It is common for a business to use one or more kinds of intermediary when it comes to getting a product or service to the end customer. Here are the main kinds of distribution intermediaries.
The most popular distribution channel for consumer goods, retailers operate outlets that trade directly with household customers. Retailers can be classified in several ways:
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 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 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.
Franchises 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.
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