Q&A - Describe the main kinds of intermediary involved in distribution channels
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Whilst many kinds of business get involved in distribution channels, the most common type of intermediaries are retailers, wholesalers, distributors, agents and franchisees. These are described briefly below:
Retailers
The most popular distribution channel for consumer goods, retailers operate outlets that trade directly with household customers. Retailers can be classified in several ways:
• Type of goods being sold (e.g. clothes, grocery, furniture)
• Type of service (e.g. self-service, counter-service)
• Size (e.g. corner shop; superstore)
• Ownership (e.g. privately-owned independent; public-quoted retail group)
• Location (e.g. rural, city-centre, out-of-town)
• Brand (e.g. nationwide retail brands; local one-shop name)
Retailers enable producers to reach a wider audience, particularly if broad coverage by the major retail chains can be obtained. The big downside to using a retailer is the loss of profit margin. A high street retailer will typically look to take at least 40-50% of the final consumer price.
Wholesalers
Wholesalers stock a range of products from several producers. The role of the wholesaler is to sell onto retailers. Wholesalers usually specialise in particular products – for example food products.
Distributors and dealers
Distributors or dealers have a similar role to wholesalers – that of taking products from producers and selling them on. However, they often sell onto the end customer rather than a retailer. They also usually have a much narrower product range. Distributors and dealers are often involved in providing after-sales service.
Franchisees
Franchisees are independent businesses that operate a branded product (usually a service) in exchange for a licence fee and a share of sales. Franchises are commonly used by businesses (franchisors) that wish to expand a service-based product into a much wider geographical area.
Agents
Agents sell the products and services of producers in return for a commission (a percentage of the sales revenues). You will often find agents working in the service sector. Good examples include travel agents, insurance agents and the organisers of party-based selling events (e.g. Tupperware and Pampered Chef).
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