Types of Wholesale Intermediaries

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  • 0:06 Wholesale…
  • 1:02 Merchant Intermediaries
  • 4:32 Functional Intermediaries
  • 5:19 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
One of the challenges facing many manufacturers of consumer products is getting products in front of consumers. In this lesson, you'll learn about types of wholesale intermediaries and the roles they play in the product distribution process.

Wholesale Intermediaries Defined

Terry is the founder and president of a company that makes a computer tablet. Since he's just started his company, one of his biggest challenges is getting his product distributed and in front of as many potential customers as possible. Instead of trying to distribute his tablets to every possible retailer that will sell it, he opts to use wholesale intermediaries to help him with distribution and related activities. Wholesale intermediaries are businesses that distribute products or services from producers to retail intermediaries, who then sell the products to individual consumers.

You can think of the intermediary as one of the middlemen between a producer and a consumer. There are two general types of wholesale intermediaries: merchant intermediaries and functional intermediaries. Let's look at what they do in a bit more detail.

Merchant Intermediaries

Terry can use a merchant intermediary. These wholesale intermediaries buy and take legal title to products and turn around and sell them to retailers or other wholesalers. Keep in mind that wholesalers may operate not only domestically but internationally as well. In other words, a wholesaler may be a way for Terry to take his product global. You can generally divide merchant intermediaries into full-service wholesalers and limited service merchant wholesalers; both of whom take title of goods, meaning they legally own and have responsibility over them.

Full-service wholesalers not only buy and take title to products, they also offer a wide range of services. For example, if Terry utilizes full service wholesalers, they may help him cover his entire market, develop sales contracts, advertise, sell and hold inventories. They may also provide credit and customer support services. Let's look at some examples.

  • General merchandise wholesalers buy and sell a large variety of products that you might find in a Target or a Wal-Mart or a Sears.
  • A limited line wholesaler buys and sells a more limited line of products compared to general merchandise wholesalers. For example, they may specialize in distributing only food, clothing, or electronics.
  • Specialty line wholesalers offer the narrowest product diversity. For example, a specialty line wholesaler may offer organic dairy and meat products instead of a complete line of groceries. Think local food co-op versus the aforementioned Target.
  • Rack jobbers are specialty line wholesalers that own their own display racks, which they maintain. They also take back any unused product. You may see racks of CDs or bins of DVDs at a grocery or convenience store; they're probably maintained by rack jobbers.

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