Classification of Middlemen Middlemen is one who specializes in performing operations or rendering services that are directly involved in the

purchase and/or sale of goods in the process of their flow from producer to the consumer. Middlemen renders service in connection with the purchase and/or sales of products as they move from producer to consumer, either he takes title to the merchandise as it flows from producer to consumer or he actively negotiates the transfer of title. They are wholesaler, retailer, consumer, producer and agent. 1. Merchant middlemen: Merchant middleman takes title (buys) and resells merchandise. Prominent middlemen in the consumer goods are wholesaler and retailer. Merchant wholesaler may be general merchandise wholesaler, general line wholesaler, especially wholesalers. Retailers include departmental stores, mail order firm, supermarket chains and variety stores. 2. Agent middlemen: Is one who negotiates and purchase or sales or both but doesnt take title to the goods in which he deals. They are brokers, manufacturers agent, sales agent, commission houses. The chief distinguishing characteristics between the two categories is whether the middlemen takes titles to the goods he handles. If he takes title he is a merchant and it doesnt, he is an agent. Also, the merchant both buys and resells whereas the agent may specialize in negotiating either buying or selling transaction. Merchant wholesaler A wholesaler is an individual or an organization that specializes in performing wholesaling activities. He buys from producer and sells to retailers and users. The term wholesaler applies only to a merchant middlemen engaged in a wholesaling activities i.e. he takes title to the goods he handles. Wholesaling middlemen, is all inclusive term covering wholesalers and other middlemen such as agents and brokers who dont take title to the merchandise. Wholesaler buys and resells merchandise to retailer, other merchants and to industrial, institutional and commercial users. But dont sell in significant amount to ultimate consumers. Wholesaling includes all marketing transactions in which purchases are intended for resell. The wholesaling functions are assembling of merchandise, breaking bulk amount into pieces and delivery. Distribution Tasks Performed by Merchant Wholesalers(for manufacturer) Merchant wholesalers serve manufacturers as well as retailers and other customers. They have survived as intermediaries in the marketing channel because, as specialists in the performance of distribution tasks, they can operate at high levels of effectiveness and efficiency. Often the average cost curves for distribution tasks are lower for wholesalers, or they are able to operate closer to the optimum points on the curves than their suppliers. Modern, well-managed merchant wholesalers are especially well suited for performing the following types of distribution tasks for producers and manufacturers. 1. 2. 3. 4. 5. 6. Providing market coverage Making sales contacts Holding inventory Processing orders Gathering market information Offering customer support

1. Providing market coverage: Market coverage is provided by merchant wholesalers to manufacturers because the markets for the products of most manufacturers consist of many customers spread over large geographical areas. To have good market coverage so that their products are readily available to customers when needed, manufacturers often rely on merchant wholesalers to secure the necessary market coverage at reasonable cost. 2. Making sales contacts: Sales contact is a valuable service provided by merchant wholesalers. For manufacturers, the cost of maintaining an outside sales force is high. If a manufacturers product is sold to many customers over a large geographical area, the cost of covering the territory with its sales force can be prohibitive.14 By using wholesalers to reach all or a significant portion of their customers, manufacturers may be able to reduce substantially the costs of outside sales contacts because their sales force would be calling on a relatively small number of wholesalers rather than the much larger number of customers. 3. Holding inventory: Holding inventory is another crucial task performed by wholesalers for manufacturers. Merchant wholesalers take title to, and usually stock, the products of the manufacturers whom they represent. By doing so, they can reduce the manufacturers financial burden and reduce some of the manufacturers risk associated with holding large inventories. 4. Processing orders: Order processing performed by wholesalers is very helpful to manufacturers because many customers buy in small quantities. Yet manufacturers both large and small find it extremely inefficient to attempt to fill large numbers of small orders from thousands of customers. 5. Gathering market information: Gathering market information is another task of substantial benefit to manufacturers. Wholesalers are usually quite close to their customers geographically and in many cases have continuous contact through frequent sales calls on their customers. Hence, they are in a good position to learn about customers product and service requirements. Such information, if passed on to manufacturers, can be valuable for product planning, pricing, and the development of competitive marketing strategy. 6. Offering customer support: Customer support is the final distribution task that wholesalers provide for manufacturers. Products may need to be exchanged or returned, or a customer may require setup, adjustment, repairs, or technical assistance. For manufacturers to provide such services directly to large numbers of customers can be very costly. Instead, manufacturers can use wholesalers to assist them in providing these services to customers. Distribution Tasks Performed by Merchant Wholesalers(for customer) 1. Assuring product availability 2. Providing customer service 3. Extending credit and financial assistance 4. Offering assortment convenience 5. Breaking bulk 6. Helping customers with advice and technical support

