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A middleman is a business model that adds and captures value between the producer and the consumer. The following are common examples.WholesaleBuying from producers and selling to other sellers as opposed to consumers. For example, a wholesaler of fish and vegetables who buys from farms and fisherman and sells to grocery stores and restaurants. This adds value as it is a great deal of overhead to deal with individual farms such that it makes sense to share this cost amongst many sellers.
CooperativeA cooperative is an organization created by producers to pool their resources and increase their negotiating power. For example, a farming cooperative that sells the agricultural products of many farms to wholesalers.EcommerceSelling products and services through digital channels. Ecommerce is a middleman business model when the seller is not the producer.
ResellerReseller is a broad term for selling something you didn't produce. Parallel ImportImporting things without the permission of the producer. For example, a firm that imports a variety of European jams to Japan without reaching any distribution agreements with the manufacturers of these products.ArbitrageArbitrage is the process of capturing value by taking advantage of price differences in different markets. For example, a soap manufacturer who sells soap for $8 in US and $38 dollars in Hong Kong might attract parallel importers who take advantage of this price difference.
Trading HouseA firm that helps producers reach foreign markets. For example, a Japanese firm that handles localization of products, sales, compliance and taxes for foreign firms who want to sell into Japanese markets.RetailRetail is a middleman business model if the retailer doesn't produce what they sell. For example, a sports shop that sells snowboards from various brands.
BrokerA broker executes a transaction on behalf of another. For example, a real estate company that sells hundreds of units on behalf of a house builder.AgentAn agent represents the interests of another. This is very similar to broker except that an agent is usually an individual and a broker is usually a firm.MarketA market connects buyers and sellers and takes a cut of each transaction. For example, a market for vacation rentals that connects owners with short term renters.
A market that sells to the highest bidder.Business models that seek to reduce the number of intermediaries between the producer and consumer. For example, a farmers market where farmers can sell directly to consumers. It should be noted that it is common for middleman to participate in farmers markets.NotesIt is a common misconception that middleman add no value but are instead rent seekers. In many cases, middleman increase the availability of goods and reduce prices or costs.|
| Type | | | Definition | A business model that adds and captures value between the producer and the consumer. | | Also Known As | Intermediary | | Related Concepts | |
Business Models
This is the complete list of articles we have written about business models.
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