to different parties, the parties may be businesses or customers try to cut out the middleman so that they can directly deal with each other and don’t have to pay any commission to the intermediary thus reducing extra costs. Generally goods are manufactured in enormous quantities at few locations. However the end consumers are dispersed over different geographical locations. Therefore, the use of a middleman or a distributor by manufacturer help them distribute the products quickly and efficiently. A middleman helps in supplementing the resources of companies by investing a significant amount of money in stocks, credits extended to customers and use of facilities for distribution of products.
Middlemen plays a vital role for businesses because of their widely dispersed geographical presence and deliver goods and services to the consumers when and where they want them. Middleman also ensures free flow of goods in different markets by matching supply and demand there. Middleman also influence business decisions made by companies by feedback to the companies about their products. Basically, there are four types of middleman; agents, distributors, wholesalers and retailers. An agent generally acts as primary selling arm of the company or manufacturer. Wholesalers are independently owned businesses who own the products they sell. Distributors are similar to wholesalers with a difference that distributors have products of only complementary lines. Retailers buys products from either distributors or wholesalers and sell it to end consumers.
For example; a distributor who buys products from a company and sell them to retailers is an example of middleman.