The Advantages & Disadvantages of Intermediary Distribution

Written by david stewart
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Choosing the right distribution channel for your products is vital to the success of your business. Know what the implications of engaging intermediaries are and obtain a well-documented agreement before commencing business. An intermediary acts as a link between the manufacturer and the retailer. It is equipped with marketing knowledge, the ability to sense the pulse of the market and selling expertise for implementation of marketing strategies.

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Provide Logistic Support

Intermediaries are engaged as they provide logistic support, i.e., they ensure smooth and effective physical distribution of goods. They take care of sorting and storage of supplies at facilities that are close and easily accessible to the end customer. Generally, a business' bulk inventory is divided up into smaller portions and distributed among intermediaries for distribution. Intermediaries also facilitate manufacturer services and provide customer care services both before and after sales.

Provide Transactional Functions

Intermediaries can use their contacts to effectively aid market coverage. This is convenient for both the manufacturer and the end user. Intermediaries usually carry out marketing and sales activities and are also responsible for establishing and enhancing buyer and seller relations between the producer and the retailer. Intermediaries often boost sales by resorting to various persuasive techniques like attractive promotion offers and product displays. They also provide customer feedback to the producer so it can make changes, if necessary.

Burden Sharing, Cost and Time Saving

Intermediaries may share many manufacturer responsibilities such as taking care of storage, stock management, setting up sales offices in strategic locations and add-on services (and their associated costs). They also share costs incurred in promotion of products and offer financial programs such as easy payments to customers. Intermediaries operate at much lower costs than manufacturers who try to manage the entire process. Delivery time is also saved because of the expertise and experience of intermediaries.

Adversely Affect Revenue and Communication Control

Intermediaries make a profit by selling the manufacturer's products to the customers. They usually mark up the prices of the products before selling them to the customers. Had the intermediaries not been involved, the manufacturer would have got greater returns by selling the products at higher rates. As the chain of distribution becomes longer, a manufacturer sometimes loses control over the process. The intermediary may distort information and resort to exaggeration of the product's benefits to increase sales.

Products are Sidelined

A manufacturer is helpless when its intermediaries ignore its products and promote a competitor's products that earn better returns and incentives. Delays in delivery may adversely affect product importance and bring down sales figures. The success of a business is largely dependant on the cooperation, knowledge and enthusiasm of its intermediaries. The moment the intermediaries lose interest in a particular product, that product is doomed.

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