TN State Board 11th Commerce Important Questions Chapter 23 Channels of Distribution
Who is a middlemen?
Hie term ‘Middlemen’ refers to all those who are in the link between the primary producer and the ultimate consumer in the exchange of goods or service.
According to evelyn Thomas “a true wholesaler is himself neither a manufacturer nor to retailer but act as a link between the two”.
According to cundiff and still “Wholesaler buys from the producer and sell merchandise to the retailers and other merchants and not to the consumer”.
According to Evelyn Thomas. “The retailer is the last of the many links in the economic chain where by the consumer’s wants are satisfied smoothly and efficiently by retailers”.
According to cundiff and still “A retailer is a merchant or occasionally an agent whose main business is selling directly to the ultimate consumers”.
Who is a broker?
A Broker is one who bargains for another and receives commission for his service. He is paid ‘brokerage’ for his services. He brings buyer and the seller to the negotiating process and arranges for finalising contracts between them.
What are the classifications of the merchant middlemen?
The merchant middlemen can be sub-divided into
The mercantile agents are:
- Commission Agents,
- Del-credere Agents,
- Warehouse keepers.
Who are the mercantile agents?
Mercantile Agents are also called functional middlemen. A businessman appoints a person to buy and sell goods on his behalf and gives him the right to borrow money on the security of goods.
What do you understand by channels of distribution?
A channel is the route through which the goods are passed on to the ultimate consumer. There are direct channels or routes of distribution without middlemen. Indirect channel consists of one or more middlemen performing different functions. Middlemen help in the flow of goods towards the lakhs or crores of consumers.
Who is a factor?
A factor is a mercantile agent to whom goods are entrusted for sale by a principal. He takes physical possession of the goods, though he does not obtain ownership of the goods.
Explain the types of mercantile agents.
(iv) Commission Agents,
(v) Warehouse keepers.
(vi) Del-credere Agents.
A Broker is one who bargains for another and receives commission for his service. He is paid ‘brokerage’ for his services.
A factor is a mercantile agent to whom goods are entrusted for sale by a principal.
(iii) Commission Agent or Consignees:
A commission agent buys and sells goods on behalf of the principal for a fixed rate of commission for all his transactions.
Explain any three characteristics of wholesalers.
The following are file characteristics of wholesalers:
- Wholesalers buy goods directly from producers or manufacturers.
- Wholesalers buy goods in large quantities and sell in relatively smaller quantities.
- Wholesalers’ sell different varieties of a particular variety of product.
What are the services .rendered by the wholesalers to the manufacturers?
Services to Producers or Manufacturers:
- Economies in Large Scale.
- Assistance in Distribution.
- Warehousing Facility.
- Forecasting of Demand.
- Publicity of Goods
What are the characteristics of retailers?
- Retailer generally involves dealing in a variety of items. A retailer makes purchases from producers or wholesalers in bulk for sale to the end consumers in small quantities.
- Retail trade is normally carried on in or near the main market area.
- Generally, retailers involve buying on credit from wholesalers and selling for cash to consumers.
- A retailer has indirect relation with the manufacturer (through wholesalers) but a direct link with the consumers.
What are the functions of Wholesalers?
(i) Collection of Goods:
Wholesaler collects the goods from manufacturers or producers in bulk.
(ii) Storage of Goods:
Wholesaler collects and stores them safely in warehouses, till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage facility.
Wholesaler sells goods to different retailers. Thus he performs the function of distribution.
Wholesalers provide financial support to producers and manufacturers by providing money in advance to them. He also sells goods to retailer on credit. Thus, at both ends wholesaler acts as a financier.
(v) Risk Taking:
Wholesaler buys finished goods from the producer and keeps them in the warehouses till the time they are sold and assumes the risk arising from price, spoilage of goods, and changes in demand.
What are functions of Retailers?
Functions of Retailers:
A retailer buys a wide variety of goods from different wholesalers after estimating customer’s demand.
A retailer maintains a ready stock of goods and displays them in the shop.
The retailer sells the goods in small quantities according to the -demand taste and preference of consumers.
(iv) Grading and Packing:
The retailer grades the goods which are not graded by manufacturers and wholesalers.
A retailer always keeps stock of goods in anticipation of demand and bears the risk of loss due to fire, theft, spoilage, price fluctuations, etc.
Retailers often carry goods from manufacturers to their retail outlets.
Explain the services rendered by wholesalers to retailers.
(i) Financial Assistance:
Wholesalers provide financial assistance to retailers by selling goods on credit. This is done by allowing credit to retailers purchasing goods from them and makes payment to them after receiving money from their customers. This helps retailers to manage their business with small amount of working capital.
(ii) Meeting the Requirements:
Due to limited capital and lack of space in his facility a retailer cannot hold large variety of products.
(iii) Introduction of New Products :
Wholesalers bring new products and their uses to the notice of retailers.
