Channels. In a market as large and diversified as that of the United States, competitive initiative has produced a variety of combinations of marketing establishments involved in the performance of the functions. These combinations are called "channels" for the flows of various elements. Some handle the flow of products, others the flows of title, information, payments, service, and the like.
The circumstances of the market -- of the buyer, of the seller, and of the product -- prescribe the functions which must be performed. Differences in market situations result in a variety of channels functioning side by side, even in the same line or trade. Dissimilar channels are also found serving in identical market situations, as a result of differences in competitive strategy and efficiency.
Wholesaling components of vertical channels include both wholesale middlemen and other wholesale establishments. They range from those establishments performing a minimum of functions (such as brokers and drop shippers) through those middlemen performing a wide range of functions (such as the selling agent and the regular wholesaler) to producers' own distributive outlets, with or without stocks.
The regular wholesaler represents a full combination of marketing functions; other establishments represent a lesser combination, and therefore a relegation of residual functions to other buyers and sellers in the channel.
In the channels for manufactured products, the following are the principal establishments and their functions:
I. LIMITED FUNCTION MIDDLEMEN
a) Not taking title.
1) Brokers. One of the most highly specialized independent middlemen is the broker, whose almost sole function is representation of buyers and sellers in negotiations. He does not take title, handle goods, render financial assistance, or determine the sale price. He is engaged either by buyers or sellers on a temporary basis and is paid a commission for his service. He is most useful in the sale of highly standardized goods, particularly of a seasonal nature, and in negotiating between widely scattered buyers and sellers.
2) Commission Merchants. Commission merchants also do not take title, but, in addition to the negotiatory functions of the broker, they may handle, or temporarily store commodities, and on occasion render financial assistance to buyers. They serve mainly in distribution of grocery specialities, and in the wholesale marketing of dry goods.
b) Taking title.
1) Drop Shippers. Buying, selling, and financing of marketing are the principal functions of drop shippers, who do not handle physically the commodities they sell. They deal primarily in the distribution of bulky products bought in large quantities.
2) Cash and Carry Wholesalers. Buying, selling, and storing are the main functions of cash and carry wholesalers, who omit delivery and marketing financing.
3) Wagon Distributors. Simultaneous sale and delivery are the chief functions of the wagon distributor, who omits storage and financing in the limited line of specialty items which he carries.
II. FULL FUNCTION ESTABLISHMENTS
a) Not taking title.
1) Manufacturers' Representatives. Manufacturers' representatives are, with selling agents, one of the two types of functional middlemen who maintain continuous contractual relations with producers whom they represent. They sell, handle products, and provide market information, but they do not buy, render financial assistance, select the market in which they sell, or determine the selling price. They serve the principal in the manner and place of his determination. This middleman is employed by producers needing economical sales assistance in selling a narrow line of products in sparce, scattered, distant, or new markets.
2) Selling Agents. Selling agents are independent, multiple-line establishments substituting for a manufacturer's own sales organization. They may perform all functions except buying. Handling the producers's entire output, they sell, store, finance, gather market information, determine price and territory. Combining the product with non-competing lines of other producers, particularly in the field of textiles but also in other lines, they serve manufacturers who are least able or willing to perform any of the marketing functions themselves.
b) Taking title.
1) Regular Wholesalers. Independent merchant wholesalers perform in some channels the dual processes of assembly and disposition. They are most useful in distributing products which, for efficiency and economy, must be gathered from many sources and distributed to many outlets end buyers. They take title, buy, sell, store, break bulk, deliver, and both gather and disseminate market information. When handling manufactured goods intended for the household consumer market, this middleman is called a wholesaler; when handling products for the industrial or institutional market, he is known as an industrial distributor. Regular wholesalers provide economical distribution for a great number of related products.
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