Intermediaries

Companies sometimes require external agents to help them market their products. The external agents are called intermediaries.

Intermediaries Intermediaries

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    • Have you ever noticed the presence of an intermediary in your everyday life? Did you know that the grocery store you go to on most days, and the shopping malls you visit, are forms of intermediaries? Did you know that people can also act as intermediaries? Read along to become an expert on all the different types of intermediaries.

    Intermediaries in Marketing

    Intermediaries help a company to promote, sell and distribute its products to its customers.

    Marketing intermediaries act as middlemen between various stages in the distribution chain. Intermediaries make the accessibility of the products easier for customers. With the technological advancements now available, and the rise in the digital engagement of customers, intermediaries can also be seen on digital platforms. Intermediaries are part of the distribution chain, with four main types of intermediaries.

    Types of Intermediaries

    Mainly four types of intermediaries act at the different stages of distribution:

    • agents and brokers
    • wholesalers
    • distributors
    • retailers

    Intermediaries: agents and brokers

    Agents are people that represent another person or entity. They serve as an intermediary between buyers and sellers on a permanent basis. They have the power to negotiate and are given decision-making power. They are most actively present in the real estate industry.

    Brokers are similar to agents in their role as intermediaries between buyers and sellers. However, they are not permanent representatives of a person or an entity. They are most active in the trading sector.

    Both agents and brokers are paid on commission for a sale or transaction they have mediated.

    Intermediaries: wholesalers

    Wholesalers act as intermediaries between manufacturers and retailers. They buy products from manufacturers or farmers and sell them to retailers. Products are purchased in huge quantities from the manufacturer, and the wholesaler distributes them to retailers. A wholesaler might buy only a specific product from manufacturers or have a variety of products from manufacturers available in large quantities.

    Wholesalers mainly focus on the Business-to-Business (B2B) market rather than the Business-to-Consumer (B2C) market.

    Wholesalers can operate in traditional cash-and-carry outlets or warehouses, but technological advancements have also allowed wholesalers to move their business onto digital platforms.

    Intermediaries: distributors

    Similar to wholesalers, distributors are in direct contact with the manufacturer. But unlike wholesalers, they do not sell the products to a retailer but the end-user. They usually distribute only from a specific manufacturer and provide after-sales services to customers. They are either paid in commission or fees by the manufacturer.

    Intermediaries: retailers

    Retailers are the types of intermediaries consumers are most familiar with and interact with the most. Shops, supermarkets, websites, etc., are examples of retail. Retailers have a wider reach. They either buy from the manufacturer or another intermediary.

    Retailers purchase fewer items than other intermediaries but have a more comprehensive range of products. E-commerce platforms such as Amazon, Shopify, etc., are also forms of retail.

    Not all businesses have intermediaries in their distribution channels. This depends upon the industry and the operating market. For example, the steel industry usually uses two intermediaries in their distribution channel, namely the wholesalers and the retailers, as shown in Figure 1. The cosmetic industry, however, usually only needs one intermediary between the manufacturer and the end consumer, the distributors, as shown in Figure 2.

    Intermediaries, Diagram showing the role of intermediaries in steel industry, StudySmarterFig. 1 - Role of intermediaries in the steel industry

    Intermediaries, Diagram showing the role of intermediaries in cosmetic industry, StudySmarterFig. 2 - Role of intermediaries in the cosmetic industry

    Examples of Intermediaries

    Let's now look closely at a few specific examples of intermediaries.

    Examples of agents

    Real estate agents work with people trying to sell and buy properties. This can be seen in Figure 3. They show the property for sale to the interested buyers and negotiate prices that both parties agree upon. They are paid in commission, which is a pre-determined percentage of the transaction made through the sale. For instance, their agreed commission could be 5% of the total value of the sale (e.g., the sale of a house).

    Intermediaries, Diagram showing the role of intermediaries in the real estate industry, StudySmarterFig. 3 - Role of intermediaries in the real estate industry,

    Literary agents work as intermediaries between authors and publishers, as shown in Figure 4. Agents pitch an author's work to the publishing company and increase the chance of the work getting published.

    Intermediaries, Diagram showing the role of intermediaries in literature industry, StudySmarterFig. 4 - Role of intermediaries in the literature industry

    Examples of wholesalers

    Websites such as thewholesaler, mxwholesale, dkwholesale, etc., are examples of wholesaler websites in the UK.

    The Booker Group, acquired by Tesco, is the largest wholesaler in the UK in terms of revenue.

    The Booker Group supplies many products, including groceries, wine, beer, stationery, tobacco, and more. They stock over 200,000 products. They supply products to restaurants, retail stores, theatres, and even the prison service in England and Wales.

