Term
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Definition
1) Producers & Manufacturers
2) Intermediaries
3) Final Users (not considered part of the Channel in this text) |
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Term
| Who uses intermediaries and why? |
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Definition
| Producers & Manufacturers sometimes shift distribution tasks to intermediaries to save money - to avoid the large fixed costs associated with distribution tasks. Also, to take advantage of the economies of scale. |
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Term
| Major Types of Wholesalers |
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Definition
1) Merchant Wholesalers
2) Agents, Brokers and Commission Merchants
3) Manufacturer’s sales branches & offices |
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Term
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Definition
| Primarily engaged in buying, taking title to, usually storing, and physically handling product in large quantities and reselling them in smaller qty. to retailers, to industrial, commercial, or institutional concerns, and to other wholesalers. |
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Term
| Agents, Brokers and Commission Merchants |
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Definition
| Do not take title to the goods in which they deal, but are actively involved in the negotiatory functions of buying and selling while acting on behalf of their clients |
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Term
| Manufacturer’s sales branches & offices |
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Definition
| Owned & operated by manufacturers, but physically separated from the plant. Used for distributing manufacturer’s products at wholesale. |
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Term
| Structure & trends in wholesaling |
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Definition
1982 – 1992 absolute sales increased substantially
Largest increase (66.1%) was for agents, brokers and commission merchants
Middle increase (65.8%) was for manufacturers’ sales branches and offices
Smallest increase (59.3%) was for merchant wholesalers
Merchant wholesalers showed decrease in percentage of total wholesale sales from 58 to 57 percent. |
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Term
| Six Distribution Tasks Performed by Merchant Wholesalers |
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Definition
1) Providing for market coverage
2) Making sales contacts
3) Holding inventory
4) Processing orders
5) Gathering market information
6) Offering customer support |
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Term
| Six Distribution Tasks Performed by Merchant Wholesalers |
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Definition
1) Providing for market coverage – value: covering large geographical areas at reasonable cost
2) Making sales contacts – value: cost of sales force is high; call on few wholesalers instead of many customers
3) Holding inventory - value: reduce manufacturer’s financial burden and risk of holding large inventories. Also helps plan production schedules
4) Processing orders - value: manufacturers can take fewer large orders vs. many small orders
5) Gathering market information - value: wholesalers’ continuous contact with customers allows them to provide better market info to manufacturers. Wholesalers know more about customers’ product and service requirements.
6) Offering customer support - value: called “value-added services.” – reduces wholesaler’s cost. |
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Term
| Six Further services provided by merchant wholesalers |
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Definition
1) Assuring product availability
2) Providing customer service
3) Extending credit and financial assistance
4) Offering assortment convenience
5) Breaking bulk (taking smaller orders)
6) Helping customers with advice and technical support |
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Term
| Distribution Tasks Performed by Agent Wholesalers |
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Definition
Manufacturer’s Agents specialize mainly in performing the market coverage and sales contact distribution tasks for manufacturers. They substitute for the manufacturers' outside sales force.
Selling Agents may handle virtually the entire marketing and sales effort for the manufacturers they represent. They may perform many if not most of the other distribution tasks.
Brokers in practice may perform many if not most of the distribution tasks, so that for all practical purposes there is little to distinguish them from manufacturer’s representatives or selling agents.
Commission Merchants actually perform a wide range of distribution tasks including physically holding inventory, though not taking title, providing market coverage, sales contact, breaking bulk, credit, and order processing. They essentially receive and warehouse products, help locate buyers, make sales, extend personal credit, process orders, and may arrange for delivery |
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Term
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Definition
| Retailers consist of business firms engaged primarily in selling merchandise for personal or household consumption and rendering services incidental to the sale of goods. |
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Term
| Six Distribution Tasks Performed by Retailers |
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Definition
1) Offering manpower and physical facilities that enable producers/manufacturers and wholesalers to have many points of contact with consumers close to their places of residence.
2) Providing personal selling, advertising, and display to aid in selling suppliers’ products
3) Interpreting consumer demand and relaying this information back through the channel
4) Dividing large quantities into consumer-sized lots, thereby providing economies for suppliers (by accepting relatively large shipments) and convenience for customers
5) Offering storage, so that suppliers can have widely dispersed inventories of their products at low cost and enabling consumers to have close access to the products of producers/manufacturers and wholesalers
6) Removing substantial risk from the producer/manufacturer (or wholesaler) by ordering and accepting delivery in advance of the season. |
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Term
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Definition
| Business firms that assist in the performance of distribution tasks other than buying, selling, and transferring title. They may be viewed as subcontractors to whom various distribution tasks can be “farmed out.” |
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Term
| Seven Common types of facilitating agencies |
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Definition
- transportation agencies
- storage agencies
- order processing agencies
- advertising agencies
- financial agencies
- insurance companies
- marketing research firms |
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