THE ROLE OF MIDDLEMEN IN MARKETING ACTIVITIES

 INTRODUCTION

Let us eliminate the middlemen because middlemen make all the “profits”, are cries that have been echoed by consumers, business people and legislators over the years. These complaints are most often focused

on middlemen (wholesalers and retailers). However, middlemen have been powerful figures in marketing finished products and/or services. Over the years, some manufacturers have made attempts to eliminate some of these middlemen, most especially wholesalers, from their trade channels; yet, wholesaling middlemen continue to be important and in many cases, dominate the distribution system.
Most manufacturing companies in Nigeria are small in nature and specialise in all kinds of production. They lack the capital needed to maintain a sales force large enough to contact their target customers. Even for manufacturers who have sufficient capital, the end benefits are too small to justify the necessary sales force costs. Besides, most of these target consumers are in small number groups, with limited knowledge of the market and the suppliers. Thus, middlemen bridge these gaps by selling in quantities needed and locating their wares close to these target customers. This unit is designed to appraise the role of middlemen in a marketing economy and to explain various types of middlemen.

OBJECTIVES

At the end of this unit, you should be able to:

1. explain who is a middleman 
2. list types of middlemen 
3. appraise the role of middlemen in marketing activities. 

 MAIN CONTENT

The Role of Middlemen in the Marketing of Goods

Middlemen are very important in many cases, in fact, in virtually all cases where consumers are involved. Usually, it is simple but not practical for a producer to deal directly with ultimate consumers. For example, think for a moment how inconvenient it would be if there were no retail middlemen – no drug stores, newspaper/vendors, supermarkets or fuel stations, hawkers, etc

There is an old saying in marketing that you can eliminate the middlemen, but not their functions. Wholesalers are those merchants who act as intermediaries between the primary producers, manufacturers or importers, on one side, and retailers or industrial consumers on the other. They buy goods and commodities in large quantities with a view to selling them to retailers in smaller quantities. They assemble merchandise from many sources warehouses and regroup the goods for convenient buying by end users. Thus, wholesalers make it possible for the manufacturers to sell to a large number of retailers to whom the merchandise cannot be easily sold directly from the factory. The wholesalers perform the following functions of marketing:

1. Assembling – The wholesalers collect varieties of products from different manufacturers and keep them in store for sale to the retailers at the time they need them. 
2. Dispersion – The products assembled and stocked by the wholesalers are supplied to the retailers who may be widely scattered. 
3. Warehousing – The goods purchased by the wholesalers from the manufacturers and producers have to be stocked in warehouses pending their sale to the retailers. The arrangement for such storage is the responsibility of the wholesalers. 
4. Transportation – The wholesalers have to move the goods from the various factories to their own warehouses and from there to the retailers’ stores. 
5.  Financing – The wholesalers in most cases sell goods on credit to the retailers. 

 Classes of Wholesalers

1. Merchants Wholesalers: Independently owned businesses that take title to the merchandise they handled. In different trades, they are called different names, such as Jobbers, distributors or mill supply houses. They fall into two categories: Full-service Wholesalers and Limited-service Wholesalers. 
2. Full-Service Wholesalers: Provide a full line of services: carrying stocks, maintaining a sales force, offering credit, making deliveries, and providing management assistance. There are two types of full-service wholesalers: wholesale merchants and industrial distributors. 
3. Limited-Service Wholesalers: Offer fewer services to their suppliers and customers than full-service wholesalers. Limited- service wholesalers are of several types: cash and carry wholesalers, truck wholesalers, drop shippers, rack jobbers, producers’ cooperatives, and mail-order wholesalers. It should be noted that there are several other types of wholesalers which you can research on at your convenience. 