    Examples of distributors

    The UK has the most significant number of distributing companies in London, followed by Manchester.

    Some of the largest distributors in the country include:

    • John Distilleries Pvt Ltd

    • Esso petroleum company Ltd

    • TATA steel UK Holdings Ltd

    John Distilleries is an Indian company and one of the biggest distributors in the UK. John, as the name suggests, produces distilled beverages. Its chief products include whiskey, wine, malts, and vodka products. The drinks are manufactured in India, exported to the UK, and sold by distributors to the people in the UK, making it easier for them to reach this product.

    Examples of retailers

    Some of the biggest and most common examples of grocery retailers in the UK include:

    • Tesco

    • Sainsbury

    • Walmart (Asda)

    • Morrisons.

    For instance, Tesco works with thousands of suppliers, who supply them with all kinds of different grocery products (e.g. milk, vegetables, bread, etc) which they sell in their numerous Tesco supermarkets.

    Importance of Intermediaries

    The importance of intermediaries comes down to a few key factors. Intermediaries of all levels are important as they make the availability of products or services for their users much more accessible. They make the process of offering the desired product to the right user efficient and effective, as they have information about the customers and their needs. The importance of intermediaries is also prevalent as they have direct contact with the customers and are therefore knowledgeable about what products to source and where to source them from. They base these decisions on the manufacturer's quality and customer demands.

    As intermediaries deal with smaller quantities of products but of a wider variety, they can match the different needs of customers. They have information as to what customers are looking for and can link them to the right supplier for a fee, making the job much quicker and easier for both parties.

    Advantages and Disadvantages of Intermediary Channels

    The advantages of intermediaries include the following:

    • Better accessibility of products and services

    • Physical distribution of goods

    • Storage of supplies

    • Better market coverage

    • Improve buyer-seller relations

    • Before-and-after sales services.

    The disadvantages of intermediaries include:

    • The manufacturer loses some decision-making power.

    • The manufacturers' profit is reduced due to the money they have to pay the intermediaries.

    • Intermediaries may be misinformed about the product, thereby misinforming the customer.

    • Intermediaries may favour a competitor's product if they offer a better fee, and as a result, the manufacturer may lose their target market or market share.

    As you can see, intermediaries are essential for businesses because of their various roles. Without intermediaries, it would be much more difficult for manufacturers and customers to find the right products quickly and efficiently.

    Intermediaries - Key takeaways

    • Intermediaries help a company promote, sell, and distribute its products to its customers.

    • There are four main types of intermediaries that act at the different distribution stages: agents or brokers, wholesalers, distributors, and retailers.

    • Agents are people that represent another person or entity. They serve as an intermediary between buyers and sellers on a permanent basis.
    • Wholesalers act as the intermediaries between manufacturers and retailers.
    • Distributors act as the intermediaries between manufacturers and end-users.
    • Retailers buy products from manufacturers or other intermediaries and sell them to the end consumer.
    • Storage of supplies, improving buyer-seller relations, and providing before-and-after-sales services are a few advantages of intermediaries.
    • Loss of the manufacturer's decision-making power, reduction in profit, and misinformation about products are a few disadvantages of intermediaries.
    Frequently Asked Questions about Intermediaries

    Why are Intermediaries important in marketing?

    Intermediaries are important in marketing as sometimes companies require external agents to market their products. The external agents are called intermediaries, and they help promote, sell, and distribute products to customers.

    What are the types of Intermediaries?

    There are four main types of intermediaries including agents and brokers, wholesalers, distributors, and retailers. 

    What is the role of Intermediaries in marketing?

    Intermediaries help a company promote, sell, and distribute its products to its customers. Marketing intermediaries act as middlemen between various stages in the distribution chain. Intermediaries make the accessibility of the products easier for customers. 

    What are the advantages and disadvantages of Intermediaries?

    Some of the advantages of intermediaries include better accessibility to products, storage of supplies, better market coverage, and improved buyer-seller relations. On the other hand, the disadvantages of intermediaries include loss of decision-making power, reduced profit, and misinformation.

    Why do companies use intermediaries?

    Companies sometimes require external agents (intermediaries) to help them market their products. This includes the promotion, sale, and distribution of the products. As a result, intermediaries act as middlemen between various stages in the distribution chain.

    Test your knowledge with multiple choice flashcards

    ___________ act as intermediaries between manufacturers and retailers.

    Shops, supermarkets, websites etc are examples of 

    Wholesalers mainly focus on the Business-to-Consumer (B2C) market.

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