Chapter 2

The
Channel
Participants

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 Learning Objectives
1. Be familiar with the classification of the major participants
in marketing channels.
2. Understand why producers and manufacturers often find it
necessary to shift many of the distribution tasks to
intermediaries.
3. Identify the major types of wholesalers as reflected in the
Census of Wholesale Trade.
4. Be aware of major trends in wholesale structure, including
patterns of size and concentration in wholesaling.
5. Recognize and explain the value of distribution tasks
performed by the major types of wholesalers.

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 Learning Objectives
6. Appreciate the complexity of retail structure and be familiar
with the different approaches used to classify retailers,
including the classifications used by the Census of Retail
Trade.
7. Know about major trends occurring in retail structure,
especially with regard to size and concentration in retailing.
8. Have an overview of the distribution tasks performed by
retailers.
9. Be cognizant of the retailer’s changing role in the
marketing channel.
10. Appreciate the role played by facilitating agencies in
marketing channels.
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 Contents
2.1. An overview of channel participants
2.2. Producers and Manufacturers
2.3. Intermediaries
2.4. Facilitating agencies.

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 An Overview of the Channel
Participants
 Participants who engage in these functions
(buying, selling and transferring title) are linked
together by the flows of negotiation or ownership
 Three basic divisions of the marketing channel
 (1) producers and manufacturers;
 (2) intermediaries and
 (3) final users
 Facilitating agencies do not perform negotiatory
functions, they are not members of the channel.

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 Producers and Manufacturers
 Producers and manufacturers consist of firms that are
involved in extracting, growing or making products
 The range of producing and manufacturing firms is
enormous, both in terms of the diversity of goods and
services produced and the size of the firms

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Classifications
of channel
participants

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 Producers and Manufacturers
 With respect to expertise, many producers and
manufacturers do not have nearly the level of expertise in
distribution that they have attained in production or
manufacturing.
 Even for those producing and manufacturing firms that
have or are capable of developing expertise in distribution,
the economies of scale that are necessary for efficient
production do not necessarily make for efficient
distribution.
 The cost of setting up such an organization to perform
these distribution tasks would be prohibitive.

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 Intermediaries

 Intermediaries, or middlemen, are independent businesses

that assist producers and manufacturers (and final users)
in the performance of negotiatory functions and other
distribution tasks
 Wholesale Intermediaries
1. Merchant wholesalers
2. Agents, brokers, and commission merchants
3. Manufacturers’ sales branches and offices

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Wholesalers

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 Wholesalers
The Census
of
Wholesale
Trade
further
classifies
wholesalers
by kind of
business—
of which
there are 18
different
categories.
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Structure and Trends in
Wholesaling

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Size and Concentration in
Wholesaling

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Size and Concentration in
Wholesaling

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 Retail Intermediaries
 Retailers consist of business firms engaged primarily in
selling merchandise for personal or household
consumption and rendering services incidental to the sale
of goods.

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 Alternative bases for classifying
retailers

A.By Ownership of Establishment B. By Kind of Business (Merchandise

1. Single-unit independent stores Handled)
2. Multiunit retail organizations 1. General merchandise group
a. chain stores a. department stores
b. branch stores b. dry goods, general merchandise
3. Manufacturer-owned retail outlets stores
4. Consumers’ cooperative stores c. general stores
5. Farmer-owned establishments d. variety stores
6. Company-owned stores (industrial 2. Single-line stores (e.g., grocery,
stores) apparel,
or commissaries furniture)
7. Government-operated stores (post 3. Specialty stores (e.g., meat markets,
exchanges, state liquor stores) lingerie shops, floor-covering stores)
8. Public utility company stores (for
sale
of major appliances)

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 Retail Intermediaries
 Structure Trends in Retailing: there were 1,114,637 retail
establishments in the United States producing a sales
volume of almost $3 trillion 2002
 Concentration in Retailing: large retailers (those with sales
of $10 million or more) accounted for almost 80 percent of
total retail sales, though they comprised just 4 percent of
all retail firms

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Retail Intermediaries

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 Retail Intermediaries
 Online Sales in Retailing Although we will address
Internet-based online retail channels in much greater
depth in Chapter 15 (Electronic Marketing Channels), a
few basis facts are presented here to provide some
perspective on the importance of online retail sales
channels in the overall retail structure.
 Clearly retail sales via online channels of distribution have
become a major and growing part of the channel structure
serving consumers

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Retail Intermediaries

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 Retailers’ Growing Power in
Marketing Channels
 The power and influence of retailers in marketing channels
have been growing. This trend follows three major
developments:
 (1) increase in size and buying power;
 (2) application of advanced technologies and
 (3) use of modern marketing strategies.
 Such giant retailers with their enormous buying power, large market
shares, and sophisticated managements have been referred to as
power retailers and category killers, terms that convey the dominant
positions these retailers enjoy
 As a result, they have become far more powerful members of
marketing channels in which they participate. In short, retailers are
now the gate-keepers into consumer markets
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 Facilitating Agencies
 Facilitating Agencies are business firms that assist in the
performance of distribution tasks other than buying, selling
and transferring title.
 Here are some of the more common types of facilitating
agencies:
 Transportation agencies
 Storage agencies
 Order processing agencies
 Third party logistics providers
 Advertising agencies
 Financial agencies
 Insurance companies
 Marketing research firms
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