Mar 09
24
For most part the manufacturing function is divorced from that retailing. There are few important examples of such vertical integration (that is, where a manufacturer runs or controls other links in the supply chain, either integrating “upwards” towards his raw materials or integrating “downwards” towards the retail outlets) but in most instances, like a famous manufacturing chemist or an equally famous catering firm, the retail outlets are either not primary outlets for the firm`s own manufactured products or, in the other case, serve as retailers only incidentally, the main retail distribution of their products being through other retails.
One can say, therefore, that vertical integration of this kind is less influential than one might suppose. For the most part, the pattern is for the retailer, or retail chain, to buy their stock from manufacturers direct, or from wholesale distributors either acting merchants in their own right or as manufacturer`s agents.
In this situation, with the retailer able to act as a freelance merchant (that is buying on his own account and holding stock at his own risk) the manufacturer is led to try to arrange matters so that the retailer is virtually forced to stock his product. He does this by establishing a strong brand, that is, persuading the public to demand that product in the shop. Further than this, the manufacturer, by means of mass communications, establishes a brand loyalty as a direct relationship between the consumer and himself -with the result that the retailer initiative in the matter is reduced to the minimum.
