Channel Members

The marketing channel structure consists of a variety of intermediaries performing distribution tasks. These tasks differ in terms of financial involvement, relationship with manufacturer (place and time context) and the functions performed.

1. Wholesaler

Wholesalers are quite common in consumer goods industry. They operate as full-fledged market­ing organizations, purchasing goods from the manufacturers in large quantities. Wholesalers have a network of marketing offices supported by their sales staff to market the products. These impor­tant functionaries also have a network of warehouses to store goods at different market locations. They collect orders from retailers and large customers (institutional) and are usually interested in volume sales only. These channel members are an important communication link providing use­ful market information to the manufacturer. They are a dominant source of supply for retailers of mass-distributed consumer products. Their logistical needs are large-quantity consignments at intervals conforming to their schedules. Wholesalers prefer freight consolidation for lower per-unit transportation charges and work on scale economics.

2. Retailer

This is the last but one link in the distribution network preceding the consumer. Retailers are com­monly engaged in selling mass-distributed consumer products. They buy the material from whole­salers in small quantities and have very limited finances to invest in the business. Retailers normally purchase goods from the wholesalers either on credit or against cash, depending on their mutual relationship and the prevailing trends in the industry. Their logistics requirement is frequent supplies in small quantities. Retailers cannot keep a large inventory because of their limited financial capacity.

3. Van Dealer

The van dealer is a totally different type of player in the distribution system. They are neither authorized dealers nor distributors of the manufacturer. They distribute different brands in the same product class. Van dealers often buy products from an authorized wholesaler of the company and sell them in their areas. They sometimes sell the products at a lower price than the com­pany’s authorized dealers by manipulating the prices based on the discounts offered to them by wholesalers. Van dealers are quite common in the electrical industry in India. Their investment risk is distributed over the several brands they sell. Generally, they do not keep the inventory. These channel members buy on a daily basis on cash terms. The van dealer can reach remote places where the company’s authorized dealer finds it uneconomical to serve the customer.

4. C&FA

C&FA is a carrying and forwarding agency. C&FA works as a mediator between the manufacturer and other channel members like wholesalers, distributors, retailers, stockiest, etc. It provides the space to manufacturers to store the goods and dispatch to other middlemen as per the manufac­turer’s instructions. C&FA does not take any dispatch decision. It follows the instructions of the manufacturer. The ownership of inventory lies with the manufacturer. The channel members place order to the manufacturer, who in turn instructs C&FA in that particular region to dispatch the material to channel members.

5. Selling Agent

Selling agents are appointed on a contractual basis for selling a company’s products to clients in lieu of an elaborate sales organization. They are contracted not to sell the competitor’s products. However, they can sell complementary products. Selling agents are deployed for collecting out­standing payments from the clients. They extend services like organizing loans and offering credit facilities to their clients. They are compensated for their services by way of commission on sales. Sales agents are quite common in the textile industry.

6. Manufacturer’s Agent

These intermediaries are appointed on a contractual basis for selling industrial goods. They repre­sent the manufacturer in creating awareness, technical discussion, commercial negotiation and liai­son with clients. Manufacturing agents are usually ex-employees with a technical background and know the technical intricacies of the product. They are compensated on a case-to-case basis. These agents do not have any organization for marketing and are mostly involved in pre-sales activities and clinching sales deals.

7. Broker

The role of the broker is to facilitate a sales/purchase deal. Brokers do not permanently represent either the buyer or the seller. They are not involved in handling products. Their function is to orga­nize negotiation meetings between two parties and facilitate a deal. Such facilitators do not provide services like financial assistance, payment collection or inspection. Their relations with buyers and sellers are limited to a particular transaction. For the broker’s services, both the parties have to pay the brokerage fee. Generally, services of brokers are quite common in stock markets, scrape selling/ purchasing and organizing auctions, and so on.

8. Dealer/Stockist

Dealers carry stocks of the company’s products on a consignment sales basis. The stocks are trans­ferred (along with the time frame to sale) to the dealer/stockist. The payment for the goods has to be made to the manufacturer at the end of the agreed credit period. Dealers/stockists have a full-fledged marketing set-up with backup facilities of warehousing. When the manufacturer realizes the payment of the inventory from dealers/stockists on expiry of the stipulated credit period, the transaction is put down in the company’s account books. Exclusive dealers do not deal in products of competitors.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.