Types of Intermediaries - Meaning, Examples

Intermediaries are persons or businesses who act as go-betweens for parties in investment transactions, commercial marketing transactions, discussions, insurance, and so on. They are frequently referred to as consultants or brokers, and they specialize in a given field.

They provide all necessary information about a product to clients while also streamlining a company's procedures. In other terms, intermediates are third-party agents or persons who act as go-betweens for two parties in a transaction.

Intermediaries Meaning

Intermediaries refer to individuals or entities that act as intermediates or middlemen between two parties (producers and consumers). They play a pivotal role in the distribution of goods and services, facilitating the exchange process.

In a simpler sense, these are like connectors. They connect the dots between the people who make products or provide services and the people who want to buy them.

Types of Marketing Intermediaries

There are four primary types of traditional intermediaries:

Brokers and Agents:

These intermediaries earn commissions by selling products and services. They're authorized to provide information about products on behalf of manufacturers but don't take ownership of the items they sell. Their major purpose is to link buyers and sellers, like real estate brokers who receive commission for successful agreements without possessing the properties they sell.

Wholesalers and Resellers:

Wholesalers purchase goods in bulk from manufacturers and then resell them to retailers or other businesses. They own the products they buy and often offer additional services like order processing and storage. Some wholesalers also handle promotional activities.

Distributors:

Manufacturers select distributors to deliver their products to wholesalers or retailers in various locations. Distributors operate across different businesses and regions, offering services such as inventory maintenance, credit extensions, and product delivery to wholesalers.

Retailers:

Retailers operate as intermediate between wholesalers and end consumers. They obtain a range of commodities from wholesalers and offer them to customers in smaller amounts from a single location.

Types of Financial Intermediaries

Underwriter:

Underwriters, often associated with companies or organizations, specialize in managing investments and engaging with potential investors across various schemes. In India, for example, insurance companies can serve as underwriters, charging fees for providing insurance services under specific terms and conditions.

Merchant Banks:

Merchant bankers are institutions that invest funds in companies in exchange for ownership shares, granting them influence in corporate matters. They act as intermediaries connecting large organizations with external markets. In India, notable examples of merchant bankers include the State Bank of India, ICICI Bank, and Punjab National Bank.

Portfolio Managers:

Portfolio managers, whether individuals, groups, or institutions, oversee investments in the stock market. They meticulously plan investments, and trade in stocks, securities, bonds, derivatives, and mutual funds to maximize returns.

Debenture Trustees:

Registered with the Securities and Exchange Board of India (SEBI), debenture trustees operate under SEBI Guidelines, 1993. They serve as vital links between debenture holders and organizations whose debentures have been purchased.

Sub Broker:

Sub-brokers, although not directly affiliated with stock exchanges, are knowledgeable individuals authorized to act on behalf of trading members. They assist both trading members and investors in matters related to securities dealings, serving as valuable intermediary in the trading process.

Stockbroker:

Stockbrokers play a pivotal role in the stock market by facilitating the trading of securities. They charge specific fees for their services and are highly effective due to their in-depth knowledge of the stock market.

Significance of Intermediaries

The significance can be summarized in the following points:

• They expand market reach for companies by making items and services more accessible to a larger audience.
• They simplify the purchase process for customers by delivering a one-stop solution, minimizing the complications of direct transactions.
• Intermediaries frequently hold experience in specialized areas, ensuring consumers obtain personalized advice and help.
• They assist control of different risks linked with transactions, giving a layer of safety to both buyers and sellers.
• They keep stakeholders updated about market developments and customer preferences, improving decision-making processes.
• They simplify transactions, reducing time for both companies and customers, enabling for more effective use of resources.
• They handle the logistics of delivering products, enabling producers to concentrate on manufacturing while reaching a bigger client base.