1. The Channel Participants
Chapter 2
The Channel Participants

2. Major Participants in the Marketing Channel
Objective 1: 2
Major Participants in the Marketing Channel
* Commercial Channel
* Target Markets

3. Why shift distribution tasks to intermediaries?
Objective 2: 2
Why shift distribution tasks to intermediaries?
Producers
&
Manufacturers
Intermediaries
• lack expertise
• lack economies of scale
(or investment to gain
economies is too large)
• spread high fixed costs
over large quantities of
diverse products
• achieve economies of
scope and economies of
scale

4. Major Types of Wholesalers
Objective 3: 2
Major Types of Wholesalers

5. Large quantities of products
Merchant Wholesalers 2
Buy,
Take title to,
Store, &
Handle
Large quantities of products
Resell to
Industrial,
commercial, or
Institutional
concerns
other
Wholesalers
Retailers

6. Agents, Brokers, & Commission Merchants2
Involved in buying & selling
while acting on behalf of clients
Commissions on
sales or purchases

7. Manufacturers’ Sales Branches & Offices2
Separated from manufacturing plants
Distribute manufacturer’s products at wholesale
Owned & operated by manufacturers
Some wholesale allied & supplementary products purchased from other manufacturers.

8. Major Trends in Wholesale Structure
Objective 4: 2
Major Trends in Wholesale Structure
42.0% Wholesale trade overall
26.5% Manufacturer’s sales branches
& offices
51.7% Merchant wholesalers
36.7% Agents, brokers, & commission
merchants

9. Trends in Size & Concentration2
Measured by:
Types of Wholesalers
Size of
wholesaler
Majority are small businesses
Sales volume
Nearly 45% of all firms have annual sales of less than $1 million
# of Employees per firm
Almost 50% of firms had fewer than 5 employees
Economic concentration in terms of % of total sales
50 largest manufacturers’ sales branches & offices garnered nearly 63% of sales for this type

10. Merchant Wholesalers’ Distribution Tasks Serve Manufacturers/Producers
Objective 5: 2
Merchant Wholesalers’ Distribution Tasks Serve Manufacturers/Producers
 Provide market coverage
 Make sales contacts
 Hold inventory
 Process orders
 Gather market information
 Offer customer support
• Operate at high levels of effectiveness and efficiency
• Average cost curves lower than those for their suppliers

11. Merchant Wholesalers’ Distribution Tasks Serve Customers (e. g
Merchant Wholesalers’ Distribution Tasks Serve Customers (e.g., retailers) 2
 Assure product availability
 Provide customer service
 Extend credit & financial
assistance (e.g., cut ICCs)
 Offer assortment convenience
 Break bulk
 Help customers with advice &
technical support

12. Agent Wholesalers’ Distribution Tasks2
Manufacturers’
Agents
or “Reps”
Market coverage
Sales contacts

13. Agent Wholesalers’ Distribution Tasks2
Selling
Agents
Market coverage
Sales contacts
Order processing
Marketing information
Product availability
Customer services

14. Agent Wholesalers’ Distribution Tasks2
Brokers
Marketing information
Market coverage
Sales contacts
Order processing
Product availability
Customer services
** “Demand - Collection”
channels are a new form
of “true” brokers – Priceline.com

15. Agent Wholesalers’ Distribution Tasks2
Commission
Merchant
Market coverage
Sales contacts
Order processing
Breaking bulk
Credit
Holding inventory
** Typical mainly in agriculture**

16. Retail Structure 2 Alternative Bases for Classifying Retailers
Objective 6:
Retail Structure 2
Alternative Bases for Classifying Retailers
By Ownership of Establishment
By Kind of Business (Merchandise Handled)
By Size of Establishment
By Degree of Vertical Integration
By Type of Relationship with other Business Organizations
By Method of Consumer Contact
By Type of Location
By Type of Service Rendered
By Legal Form of Organization
By Management Organizations or Operational Technique

17. Definition of Retailing and Retailers*2
Definition of Retailing and Retailers*
*Note this is different from your text, but will be the definition used throughout the remainder of the course.
Retailing – consists of the final activities and steps needed to place merchandise made elsewhere in the hands of the consumer or to provide services to the consumer. (Dunne, Lusch, and Carver 2009)
Retailer – any firm that sells merchandise or services to the final consumer. (Dunne, Lusch, and Carver 2009)
Requires more than 50% of one’s business to come from retailing
E.g. Costco and Sam’s are wholesalers, not a retailers

18. Retail Structure Trends
Objective 7:
Retail Structure Trends 2
Decreasing number of establishments
Increasing sales
= increase in size of retail establishments
measured by average sales volume
per store

19. Concentration in Retailing2
In 2002
4% of all retail firms
accounted for nearly 80%
of total sales!!

20. Distribution Tasks Performed by Retailers
Objective 8:
Distribution Tasks Performed by Retailers 2
The role of the retailer in the distribution channel, regardless of his size or type, is to interpret the demands of his customers and to find and stock the goods these customers want, when they want them, and in the way they want them. This adds up to having the right assortments at the time customers are ready to buy.
— Charles Y. Lazarus

21. Distribution Tasks Performed by Retailers2
Distribution Tasks Performed by Retailers
Offer manpower & physical facilities close to consumers’ residences
Provide personal assistance to help sell products
Interpret and relay consumer demand
Divide large quantities into consumer-sized lots
Offer storage
Remove risk by ordering in advance of the season

22. Retailers’ Growing Power in Marketing Channels
Objective 9: 2
Retailers’ Growing Power in Marketing Channels
Increased size & buying power
Become power retailers
&
category killers
Application of advanced
Technologies
Information technology & the Internet; threetailing
Use of modern marketing strategies
Modern techniques; relationship marketing

23. Facilitating Agencies in Marketing Channels
Objective 10: 2
Facilitating Agencies in Marketing Channels
Transportation agencies
Storage agencies
Order processing agencies
Advertising agencies
Financial agencies
Insurance companies
Marketing research firms