Exclusive distribution

Exclusive distribution
See also

Exclusive distribution is the most restrictive form of market coverage that covers only one or few dealers in a given area. Since purchasers may need to look or make a trip widely to purchase the item, exclusive distribution is normally restricted to consumer specialty goods, major industrial equipment and a few shopping goods. It is also used for expensive and high-quality products such as luxury cars (Porsche, BMW). Exclusive distribution is located in a relatively large geographical area, where one service point is used for service[1][2].

Exclusive Distribution Contracts

In exclusive distribution contracts, the provider embraces to supply the items just to one distributor, by rejecting of other potential merchants, in a predetermined territory (territorial exclusivity) or to a certain group of clients (exclusive customer allocation). This provides the merchant with assurance against intra-brand rivalry (i. e. from results of the same brand expedited to the market by different distributors). The degree of this insurance relies upon the agreement. Examples of exclusive distribution understandings previously showed up in the motor industry. In this way, these agreements have become normal in for all intents and purposes all branches of the wholesale and retail sector (rural hardware, electrical machines, furniture, beauty products and computer equipment)[3].

Intensity of Distribution Levels

There are three types of distribution levels[4]:

  • Intensive – number of intermediaries in market - many; the goal is to achieve mass sales, popular among health and beauty products and everyday items that must be available everywhere; examples: Pepsi-Cola, Frito-Lay potato chips, Huggies diapers.
  • Selective – number of intermediaries in market - several; the goal is to work intimately with selected intermediaries who meet certain criteria, commonly utilized for shopping products and some specialty goods; examples: Donna Karan clothing, Burton snowboards, Aveda aromatherapy products.
  • Exclusive – number of intermediaries in market - one; the goal is to work with a single intermediary for items that require exceptional assets or situating, normally utilized for specialty merchandise and major modern gear; examples: BMW cars, Rolex watches.

Example of exclusive distribution

“The goods that fall in the speciality category are usually distributed using exclusive formats. For instance, automobiles, expensive watches, appliances, and designer apparels are often distributed using exclusive distribution. In the context of service distribution, when services are distributed through franchise route, they follow exclusive distribution arrangements. For instance, McDonald's franchisees are given exclusive rights to offer its services in a geographical area. The same route is also followed by service firms like NIIT and Vandana Luthra's Beauty Clinics[5].”

Footnotes

  1. W. M. Pride, O. C. Ferrell (2010), p. 401
  2. Ch. W. Lamb, J. F. Hair, C. McDaniel (2011), p. 404
  3. M. W. Hesselink, J. W. Rutgers, O. B. Diaz, M. Scotton, M. Veldman (2006), p. 260
  4. Ch. W. Lamb, J. F. Hair, C. McDaniel (2011), p. 403-404
  5. H. V. Verma (2007), p. 81

References

Author: Monika Wójcik