Relation of Finance to Distribution Channels

The financial strength of a vendor has a decided influence upon his channels of distribution. Some canners of fruit and vegetables dispose of their entire output through selling agents to whom they are financially obligated. A similar reason is often advanced for the employment of selling agents in the textile trades although another marketing specialist, the factor, is often used for purely financial assistance.

Whether or not a firm shall embark upon a method of distribution involving the elimination of the wholesaler or even the retailer may hinge largely or entirely upon the extent of its financial resources. Few manufacturers, indeed, can muster the capital required for establishing their own retail stores. Many of them cannot even afford to establish a sales organization to sell directly to retailers, or to maintain the warehouses necessary to furnish prompt delivery. This is one of the important reasons for the utilization of the wholesaler in the channel of distribution. One reason for the employment of manufacturers' agents is the inability of sellers to finance their own sales force.

This problem may be viewed, with results not dissimilar, from the standpoint of the buyer. Relatively few retailers can afford to purchase their merchandise requirements directly from manufacturers. Most independent druggists and hardware merchants use wholesalers not only as a source of supply for merchandise but also as a source of capital for financing inventories through trade credit.