Question

Long answer type questions.

What is the chain distribution? Explain the need of the middlemen in the market.

Answer 1

Chain of distribution or channels of distribution refers to the individuals, institutions and agents who facilitate the process of distribution.
Middlemen play a very important role in the market. As the potential consumers of a product are spread over a larger geographical area, it becomes difficult for producers or manufacturers to directly contact customers for the sale of their products. Here, middlemen play an important role. They facilitate the transfer of goods from the place of production to the place where they are consumed. For example, for a manufacturer of sugar in Punjab, it would be difficult to contact the customers in other parts of the country. To ease the process, it would sell its product to wholesalers who in turn would sell it to the retailers. The retailers then finally sell the product to the customers. In addition, the middlemen also reduce the efforts of the consumers by offering various goods and services at a convenient single location. For example, at a retail store a customer can get a wide variety of goods. Besides this, middlemen perform the function of setting a deal that can satisfy producers and consumers. They negotiate price, quality, quantity, etc., for efficient transfer of ownership to satisfy the needs of both parties.Thus, channels of distribution or middlemen play an eminent role as they facilitate the exchange or transfer of goods and services from the producer to the consumer.