Exclusive Distribution takes place when suppliers enter into
agreements with one (or very few) retailer(s) which will be the only company
in the specified geographic areas to carry certain brands and/or product lines.
Often this strategy is chosen for branding reasons.
Benefits of Exclusive Distribution. Advantages.
CONTROL: Since the exclusive distributor is dependent on the firm, the firm has a lot of control over it.
FOCUS: Exclusive distribution helps to keepthings simple for the firm. It need not worry of losing its distributor to the competitor, because it has a strong alliance. Hence it can focus on winning over the competition rather than on its distributors.
AVAILABILITY: Exclusive distributors are able to stock a lot of inventory. As a result, products are quickly available to retailers and wholesalers.
FINANCIAL: The exclusive distributor is expected to have good cash in hand and to carry substantial inventory. As a result, the inventory risk is mainly on the distributor and the firmss finances are safe.
MARKET PENETRATION: This becomes easier for the firm, because it does not need to cover its own back and does not need to spend resources on finding, convincing and maintaining the distribution channel. It is able to focus on building the brand and doing promotional activities so that its penetration in the market becomes much better.
LOCALIZATION: If the firm is new in a foreign market, is it unfamiliar with local customs, consumer preferences, laws, etc. An agreement with a local exclusive distributor can be very helpful in this situation.
Drawbacks of Exclusive Distribution. Disdvantages.
DEPENDENCE: Obviously a dependency is created on the exclusive distributor. But that dependence is often two-way.
TRUST: Due to mentioned dependency, the exclusive distributor better be trustworthy. Otherwise, he might use the provided marketing budgets for other uses.
STRATEGIC RISK: Due to mentioned dependency, if there is a severe conflict with an exclusive distributor, the firm might lose the entire market and due to the excellent relations of the exclusive distibutor in the market it could be difficult to switch to another distributor.
Distribution ("Placement") is one of the 4 Ps of the Marketing Mix.
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