In product distribution, intermediaries are entities who help minimize the cost of interaction by specializing in handling a large number of activities on behalf of buyers and sellers. In order for a finished product to get to an end consumer, a business generally uses several channels of distribution.
In the production process, raw materials are transformed into forms that are useful to consumers, adding value along the way. Intermediaries including wholesalers, retailers and distributors, take care of all the little things that go into the product sales process, such as pricing, marketing, sales and distribution adding value as well.
Product Distribution Intermediaries
Product distribution intermediaries may be companies or individuals acting as wholesalers, retailers, brokers or distribution services who ultimately bring the product closer to the customer for a price. As a result of their efforts, consumers are more likely to have access to, and purchase, the product. This is the added value that these organizations and individuals provide. Manufacturers utilize these middlemen to move products from the factory to a particular location and set pricing that is within reach of customers. Advisers—another type of intermediary—influence sales by recommending products to customers, but may not sell the solution at all.
For example, a company can outsource assembly services and have a provider assemble the components of its tools, which adds value. In this example, intermediaries offer customers time savings by providing an efficient and effective method of tool assembly, particularly when demand is high. Since the product is sourced directly from the manufacturer, a retailer can also add value by handling direct customer contact.
It’s easiest to think of a distribution channel as the path that a product takes in order to go from the manufacturer to the customer. If a customer were to buy the product directly from a manufacturer, this path would be a relatively short one.
The choice of distribution channel(s) is based on various factors related to the company's product and the way it is used. Manufacturers have the option of taking their products to their markets themselves, but most involve intermediaries.
A manufacturer typically needs a few intermediates, such as specialist retailers, to sell its product effectively. To maximize efficiency and profit, smart companies develop a product distribution strategy. Optimizing distribution channels also improves the speed with which products can be distributed over a large geographical area.
Product Distribution Methods
A single-tier distribution channel design is when a vendor develops direct relationships with channel partners that sell to the end customer. A two-tier distribution model allows sellers to sell products supplied by distributors such as NewStream Enterprises, LLC. Sellers develop channel strategies to determine what types of intermediaries they can target and how they can optimize partner relationships to improve sales.
Intermediaries Add Value to Products Distributed
Intermediaries of all kinds play a significant role in distributing and promoting a product. If selling directly from the manufacturer to the consumer was the most efficient or profitable way, there would be no need for channels of distribution.
Intermediaries create a win-win situation by providing benefits to both manufacturers and consumers. Improving efficiency, allowing for a better assortment of products and routinization of transactions makes the process easier and the customer experience more positive.
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