Role of middlemen in the marketing of agricultural commodities

The starting point of this discussion is a broad review of the historical changes in the role of middlemen in the market place. An important argument is that middlemen always fulfill important marketing functions in the marketing system, and that the roles they take complement those of other market actors. The three main roles, in which middlemen actually follow different business logic and perform widely different functions, are highlighted. These roles include middleman as a trader, middleman as a distributor and middleman as a provider.
The middleman as trader
Middlemen as traders offer to their customers an assortment of products acquired from various sources (fig 2). The assortment offered to the customers by the middleman is different from what can be offered by each of the firms supplying the middleman. The middleman offers thus an own ‘product/service’ in which the various suppliers’ products are just but components. The business, like any business, depends on developing and maintaining exchange relationships with customers – and suppliers –for which it competes with others.
Middleman as a trader
The middleman trader exercises the essential entrepreneurial functions of exploring and creating market exchange opportunities and bears the risk entailed in this task. It operates in two markets- helping customers access resources needed and the holders of resources to reach the users. The middleman has an important function in the economy of the gap bridging activities in the market network. By creating a different bundle of resource elements offered to customers the middleman takes on the function “to economize” on costs of bridging the supplier-customer gap i.e. lowering transaction costs. Historically, a middleman as a trader bought and sold all types of products and carried out all the basic commercial functions. He was an exporter, wholesaler, importer, retailer, ship owner, banker and insurer. Even though a trader middleman may do a bit of product sorting and packaging, his distinctive trait is that he does not transform resources physically to any significant extent.
The middleman as distributor
The role of middlemen as distributor represents the dominating view on intermediaries in the marketing literature which takes a manufacturer’s perspective. Middlemen are considered ‘business firms that help the company find customers or close sales with them’. They hold inventories and ‘push’ the products, which are crucial marketing activities when speculation rules the game. The distributor role maintains the basic characteristic of the middleman as a trader but the emphasis shifts. In this case, the inputs are given, identified and provided through the manufacturer. The figure (fig 3) illustrating the role of the middleman as a distributor is to some extent extreme as it reflects the perspective of one manufacturer. Of course, most distributors represent more than one manufacturer.
Middleman as a distributor

The middleman is dependent on individual manufacturers for developing exchange relationships with customers, but many of the middlemen as distributors continue to fulfill the assortment function and serve several more or less differentiated manufacturers. The middleman as a distributor has been the view of the role of an intermediary for a long time.
The middleman as provider
 In this case the logic of the middleman’s business is derived from a customer/user perspective (fig 4). In this view the middleman is part of the user’s supply network, rather than a manufacturer’s channel. Using Bucklin (1965), speculation is replaced by postponement as the main business logic for the middleman and the whole market network. The “supply chain perspective” mirrors the changes in the allocation of the business functions in the overall network of market relationships. The current concern with supply chain management both in practice and theory indicates that the emergence of the middleman as a provider is not a marginal phenomenon and concerns numerous middleman businesses. Supply chain management perspective is not applicable only to the user- manufacturer but to user -tout court. This perspective of a middleman is not new-it has only been more or less obscured by the dominant paradigm of middleman as a distributor. The middleman here is considered not to be a hired link in a chain forged by a manufacturer, but rather an independent market, the focus of a large group of customers for whom he buys.
Middleman as a provider

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This module was developed by Moi University, Department of Economics and Agricultural Resource Management with support from OER Africa and Bill & Mellinda Gates Foundation