Middlemen are into two categories, namely- merchant and agent middlemen. Let us look at these, one after another.
1. Agent Middlemen
These types of middlemen do not take title to the goods they sell. They perform specialized marketing functions for their goods. They are known for the special marketing functions they perform within the channels of distribution.
These functions include (among others) they receive a commission for the functions they perform to either consumers or wholesalers and even producers. They are usually found in the sale of industrial goods. The types of agent middlemen are discussed below:
i) Selling Agents
They are usually large institutions. They have marketing facilities for the functions they perform. An agent is usually chosen to represent a manufacturer, fully/wholly, in a given target market. He/she takes control of the marketing of all the producer’s products in the market.
He/she often serves as the marketing department for the producer. He/she is not restricted by territory but renders financial assistance to producers. They are, usually, used by new producers or producers that are financially weak. They are also used when new markets are to be penetrated by manufacturers.
ii) Manufacturer’s Agents or Representatives
These are representatives that are authorized by manufacturers to sell all or some parts of their products in, clearly, defined territories.
The agents are, usually, paid a commission on the total amount sold. They are, usually, smaller in number and financially weak.
The producers decide on who handles their products, the prices to charge, and the terms of sales. Manufacturer’s agents are employed /engaged where a producer has good quality products, but wishes to enter a new market, but lacks facilities to do so.
They are also employed where a manufacturer may wish to use the experience of a particular distributor to penetrate a target market.
iii) Commissioned Merchants
These agents take physical possession of the goods; they deal in agricultural materials that need to be stored and transported from the point of production to the market.
They provide storage and transportation facilities for the goods they handle. They also negotiate the terms of trade; but they are placed on commission, usually. Although this depends on the amount received from the goods sold. They do not take title to the goods they sell.
These agents specialize in specific commodities and provide their principals with established contacts for the sale of their goods.
Their main function is to provide information on the source of supply and prospective buyers within a given field; they also negotiate the terms of trade.
Read Also: Functions of Middlemen in Marketing
Brokers negotiate sales for specialized goods and seasonal products that do not require constant distribution.
2. Merchant Middlemen
These types of middlemen own the goods they sell. They buy the goods and take possession of them.
They bear the risk involved in marketing them. Profits or losses from the sale of the goods often accrue to them. The two main ones are wholesalers and retailers.
Wholesalers are merchant middlemen that take title to the goods they sell. They operate between producers or manufacturers and retailers, other wholesalers, merchants and /or industrial institutions, and commercial users.
Wholesalers do not sell in significant amounts to ultimate consumers. They, however, sell to those who will resell the goods or use them to produce other goods.
Read Also: The Promotion Mix and Forms of Advertising
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