Intermediaries

Have you ever noticed the presence of an intermediary in your everyday life? Did you know that the grocery store you go to on most days, and the shopping malls you visit, are forms of intermediaries? Did you know that people can also act as intermediaries? Read more to find out who or what intermediaries are, what they do, and what the different kinds of intermediaries are.

Intermediaries in Marketing

Companies sometimes require external agents to help them market their products. The external agents are called intermediaries.

Marketing intermediaries act as middlemen between various stages in the distribution chain. Intermediaries make the accessibility of the products easier for customers. With the technological advancements now available, and the rise in the digital engagement of customers, intermediaries can also be seen on digital platforms. Intermediaries are part of the distribution chain, and there are four main types of intermediaries.

Types of intermediaries

There are mainly 4 types of intermediaries that act at the different stages of distribution.

Intermediaries: Agents and brokers

Agents are people that represent another person or entity. They serve as an intermediary between buyers and sellers on a permanent basis. They have the power to negotiate and are given some form of decision-making power. They are most actively present in the real estate industry.

Brokers are similar to agents in the role they play as intermediaries between buyers and sellers. However, they are not permanent representatives of a person or an entity. They are most active in the trading sector.

Both agents and brokers are paid on commission for a sale or transaction that they have mediated.

Intermediaries: Wholesalers

Wholesalers act as intermediaries between manufacturers and retailers. They buy products from manufacturers or farmers and sell them to retailers. Products are bought in huge quantities from the manufacturer, and the wholesaler distributes them to retailers. A wholesaler might buy only a specific product from manufacturers, or have a variety of products from manufacturers available in large quantities.

Wholesalers mainly focus on the Business-to-Business (B2B) market rather than the Business-to-Consumer (B2C) market.

Wholesalers can either operate in traditional cash-and-carry outlets, or warehouses, but the advancements in technology have also allowed wholesalers to move their business into the digital platform.

Intermediaries: Distributors

Similar to wholesalers, distributors are in direct contact with the manufacturer. But unlike wholesalers, they do not sell the products to a retailer, but to the end-user. They usually distribute only from a specific manufacturer, and also provide after-sales services to customers. They are either paid in commission or fees by the manufacturer.

Intermediaries: Retailers

Retailers are the types of intermediaries consumers are most familiar with and interact with the most. Shops, supermarkets, websites, etc. are examples of retail. Retailers have a wider reach. They either buy from the manufacturer or from another intermediary.

Retailers purchase fewer quantities of items compared to other intermediaries but have a wider range of products. E-commerce platforms such as Amazon, Shopify, etc. are also forms of retail.

Not all businesses have intermediaries in their distribution channels. This depends upon the industry and the operating market. For example, the steel industry usually makes use of two intermediaries in their distribution channel, namely the wholesalers and the retailers as shown in Figure 1. The cosmetic industry, however, usually only needs one intermediary between the manufacturer and the end consumer, the distributors, as shown in Figure 2.

Figure 1. Role of intermediaries in the steel industry, StudySmarter

Figure 2. Role of intermediaries in the cosmetic industry, StudySmarter

Examples of intermediaries

Let's now take a closer look at a few specific examples of intermediaries.

Intermediaries: Examples of agents

Real estate agents work with people trying to sell and buy properties. This can be seen in Figure 3. They show the property for sale to the interested buyers and negotiate prices that both parties agree upon. They are paid in commission, which is a pre-determined percentage of the transaction made through the sale. For instance, their agreed commission could be 5% of the total value of the sale (e.g. the sale of a house).

Figure 3. Role of intermediaries in the real estate industry, StudySmarter

Literary agents work as intermediaries between authors and publishers, as shown in Figure 4. Agents pitch an author’s work to the publishing company and increase the chance of the work getting published.

Figure 4. Role of intermediaries in the literature industry, StudySmarter

Intermediaries: Examples of wholesalers

Websites such as thewholesaler, mxwholesale, dkwholesale, etc. are examples of wholesaler websites in the UK.

The Booker Group, acquired by Tesco, is the largest wholesaler in the UK in terms of revenue.

The Booker Group supplies many products, including groceries, wine, beer, stationery, tobacco, and more. They stock over 200,000 products. They supply products to restaurants, retail stores, theatres, and even the prison service in England and Wales.

Intermediaries: Examples of distributors

The UK has the largest number of distributing companies in London, followed by Manchester.

Some of the largest distributors in the country include:

• John Distilleries Pvt Ltd

• Esso petroleum company Ltd

• TATA steel UK Holdings Ltd

John Distilleries is an Indian company and one of the biggest distributors in the UK. John, as the name suggests, produces distilled beverages. Its chief products include whiskey, wine, malts, and vodka products. The beverages are manufactured in India, exported to the UK, and sold by distributors to the people in the UK, making it easier for them to reach this product.

Intermediaries: Examples of retailers

Some of the biggest and most common examples of grocery retailers in the UK include:

• Tesco

• Sainsbury

• Walmart (Asda)

• Morrisons.

For instance, Tesco works with thousands of suppliers, who supply them with all kinds of different grocery products (e.g. milk, vegetables, bread, etc) which they sell in their numerous Tesco supermarkets.

Importance of intermediaries

Intermediaries of all levels make the availability of products or services for their users much easier. They make the process of offering the desired product to the right user efficient and effective, as they have information about the customers and their needs. They have direct contact with the customers and are therefore knowledgeable about what products to source and where to source them from. They base these decisions on the quality of the manufacturer and that demanded by the customers.

As intermediaries deal with smaller quantities of products but of a bigger variety, they can match the different needs of customers. They have information as to what customers are looking for, and can link them to the right supplier for a fee, making the job much quicker and easier for both parties.

What are the advantages and disadvantages of intermediary channels?

The advantages of intermediaries include the following:

• Better accessibility of products and services

• Physical distribution of goods

• Storage of supplies

• Better market coverage

• Improve buyer-seller relations

• Before-and-after sales services.

The disadvantages of intermediaries include:

• The manufacturer loses some decision making power.

• The manufacturers’ profit is reduced due to the money they have to pay the intermediaries.

• Intermediaries may be misinformed about the product, thereby misinforming the customer.

• Intermediaries may favour a competitor’s product if they offer a better fee, and as a result the manufacturer may lose their target market or market share.

As you can see, intermediaries are very important for businesses because of the various roles they play. Without intermediaries, it would be a lot more difficult for both manufacturers and customers to find the right products as quickly and easily as they can.