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What Distribution Is

Products have to be physically moved from where they are produced to a convenient place where consumer and industrial buyers can see and purchase them. Physical distribution is the movement of goods from producers to industrial and consumer users and involves functions such as transportation and storage.

A marketing middleman is an organization that assists in the movement of goods and services from producer to industrial and consumer users. They are called middlemen because they are organizations in the middle of a whole series of organizations that join together to help distribute goods from producer to consumer. It is easy to understand, therefore, why these organizations as a group are known as a channel of distribution.

A channel of distribution consists of marketing middlemen such as wholesalers and retailers who join together to transport and store goods in their path from producers to consumers.

Do we need middlemen? Manufacturers do not need middlemen to sell their goods to consumers and industrial markets. So why have marketing middlemen at all? The answer is that middlemen perform certain marketing functions such as transportation, storage, selling, and advertising more effectively and efficiently than could be done by most manufacturers. A simple analogy is this: you could sell your own home or buy stock directly from other people, but most people do not. Why? Because there are specialists called brokers who make the process more efficient and easier. Brokers are marketing middlemen who bring buyers and sellers together and assist in negotiating an exchange, but do not take title to the goods. Usually, the do not carry inventory, provide credit, or assume risk. The examples with which you are likely to be most familiar include insurance brokers, real estate brokers, and stockbrokers. Brokers act as intermediaries in other situations as well. Food brokers, for example, sell commodities such as wheat, corn, and potatoes.

The Value Created by Middlemen. Marketing middlemen have always been viewed by the public with some suspicion. Surveys have shown that about half the cost of the things we buy are marketing costs that are largely to pay for the work of middlemen. People reason that if we could only get rid of middlemen, we could greatly reduce the cost of everything we buy.

Businesses are not the only organizations in which a high proportion of costs are due to marketing middlemen. It also costs much to have several churches in one city when people ‘need’ only one. It is also expensive to have post offices, libraries/ health clinics, and other such nonbusiness middleman organizations. But again, the convenience and efficiency of having such facilities usually far outweigh the cost. (2319).

(Андреева Л. Л. Методические указания по развитию навыков чтения и устной речи на материале текстов по специальности для студентов ОЗО экономического факультета / Л. Л. Андреева.. – Ростов-на Дону, 2002. – с. 19-20)

 

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