(a) State five functions performed by the wholesaler in the channel of distribution.
(b) Explain five factors that encourage the elimination of middlemen from the channel of distribution.
Explanation
(a) The functions performed by the wholesaler in the channel of distribution include:
(i) He engages in bulk breaking by buying in large quantities from the manufacturer and selling in bits to the retailers.
(ii) He warehouses goods.
(iii) He helps to complete the process of production by labelling, prepackaging and branding goods.
(iv) He sells on credit to retailers
(v) He finances the manufacturer by paying for goods in advance
(vi) He transports goods through his own fleet of vehicles.
(vii) The wholesaler markets the goods by advertising, demonstrating and displaying them as needed.
(viii) He liaises between the manufacturer and retailers and disseminates the views of one to the other.
(b) The factors that encourage the elimination of middlemen from the channel of distribution are:
(i) Manufacturers with good transport and communication facilities will prefer to deliver the goods themselves.
(ii) Improved credit facilities from banks and other financial houses have rendered the role of middlemen in financing the manufacturer less important.
(iii) Fragile and technical goods that require special handling need no middlemen as manufacturers prefer to deal directly with the consumers.
(iv) Goods of high unit value do not need to be entrusted to middlemen.
(v) The need by manufacturers to control the market for their goods and prevent hoarding since middlemen carry competing brands, makes the manufacturers deal directly with the consumers and thus eliminate middlemen.
(vi) Some manufacturers now choose to spend more on advertising to create awareness and hence demand their products, instead of using the middlemen.
(vii) Manufacturers may eliminate the middlemen because of the need to obtain immediate feedback from the consumers.
(ix) Manufacturers may eliminate middlemen to avoid adulteration of goods.
(x) Where there is a high demand for a product, the manufacturer may choose to eliminate middlemen to meet the demand promptly and adequately.