The Advantages of Eliminating the Middleman

The term "middleman" describes an intermediary between a producer and an end customer. In a typical distribution channel, the middleman is the wholesaler or the retailer. Manufacturers would eliminate the middleman by selling products directly to retail stores or consumers. Wholesalers can do the same by skipping retailers and selling directly to consumers. This strategy has some advantages over a straightforward distribution process.

The primary motive to eliminate your traditional buyer and sell further up the food chain is to save money. Manufacturers today sell directly to consumers thanks to Internet expansion. Rather than paying sales representatives to promote products to resellers, companies can promote products on their own websites, take orders and send goods directly to the final customer.

Eliminating the middleman usually creates a win-win for the seller and buyer from a money perspective. Each step in a traditional distribution process involves a trade buyer adding a markup to his costs. This ultimately makes the final customer's price higher because he is paying for the original product costs, the costs of each buyer's acquisition as well as the profit expected by the retailer. By getting rid of the middleman's markups, you can offer the customer a lower price while getting higher gross profits for yourself.

Skipping steps in the distribution channel reduces the amount of logistics and transportation required in the movement of goods from manufacturer to consumer. This increases efficiency significantly. Manufacturers, for instance, can skip wholesalers and more quickly replenish retailers with stock. Additionally, companies can offer products and websites and quickly ship them to consumers following the purchase. Response time on customized orders also has become more efficient over time as companies have eliminated steps in the distribution process. This increases customer satisfaction and revenue.

An indirect benefit of eliminating the middleman, which some companies promote actively, is better environmental preservation. By minimizing the number of trucks and travel time moving products from one step to the next, you reduce the pollutants in the air. Additionally, local farmers have taken opportunities to market fresh produce to local buyers to improve freshness and minimize waste from delays in moving perishable foods.