(iv) Price Stability:
Wholesalers reduce price fluctuations by adjusting supply and demand and save the retailers from loss arising from price fluctuations.
(v) Economy in Transport:
A wholesaler often delivers goods at the door steps of retailers and save their time and cost of transport.
(vi) Regular Supply:
Wholesalers keep large stock of varieties of goods and provide a regular supply of goods as per the retailer’s need.
What are the service’s rendered by retailers to wholesalers?
(i) Help in Distribution:
Retailers relieve the manufacturers and wholesalers of the burden of collecting and executing a large number of small orders from various consumers.
(ii) Market- Information:
Retailer supply valuable information to wholesalers about changes in tastes, preferences, fashion etc. of consumers.
(iii) Large Scale Operation:
The manufacturers and wholesalers are freed from the trouble of making individual sales to consumers in small quantities. This enables them to operate on, at relatively large scale and thereby fully concentrate on their other activities.
(iv) Help in Promotion:
Retailers participate in the promotional activities carried by , manufacturers and wholesalers such as short time offers, coupons, free gifts, sales contests, etc. Retailers help in promoting the sale of the products.
(v) Personal Attention:
The retailer is able to provide more personal attention to his customers than the wholesaler is, He gives special services on the spot when the articles require minor repairs.
Explain the services rendered to consumers by Retailers.
A retailer provides the following services to consumers.
(i) Regular Supply of Goods:
Retailers maintain a ready stock of various products of different manufacturers for sale to consumers.
(ii) New Products Information:
The retailers provide important information about the new arrival of products through their personal.
(iii) Credit Facilities:
Sometimes retailers provide credit facilities to their customers and enable them to increase their level of consumption.
(iv) Wide Selection:
Retailers generally keep stock of a variety of products of different manufacturers.
(v) Miscellaneous Services:
(a) Retailers provide free door delivery services to the customers,
(b) They provide after sale service to customers,
(c) They allow cash discounts on their sales.
What are the factors affecting a channel of distribution?
The factors determining the suitability of a channel for a product distribution are as follows:
(i) Product Characteristics:
Seasonal products are distributed through less layer of middlemen. Non standardized products that are made according to customer specifications may be delivered directly.
(ii) Market Characteristics:
The size of the market for the goods is a major factor while selecting the route for distribution of products.
(iii) Number of Consumers:
Large purchases made by few consumers require centralised distribution.
(iv) Middlemen factor:
Middlemen who are experienced and have produced more sales are wanted by all producers. Long channel naturally increases the cost and price of the product.
(v) Capacity of the Manufacturer:
A financially strong producer may select a high technology oriented channel which will reduce cost in the long run. Manufacturers with large volume of production may open direct branches in cities and towns where there is more sales. They can also provide more services expected by consumers.
Student should visit a nearby wholesale trade unit and watch the trading activities held there.
Rathna Fan House – T. Nagar. All kinds of fans are available here.
Student should visit a nearby two-wheeler showroom and watch which type of channel of distribution followed by them.
Manufacturer – middlemen – showroom – customers.
Student should know that there will be SOHO (small Office – Home Office) method that plays an important role.
- Small office: For. business purpose to open separate office to use business purpose.
- Home office: For business purpose our home is used as a business office purpose.
Students should recognize the importance of on-Ijne trading and develop them as per the future developments in this field.
- Importance of on-line trading and develop on-line trading.
- Fast growth of increasing the population no time to spend for shopping.
- So people to sit at home. to order the products which is necessary for their home. So on-line trading is essential for fast growth of population.
Choose the Correct Answer:
Trade middleman who acts as a link between wholesaler and customers refers to a:
Who is the first middleman in the channel of distribution?
________ buy the goods from the producer and sell it to the retailers.
________ are buyer and the seller into contact.
(b) Commission agent
(c) Selling agent
Merchant middlemen can be classified into ______ categories.
Wholesalers deal in ________ quantity of goods.
A ______ is a mercantile agent to whom goods are entrusted for sale by a principal and takes physical possession of the goods, but does not obtain ownership.
(d) commission agent
Samacheer Kalvi 11th Commerce Notes Chapter 23 Channels of Distribution
→ The manufacture producing goods on large scale select the channel through which their goods should reach the consumers. These goods are converted into cash only when the end user buy and use them. To cut the cost, to reach maximum customers and to retain all consumers and producers select one channel or combine many channels to distribute the goods.
→ Channel of distribution:
A channel is the route through which the goods are passed on to the ultimate consumer. There are direct channels or routes of distribution without middle men. Middle men help in the flow of goods towards the lakhs or crores of consumers. The products should reach all these consumers living inside the country and throughout the world.
There are industrial and consumer goods, perishable and durable goods, pin to plane different size of goods and so on. Not only the goods but also the services need distribution network.