1. Assuring product availability: Product availability, providing for the ready availability of products, is probably the most basic distribution task performed by wholesalers for customers. Because of the closeness of wholesalers to their customers and/or their sensitivity to customers needs, they can provide a level of product availability that many manufacturers could not easily match. Customer service is another valuable distribution task performed by wholesalers. 2. Providing customer service: Customer service is another valuable distribution task performed by wholesalers. Customers often require services such as delivery, repairs, or warranty work. By making these services available to their customers, wholesalers save their customers effort and expense. [Link] credit and financial assistance: Credit and financial assistance are provided by wholesalers in two ways. First, by extending open account credit to customers on products sold, wholesalers allow customers to use products in their business before having to pay for them. 4. Offering assortment convenience: Assortment convenience refers to the wholesalers ability to bring together from a variety of manufacturers an assortment of products, greatly simplifying customers ordering tasks. Instead of having to order separately from dozens or even hundreds of manufacturers, customers can turn to one or a few general line or specialist wholesalers who can provide them with all or most of the products they need. 5. Breaking bulk: Breaking bulk is important because often customers do not need large quantities of products, or they may prefer to order only a small quantity at a time. Many manufacturers find it uneconomical to fill small orders and will establish minimum order requirements to discourage them. By buying large quantities from manufacturers and breaking down these bulk orders into smaller quantities, wholesalers provide customers with the ability to buy only the quantity they need.

6. Helping customers with advice and technical support: Advice and technical support is the final distribution task wholesalers are called on to perform for their customers. Many products, even those that are not considered technical may still require a certain amount of technical advice and assistance for proper use, as well as advice on how they should be sold. Wholesalers, especially through a well-trained outside. Types of wholesaling intermediaries A) Merchant wholesaler B) Agents, brokers and commission merchant(agent or functional wholesaler) C) Manufacturers sales branch and offices

A) Merchant wholesaler: They deal on delivery of goods with ownership transfer. They bear risk of spoilage, damage etc. Merchant wholesaler can be classified as1. On the basis of goods handling: General merchandise wholesaler (deal on manufacturing goods like clothing, sports etc.), general line wholesaler (they deal on specific line of goods like only clothing item related product), specialty wholesaler (they deal only one category like belt under clothing)

[Link] the basis of service rendered: Full service wholesaler: They assume risk and provide full range of services such as movement of goods, storing, credit facility, promotion. They often referred to as a distributor or jobber. Limited function wholesaler: They are specialized firms and perform unique combination of services. Rack merchandiser specializes in handling all aspect of distribution, from the manufacturer to placement of merchandise on display racks, which they provide to retailers. This form of specialized wholesaler is frequently used by grocery stores and convenience markets for nonfood items such as pet products, house wares, toys, books etc. Cash and carry wholesaler: They perform most wholesaling function except financing and delivery. Truck wholesaling: Generally distributor offers a limited assortment of well known , fast moving items. Drop shipper: They take order from customer and place them with producers which then ship directly to customers. They take title but never physically handle products(bulky item). Mail order wholesaler:

B) Agents, brokers and commission merchant: In contrast with merchant wholesaler, agent and broker never take title to the product they handle. Their main function is bring together . Commission merchant: They receive products on consignment and negotiate sale in their own name. They offer credit and may provide value added services such as specialized packaging. Selling agent: They are responsible for total marketing for a firms product line. Brokers: they are wholesalers whose primary activity is to establish contact between buying and seller. Manufactures agent: An independent sales person who works for several manufacture of related but non competing products line. C) Manufacturers sales branch and offices: Manufacturers' sales branches and offices are owned and operated by manufacturers but are physically separated from manufacturing plants. They are used primarily for the purpose of distributing the manufacturers' own products at wholesale. Some have warehousing facilities where inventories are maintained, while others are merely sales offices. Some of them also wholesale allied and supplementary products purchased from other manufacturers. .