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The Role of Intermediaries in a Value Chain
The generic 
Value Chain 
of an organisation describes the activities 
involved in the manufacture, marketing and delivery of a product or 
service by the firm.
In order to decide whether a firm should undertake its own 
distribution direct to consumers or whether it would be more efficient and 
effective to use intermediaries, it is necessary to understand the functions 
of these intermediaries. Consumers often want only a limited quantity of 
a wide range of goods, goods that are conveniently made available under 
one roof (i.e. in a retail supermarket). Intermediaries can help overcome 
this 
discrepancy of assortment
by reducing dramatically the number of 
contacts required between suppliers and the end customers
In many cases, intermediaries can have 
superior knowledge 
of a 
target market compared to manufacturers. Retailers can therefore add 

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value to the producer’s goods by tailoring their offerings more closely to 
the specific requirements of consumers.
Intermediaries help to overcome two types of gap:
➢
A location gap
occurs due to the geographic separation of producers 
and the consumers of their goods.
➢
A time gap
takes place between when consumers want to actually 
purchase products and when manufactures produce them (e.g. 
manufacturers may prefer to produce on Monday to Friday, but 
consumers may prefer to buy at weekends). Intermediaries help to 
reconcile this gap.
Types of Intermediary
A variety of types of intermediary can participate in the value 
chain. Wholesalers and retailers take title to products, typically building 
up stocks and thereby assuming risk. Other intermediaries such as agents 
and brokers do not take title to goods. Instead they arrange exchanges 
between buyers and sellers and in return receive commissions or fees.
A number of different types of retailer may be identified:
➢
Ddepartment stores, 
e.g. Debenhams.
➢
Supermarkets
, e.g. Reliance. 
➢
Discount sheds or “category killers”, 
e.g. Toys ’R’ Us
➢
Speciality shops,
e.g. clothing (Next), music (HMV), 
➢
Convenience or “c” stores,
e.g. 7-Eleven
➢
Markets and cash and carry warehouses,
e.g. Makro.
➢
Catalogue showrooms,
e.g. Argos.
Multiples are usually defined as retailers with over ten outlets. 
They have tended to grow at the expense of independent retailers, but 
have also eroded the market share of the cooperatives. Retailers have their 
own set of strategic choices. 
Location 
is usually the most critical issue 
since it is central to attracting the right kind of customer in sufficient 
volume to make trade viable. Retailers are using increasingly sophisticated 
geo-demographic methods to determine the optimum locations for their 
outlets. Strategic decisions need to be made about what product assortment 

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to provide and market segments should be served. As East (1997) has 
pointed out, retailers spend large sums of money in attracting customers, 
but despite offering factors such as value, choice, friendly service and 
quality, the main reason cited by supermarket users for patronage is close 
location.