Question

Profit-seeking intermediaries widely exist in product, labor, financial and other markets. These intermediaries charge fees, resulting in higher product prices for consumers, lower compensations for workers and lower returns for depositors/investors. Why do consumers, workers and investors still need these intermediaries in the market economy, especially in a more developed market economy?

Answer 1

The importance of intermediaries to the stakeholders:

1. They provide logistic support: intermediaries provide smooth and effective distribution of goods from the seller to the buyer. They take care of the storage requirement and they sort the nearest storage facilities to the end consumers. They keep in mind the requirement of the consumer and them storage facilities close and in reach for the need of the consumers. They also provide customer care service and after sale services to the consumers.
2. Provide transactional functions: intermediaries use their contacts to effectively provide the market coverage. They help both the manufacturer and the consumer. They carry out both marketing and sales activities and provide a smooth buyer seller relation. They provide customer feed backs to the manufacturers to provide better services and make the necessary changes .
3. Boost the sales : it is possible for the company to sell its good directly to the consumer but by using intermediaries, it improves the product awareness in the market and the product is available to the larger market and consumers by them . this in turns increases the sales of the company also this decreases the cost of the company , as the intermediaries are expert and would perform these tasks at lower cost.
4. packaging and promotion: packaging is also important as a attraction for the consumers and intermediaries being the locals and more interact with the consumers are aware about the likes and dislikes of the end users.
5. sharing of cost , risk and time: they also share the manufacturers burden in terms of storage requirement, stock management and selling services. They also contribute in sharing the cost of the storage and promotion process. In a way they lower the cost of the manufacturers that would have incurred by them if not for the intermediaries.