A group of small grocery shops 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 shops obtain better profit margins. Which of the following types of vertical marketing system can be observed here?

Question

Quizplus · Accepted Answer

In a contractual vertical marketing system, independent firms at different levels of production and distribution work together through contracts to obtain better economies of scale and a larger market impact. In this scenario, the group of small grocery shops are forming a contract with each other to buy products directly from manufacturers, which results in bulk purchases and better profit margins. Therefore, the best choice is A) contractual.

A Group of Small Grocery Shops Forms a New Business