Intermediaries

Posted in Operations and Supply Chain Terms, Total Reads: 461
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Definition: Intermediaries

The manufacturer usually do not sell the goods directly to the end user. In order to make these goods and services available to the end user, certain firms as well as individuals exist in the market place who mediate the entire process of promoting, selling and making the goods available. These firms or individuals are referred to as intermediaries. They may buy a product or enter into contracts with the manufacturer or another intermediary to further sell these products directly to the end user or another intermediary. As the product moves from one intermediary to another an increase in the price of the product is witnessed.

Intermediaries are mainly of four types:

  • Agents:
    • An agent may be an individual or a firm acting as a primary seller of the manufacturer to the user. He doesn’t take the ownership of the products. He makes his profits by earning commission on the product sold or by charging a fees on the service provided
  • Wholesaler:
    • Wholesalers are individual firms that buy the goods in bulk. The ownership of the products is passed to the wholesaler. He sells these products to other intermediaries like retailers for a profit margin
  • Distributors:
    • Distributors are similar to the wholesalers. However a wholesaler may carry products of two competing brands, a distributor cannot. For example a wholesaler may have both apple and Samsung mobiles, but a distributor may just carry Samsung mobile phones.
  • Retailers:
    • Retailers make goods available to the end user for consumption. These can be small mom and pop stores or a part of the large chain like Tesco, Big bazaar. They sell products at the MRP. Like wholesalers and Distributors retailers also purchase the product and gain the ownership of their inventory.

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