A group of small convenience stores forms a new business entity to buy products directly from manufacturers.The group buys products in bulk which are then distributed among members.This helps the stores obtain better profit margins.Which of the following types of vertical marketing system can be observed here?

Question

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In a contractual vertical marketing system, separate firms at different levels of production and distribution work together through contracts to coordinate their activities and improve their efficiency. In this case, the convenience stores have formed a new business entity that operates as a contractual system, with agreements in place to buy products directly from manufacturers and distribute them among members to improve profitability.

A Group of Small Convenience Stores Forms a New Business