Retailers and Intermediaries

Intermediaries are individuals or firms that help distribute a product. They exist because they are often more efficient at distribution than manufacturers — specialists in logistics, assortment, and accessibility who provide place, time, and possession utility that manufacturers cannot achieve alone without massive capital investment.

mindmap
  root((Retailers &\nIntermediaries))
    Wholesalers
      Sell to businesses B2B
      Bulk Breaking
      Storage
      Logistics
    Brick-and-Mortar Retailers
      Department Stores The Bay
      Supermarkets Loblaws
      Specialty Stores Aldo
      Category Killers Best Buy
      Discount Stores Walmart
      Wholesale Clubs Costco
      Factory Outlets Nike Outlet
      Convenience Stores Circle K
    Nonstore Retailing
      Catalogue Marketing
      Telemarketing
      Direct Selling Avon
      Video/TV QVC
    E-Intermediaries
      Collect Information aggregators
      Deliver Products Amazon

How It Appears Per Course

ADMN 201

LO7 covers the classification of wholesalers, all major brick-and-mortar retailer types, nonstore retailing forms, and e-intermediaries. The chapter repeatedly defends the value intermediaries add — they are not “parasites” but efficiency specialists.

Wholesalers

A wholesaler is an intermediary that sells products to other businesses (retailers or other merchants) for resale to final consumers. Wholesalers do not sell to the end consumer.

What Wholesalers Do

1. Bulk Breaking: buy in massive quantities from manufacturers; sell in smaller quantities to retailers who can’t afford full factory minimums
2. Storage: hold inventory so retailers don’t have to — absorbing the cost and risk of holding stock
3. Logistics: handle transport to widely dispersed retail locations

Example: A convenience store (Circle K) cannot order one box of candy bars directly from a factory. They buy from a wholesaler who serves hundreds of stores in the region.

Retailers

A retailer is an intermediary that sells products directly to the final consumer.

Brick-and-Mortar Retailer Types

Type	Description	Example
Department Store	Organized into specialized departments (shoes, furniture, cosmetics); wide range of goods and services	The Bay
Supermarket	Large store divided by related products; stresses low prices and self-service	Loblaws, Sobeys
Specialty Store	Small store serving a specific market segment with a full product line and knowledgeable staff	Aldo Shoes, Sunglass Hut
Category Killer	Very large specialty store that dominates sales in one category at scale; often undercuts smaller competitors	Best Buy, Staples
Discount Store	Wide variety of merchandise with minimal service at low prices	Walmart
Wholesale Club	Brand-name merchandise at large discounts; annual membership fee required	Costco
Factory Outlet	Manufacturer-owned store selling last season’s stock or factory seconds	Nike Outlet
Convenience Store	Accessible locations, extended hours, speedy service — sells speed and availability	Couche-Tard, Circle K

Category Killer vs. Specialty Store: both focus on one category, but a Category Killer operates on a giant scale that can price aggressively and dominate the market — “killing” smaller independent specialty shops.

Costco nuance: Costco is called a “Wholesale Club” but sells to end consumers, making it technically a retailer. When it sells to small businesses (e.g., a restaurant buying bulk flour), it acts as a wholesaler. It is a hybrid.

Nonstore Retailing (Direct-Response)

Retailers who reach consumers without a physical storefront:

Type	Mechanism	Example
Catalogue Marketing	Customers order from mailed catalogues	Traditional Sears model
Telemarketing	Telephone calls to sell directly	Inbound toll-free lines
Direct Selling	Door-to-door or home-party selling; oldest form	Avon Products (world’s largest direct seller)
Video/TV	Viewers shop from special TV channels	QVC, Home Shopping Network

E-Intermediaries

An e-intermediary is an internet-based distribution channel member. They perform two functions:

1. Collect Information: gather data about various sellers and present it to consumers — acting as aggregators (price comparison sites, search engines for products)
2. Deliver Products: assist in the physical or digital delivery of internet purchases

Online retailing is a form of e-intermediary where a seller’s product information is connected to consumers via their computers, enabling purchase at home.

Amazon as a case study:

• When Amazon sells to you directly → online retailer
• When Amazon hosts a third-party seller and facilitates the transaction → e-intermediary (collecting info, managing delivery)
• Amazon has “severely impacted” the retail sector, contributing to the decline of physical malls

The Efficiency Argument

graph LR
    subgraph Without Intermediary
        C1[Consumer] -->|Separate trip| F1[Tomato Farm]
        C1 -->|Separate trip| F2[Beef Ranch]
        C1 -->|Separate trip| F3[Bean Farm]
    end
    subgraph With Intermediary
        C2[Consumer] -->|One trip| SM[Supermarket\n= Intermediary]
        SM --- F4[Tomato Farm]
        SM --- F5[Beef Ranch]
        SM --- F6[Bean Farm]
    end

Intermediaries reduce the total number of transactions required to connect producers with consumers. Even though each intermediary charges a margin, they achieve economies of scale in purchasing, storage, and transport that the individual producer and consumer cannot replicate alone.

The Walmart JIT Model

Walmart revolutionized distribution by integrating Just-In-Time (JIT) practices, eliminating traditional wholesale dependency:

1. A product barcode is scanned at checkout
2. The inventory system is updated instantly
3. A digital signal is sent automatically to the manufacturer (e.g., Procter & Gamble)
4. A replenishment shipment is triggered — restocking in as little as two days

Result: shelves stay full without Walmart holding massive warehouse inventory — lowering costs while maintaining availability. See PhysicalDistribution for more on JIT.

Cross-Course Connections

DistributionChannels — channel structure (direct, retail, wholesale, agent/broker) that determines which intermediaries are involved
PhysicalDistribution — the logistics operations (warehousing, transport) that intermediaries often manage
MarketingMix — distribution/place must align with product positioning

Key Points for Exam/Study

• Wholesalers = sell to businesses (B2B); Retailers = sell to final consumers (B2C)
• Department Store: wide variety in specialized departments (The Bay)
• Supermarket: food + household, low price + self-service (Loblaws)
• Specialty Store: deep product line in one segment, expert staff (Aldo)
• Category Killer: giant specialty store that dominates its category (Best Buy)
• Discount Store: low price, minimal service (Walmart)
• Wholesale Club: membership fee, bulk discounts (Costco) — hybrid wholesaler/retailer
• Factory Outlet: manufacturer-owned, last season’s stock
• Convenience Store: speed + accessibility (Circle K)
• E-intermediaries do two things: collect information OR deliver products
• Intermediaries can lower final prices — not always raise them

Open Questions

• How do traditional department stores (The Bay, Sears) compete with the rise of online retailers and category killers?
• What is the long-term sustainability of the e-intermediary model as shipping costs rise?