Exclusive Distribution is a situation that takes place when a supplier allows specific exclusivity of sales of goods and services to a particular group of consumers or territory. In return, the distributer agrees to sell goods or services of the supplier’s competitors. In exclusive distribution, very few dealers are authorized to sell specific merchandise within a particular territory. The agreement is made between the distributers and suppliers who are officially recognized while in some, competitors may create legal challenges. If any firm proves that an exclusive distribution can cause harm in the competition, it may be able to verify that the agreement is illegal.
This type of distribution is mostly associated with high end and expensive products. When a single outlet is given for an exclusive product to sell in a specific geographic area, this is known to be as an exclusive distribution. Products like electronic appliances, automobiles, lavish furniture and brands of clothing that manages to have a persistent brand loyalty are more likely to be distributed exclusively. This is considered to be true when a customer who lives in a distant place is willing to overcome any inconvenience of traveling in order to purchase the product.
Exclusive distribution is undertaken when a manufacturer insists on an aggressive selling on part of the wholesaler or retailers or if any particular distribution channel is important, exclusive distribution works to enhance the image of the product and enables firm to charge high price on such products. Many manufacturers can use multiple brands for exclusive distribution for selling products to more than one wholesaler or retailers.
When you encounter a product that you wish to purchase but seem difficult to locate that product, this represents an exclusive distribution. Exclusive distribution is favorable for products that are purchased by consumers infrequently, consumed for a longer time period or the one that requires fitting in according to the needs of the consumers. It’s inappropriate for products that are bought frequently and convenient to buy. Exclusive Distribution is often perceived as an incentive for sellers when limited target market is available for products. For instance, luxurious items like automobiles, Patek Phillips watches are only available at exclusive outlets.
The producers who use this type of distribution expects dealers to carry out a complete inventory, send personnel for transactions and service training, contribute in promotional programs and provide excellent customer services. Exclusive Distribution is appropriate for a product that is just introduced in the market but when competition becomes tough and the product goes through its life cycle, other different distribution channels become necessary to operate. A drawback with this distribution channel is when unauthorized resellers acquire and sell products that violate an agreement between a manufacturer and its exclusive authorized dealers. The manufacturer of Rolex watches has also faced with the same problem.
The exclusive distribution also reduces the marketing costs as the firms deal with small no. of dealers. The producers and dealers work closely in making decisions related to advertising, promotions, inventory carried out by retailers and prices. One good example of exclusive distribution is Apple who has deal with AT&T to provide iPhones to consumers.