Vertical Marketing Systems

In history, distribution channels have been loose collections of self-governing companies, each indicating little concern for total channel performance. These conventional distribution channels have lacked powerful leadership and have been troubled by damaging conflict and weak performance. One of the biggest current channel developments has been the vertical marketing systems which have emerged to challenge conventional marketing channels. Given figure contrasts the two kinds of channel arrangements. 

A conventional distribution channel consists of one or more independent manufacture, retailers, and wholesalers. Each is a separate business looking for maximize its own profits, even at the cost of profits for the system like a whole. No channel member contains much control over the other members, and no formal means exists for resolving channel conflict and assigning roles. On the contrary, a Vertical Marketing System (VMS) consists of producer's retailers and wholesalers acting as a unified system. One channel member owns the others, has contracts with them, or wields so much strong that they has to all cooperate. The VMS can be dominated by the wholesaler, producer or retailer.