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Mercantile Agents, Merchant Middlemen | Channels of Distribution | Commerce - Middleman | 11th Commerce : Channels of Distribution

Chapter: 11th Commerce : Channels of Distribution

Middleman

The 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.

Middleman

The 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. The various intermediaries can be broadly classified into two main categories.

1.        Mercantile Agents

2.        Merchant Middlemen

 

1. 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. He is known as mercantile agent. He is not given ownership title of the goods. He is paid commission on his turnover.

 

Kinds of Mercantile Agents or Agent Middlemen

 

1.        Brokers

2.        Factors

3.        Commission Agents

4.        Del-credere Agents

5.        Auctioneers

6.        Warehouse keepers.

 

1. Brokers

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. The principal businessman does not pass on either possession of goods or the ownership of goods to the broker. The broker is not personally liable for the contracts concluded.

Clothing, furniture, food, and commodities such as timber and steel are often sold by brokers. They are assigned to different geographical territories by the producers with whom they work as they have excellent industry contacts .The most common form of agent and broker encountered by the consumers are functioning in real estate sector. A real estate agent acts for both the buyer and the seller.

 

2. Factors

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. A factor sells goods in his own name without revealing the name of his principal. He may even sell them on credit and other usual terms. He is entitled to receive payment for the goods sold and he gives valid receipts. He is liable for his action. He can sue or be sued for his contracts. He has a right of lien on goods in his possession for his unpaid charges.

 

3. 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. All risks connected with his transactions are borne by the principal. His functions are more varied than a broker and he takes decision over the prices and terms of the sale. He has expert knowledge of the goods and trends in the market. He takes possession of the goods without title over them and sells in his own name.

 

4. Del-credere Agents

The agent who guarantees to the principal the collection of cash from credit sales is called del-credere agent’. If they do not pay, the agent would bear the loss himself. He is given an additional commission known as del-credere  commission  for  bearing the risk. He carefully selects the buyers to whom credit can be extended based on their honesty and reliability.

 

5. Auctioneers

Auctioneers are agents who sell goods by auctiononbehalf of their principals. Auction sale is made through a notification to the public. The notice clearly mentions the date, time, place and details of goods which will be widely published through newspapers, posters, leaflets and announcements etc., Auction sale may be “WITH RESERVE” and “WTIHOUT RESERVE”. In case of auction “WITH RESERVE” no sale can take place below the minimum price fixed by the seller, which is known as “Reserve Price”. In case of auction “WITHOUT RESERVE” the auctioneer is bound to sell the product to the highest bidder. The price for which the bid is accepted is called “knocked down price”. Striking a hammer on the desk indicates the acceptance of a bid by auctioneer. After the highest bid is accepted, the auctioneer becomes the agent for both the seller and the buyer. For his services, the auctioneer is entitled to receive a commission, which is a certain percentage of the sale proceeds.

 

6. Warehouse–keeper

A Warehouse keeper accepts goods for the purpose of storage in his warehouse. He should exercise reasonable care and diligence in the storage of goods. He is entitled to payment for his services. He will have lien on the goods in case the payments for his services remain unpaid. The warehouse keeper delivers to the owner of the goods a receipt known as warehouse keeper’s receipt or certificate. It is an acknowledgement issued by warehouse keeper for the receipt of goods by him for the purpose of storage. It is not a document of title to goods. He may issue a ‘Warehouse warrant’, which is a document of title to goods


 


2. Merchant Middlemen

 

Merchant Middlemen are the intermediaries who buy and sell the goods in their own name, and in return earn a profit out of it. They take ownership as well as possession of the goods they sell. They operate in their own name and bear all the risks. Merchant middleman can be further sub- divided into:

1. Wholesaler,

2. Retailer

 

1. Merchant Wholesalers: Merchant wholesalers are wholesalers who take title to the goods. They are also sometimes referred to as distributors, dealers, and jobbers. This category includes both full- service wholesalers and limited-service wholesalers. Full-service wholesalers performabroadrangeofservicesfortheir customers, such as stocking inventories, operating warehouses, supplying credit to buyers, employing salespeople to assist customers, and delivering goods to customers.

a. Limited- Service Wholesalers offer fewer services to their customers but lower prices. They might not offer delivery services, extend their customers’ credit, or have sales forces that actively call sellers. Small retailers often buy from cash-and-carry wholesalers to keep their prices as low as big retailers that get large discounts because of the huge volumes of goods they buy.

b. Drop Shippers are another type of limited-service wholesaler. Although drop shippers take title to the goods, they don’t actually take possession of them or handle them. They deal with goods that are large or bulky. Instead, they earn a commission by finding sellers and passing their orders over to the producers, who then ship them directly to the sellers. Mail-order wholesalers sell their products using catalogs instead of sales forces and then ship the products over to buyers.

Truck jobbers (or truck wholesalers) actually store products, which are often highly perishable (e.g., fresh fish), on their trucks. The trucks make the rounds to customers, who inspect and  select the products they want straight off the trucks.

Rack Jobbers sell specialty products, such as books, hosiery, and magazines that they display on their own racks in stores. Rack jobbers retain the title to the goods while the merchandise remain physically in the stores for sale. Periodically, they take count of what’s been sold off their racks and then bill the stores for those items.


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