Retailers

Retailing includes all the marketing activities carried out by the retailers, aimed to satisfy the consumers’ demands while making profits. This involves selling of goods or services directly to final consumers for their personal and business uses. A retailer is defined as a middleman who sells mainly to the ultimate consumer. He may sell to institutions but most of his sales are made to industrial or household consumers. He usually sells in small lots.
The retailer is the last link and the most important intermediary in the chain of distribution. Mass production in the present day set-up is geared to the requirements of the ultimate consumers. Retailers are directly and ultimately in touch with the ultimate consumers and thus occupy a strategic position in the whole chain of distribution. The basic features of retail trading are the purchase of goods from wholesalers and selling in small lots to consumers.

The retail shops especially in Nigeria are one of the oldest and most widely used business establishments in a country. Retail business originated through the use of peddlers engaged in house to house sales. This was followed by opening up of small retail shops usually owned by sole proprietors or small partnership firms, which are frequented by customers for obtaining their requirements. Examples of these retailers are those small business owners located at our house-step premises. These include Mama Iyabo’s Retail Store, Alhaji Bala’s Retail Store, Mr. Okoro’s Spare Parts Store, etc.

FUNCTIONS OF RETAILERS

The following are some of the functions of retailers:

1. Estimation of the probable demands of the consumers for various types of goods dealt with. Assembling of various types of goods from different wholesalers. 
2. Sale of various kinds of products to the consumers as and when needed by target consumers. Physical movement of goods from the wholesaler’s warehouses 
3. to their own stores. Storage of goods to maintain uninterrupted supply of goods to the consumers. 
4. Assumption of risk of loss of goods by fire, theft, deterioration, etc. as long as they are not disposed of to the consumers. 
5. Extension of credit to some selected regular customers. Providing information about consumer tastes and preferences to wholesalers/manufacturers. 

TYPES OF RETAILERS

There is a wide variety of retail trading establishments. They vary from hawkers and peddlers to big departmental stores. Hawkers and peddlers move from door-to-door or to residential houses to sell their goods. Pavement shops usually arrange their wares at busy street corners or busy streets as found in all the streets in Lagos, Kano, Kaduna, Aba, etc. Some traders sell their wares at weekly markets as applies to the rural markets in our communities in Nigeria. Our discussion will be limited to some selected retail stores, namely:

1. Specialty Stores: Carry a narrow product line with a deep assortment with limited line: apparel stores, sporting-goods stores, furniture stores, florists and bookstores. Specialty stores can be sub-classified by the degree of narrowness in their product line. A clothing store would be a single-line store; a men’s clothing store would be a limited-line store; and a men’s custom- shirt would be a super specialty store, etc. 
2. Department Stores: Carry several product lines – typically clothing, home furnishing, and household goods with each line operated as a separate department managed by specialist sellers or merchandisers. 
3. Supermarkets: Relatively large, low-cost, low-margin, high- volume, self-service operations designed to serve the consumer’s total needs for food, laundry, and household maintenance products. Supermarkets earn an operating profit of only about 1% on their sales and 10% on their net worth. Despite strong competition from new and innovative competitors like superstores and discount stores, supermarkets remain the most frequently shopped type of retail store, by average Nigerians, especially among the bankers, oil workers, politicians, etc. 
4. Convenience Stores: Relatively small stores that are located near residential areas, open long hours, seven days a week, and carry a limited line of high-turnover convenience products. Their long hours and their accessibility by consumers mainly for fill-in purchases make them relatively high-price operators. 
5. Catalogue-Showrooms: Sell a broad selection of high-mark-up, fast-moving, brand-name goods at discount prices. These include jewellery, power-tools, cameras, suitcases, small appliances, toys, and sporting goods. Customers order the goods through a catalogue or visit the showrooms, pick these goods as and when visiting such stores. Catalogue showrooms make their money by cutting costs and margins to provide low prices that will attract a higher volume of sales. 
6. Cooperative Stores: Consumers sometimes come together to form cooperative societies to sell goods on retail basis. The basic purpose is to eliminate middlemen and obtain their requirements at lower prices. The capital is subscribed by the members through the purchase of shares of small denominations. Cooperative stores purchase their requirements in bulk from manufacturers or wholesalers, thus enabling the cooperative stores to sell their products at lower prices than the ordinary retailers.