8 DISADVANTAGES OR ARGUMENTS AGAINST MIDDLEMEN IN THE CHANNEL OF DISTRIBUTION

Middleman such as retailers, wholesalers, and agents connect producers ( or sellers) to consumers (or buyers).

Middlemen links buyers and sellers

They play an important role in the channel of distribution.

However, middlemen have the following disadvantages which are explained below:

1. Increased costs and price of goods and services: Using a middleman to distribute goods and services entails costs.

It is common knowledge that middlemen make money by purchasing items for a much lower price and reselling them for a higher price.

The consumer is ultimately responsible for paying all of this price increase brought on by middlemen.

2. Sells Sub-standard products: To increase their profit margin, some dishonest retailers may buy sub-standard goods at a lower price and then sell them to the consumer without minding the side effects.

The ultimate losers from these actions are the customers, who may get sick or even pass away after using the sub-standard goods.

3. Sells expired goods:  Middlemen such as wholesalers, and retailers are known to keep goods in their warehouses or store.

Most goods, however, have expired dates and may have even expired before they are demanded by the consumers.

However, some middlemen sell goods to unsuspecting customers despite fully knowing that they have expired.

The implication is that consumers may consume expired goods, which would be harmful to their health.

4. Hoarding: According to Wikipedia, Hoarding in economics refers to the concept of purchasing and storing a large amount of product belonging to a particular market, creating a scarcity of that product, and ultimately driving the price of that product up.

Sometimes, middlemen would keep large quantities of goods in their warehouses to create an artificial scarcity and increase the price.

The effect is excessive profit for the middlemen at the expense of price hikes to the dismay of the consumer. 

5. Longer chain of distribution: If there were no middlemen in the chain of distribution, goods would have been sold directly from the manufacturer to the consumers.

However, the presence of middlemen in the chain of distribution makes the chain of distribution longer and, therefore, not suitable for perishable goods.

6. The producer may not receive consumer feedback from middlemen: Producers must rely on the middlemen's feedback gleaned from client feedback since he does not interact with consumers directly.

However, as we have observed more often, middlemen often forget to give customer feedback to producers or chose not to do so because they feel it is unnecessary.

Without user feedback, how will producers be able to improve the quality of their products?

7. Middlemen may not relay product information to consumers: Typically, producers communicate product information to middlemen, who then communicate it to consumers.

However, we have observed some situations when middlemen may fail to give customers crucial product information.

For example, the producer may provide important product installation advice and then convey it to the middlemen, which are supposed to convey the same advice to the end-user.

The middlemen may forget to do so, thereby reducing the consumer level of product satisfaction.

8. Fails to pass on benefits to the consumers: Greedy middlemen typically refuse to pass product benefits to the consumers.

As an illustration, the manufacturers may add an extra unit of a product to the product packaging.

The retailer who sells in units would not, however, pass the extra unit to the consumers.

Rather, he will instead keep the extra unit to himself, with the possibility of potentially selling it to consumers separately.

Furthermore, middlemen typically do not provide consumers with the discounts they earn from the manufacturers.

READ ALSO: MEANING AND SCOPE OF COMMERCE

Final words

Although the arguments against middlemen are valid, it is ultimately up to the producers to decide whether or not to do away with middlemen from the chain of distribution.

Perishable commodities, for example, may justify the elimination of middlemen.

Other products, such as those connected to information and communications technology, could need middlemen for the user to install them

Therefore, the choice to do away with middlemen should be made in consideration of the nature of the goods.

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