26/05/2024

The CTO

The Best Chief Technology Officer

Distributive Trade IV – Role, Importance and Situations When Middlemen Should Be By-Passed

Distributive Trade IV – Role, Importance and Situations When Middlemen Should Be By-Passed

The middlemen are the wholesalers and retailers who specialize in performing activities relating to the purchase and sale of goods in the process of their flow from manufacturer to final consumers or buyers. They are situated in the marketing channel at points between the manufacturer and final consumers. The middle men have continued to wax stronger in spite of all strong arguments for their elimination, and not just only in business but also in sports. There are lots of agents attached to athletes and in most cases, their say matter a lot. So, the middlemen continue to survive because the functions they perform to both the producer and ultimately to customers cannot be performed by either the manufacturer or the consumers. Therefore, it is quite obvious that they would continue to flourish.

Disadvantages of elimination of middlemen

A school of thought supports the total elimination of the middlemen, I.e, wholesaler and retailer, because of the following disadvantages associated with them.

1. Longer channel of distribution: The wholesalers and retailers make the channel of distribution of goods longer.
2. Creation of artificial scarcity: The wholesalers and retailers normally create artificial acarcity of products through hoarding.
3. Increase in prices: The middlemen also cause unnecessary price increase to the dismay of the final consumer.
4. Misinformation: The middlemen sometimes misinform the consumers.
5. Fluctuation of prices: The middlemen can also cause price fluctuation, especially when too many of them are involved in distribution of products.
6. Disguised unemployment: The presence of wholesalers could encourage large scale disguised unemployment.

Reasons or Circumstances that may warrant the by-passing of the Middlemen

Some manufacturers by-pass the wholesalers and even the retailers and sell their goods directly to the consumers. This is done for the following reasons.

1. Increase in profits: Manufacturers can increase their profit if they are able to sell their products directly to the consumers.
2. Ownerships of warehouses: Some large retailers have large warehouses and this can make the manufacturer by-pass the wholesaler.
3. Cheap products: Consumers are able to buy products at cheaper prices when the activities of both wholesalers and retailers are cut off.
4. Development of mail order system: There may be no need of middlemen in mail order system since most of the transactions are done by mail.
5. Packaging and branding done by manufacturer: Most of the packaging and branding can be done by manufactures thereby making the middlemen irrelevant.
6. Presence of technical goods: The manufacturer can sell directly to the consumers if the goods produced are highly technical and required special specification e.g, computers.
7. Perishable goods: Middlemen can be eliminated when perishable goods, eg, tomatoes, are involved because the goods can easily get spoilt.
8. Branded products: Middlemen can also be by-passed when the products are branded for easy identification by the manufacturers.
9. Involvement of expensive goods: Manufacturers also prefer to sell expensive goods directly to the consumers because they normally have low volume of sales.
10. Small scale production; The manufacturers will prefer to sell directly to the consumers when the scale of production of the goods is very small.

Whether there a producer can stand without the middlemen or not, it is still a simple fact that a business will not flourish to its maximum best without them. Imagine a business mugul having several cargoes of goods and then you tell him, he doesn’t need middlemen? He may be tempted to shoot you. Middle men are very essential and key to distributive trade (especially in large business enterprises), hence cannot be eliminated.