What is the Definition of Exclusive Distribution?
“Exclusive Distribution is the one where in a manufacturer or supplier authorizes one distributor to carry out the distribution work within a definite region.”
“When the firm distributes its brand through just one or two major outlets in the market, who exclusively deal in it and not all competing brands, it is said that the firm is using an exclusive distribution strategy.”
What is the Meaning of Exclusive Distribution?
Exclusive distribution is a situation where a company decides to make its products available to customers through a very limited number of retailers or distributors. For an exclusive distribution, a legal agreement between the manufacturer and the distributor needs to be made which defines the all the relevant details of the distribution. In case the legality is an issue i.e., in case the agreement between the manufacturer and the distributor is not made legally,, the competitors can take great advantage of this. Thus an agreement is necessary.
This distributor becomes the sole authorized seller of the manufacturer’s specific products. Here, the manufacturer gives the sole and special rights to one distributor to sell the goods. Exclusive distribution indicated that the distribution is defined and carefully carried out by the producer through just one channel. As the distribution authority is handed on the distributor, the role of the wholesaler or the manufacturer is minimized. There are three types of distribution- Intensive, Selective and Exclusive distribution. As exclusive distribution gives the authority to a single person (distributor) for handling a particular region, this enables in running a smooth supply chain management. This helps the manufacturer in focusing on the production of the goods and commodities and simultaneously the distributor focuses on the distribution of those goods and commodities. Some brands and companies choose this channel as a strategy to sell their goods.
What is the structure of Exclusive Distribution?
A structure of exclusive distribution favors both, the manufacturer as well as the distributor. The work gets allotted to each party and thus they can perform their primary function quite effectively as they need to focus on one particular area.
What are the characteristics of Exclusive Distribution?
- Exclusive distribution encourages a smooth and balanced supply chain management.
- A legal agreement is made between the manufacturer and the distributor for the distribution.
- Exclusive authority is given to the distributor to sell off the products in a particular area or region.
- The products dealt with in this type of distribution are high end and high quality products.
- It gives complete rights to the distributor to carry out the distribution in his/her own manner.
What is the importance of Exclusive Distribution?
Exclusive distribution in business helps in having a smooth flow of production as well as distribution. Also, this strategy helps the parties to focus on their particular job and thus the management of work flows in an easy manner.
What is the example of Exclusive Distribution?
High-end companies like Rolex, Lamborghini, Mercedes, BMW, etc. use the exclusive distribution strategy. They appoint only a handful of people so that the distribution function is carried out easily by them and the manufacturers would only focus on the production part. Embracing this strategy is helpful for the high end brands, they do not need to have a showroom everywhere but the distribution is looked after by only some distributors. These brands being elite have their showrooms and distribution territories in the areas of high income earners.
What are the advantages of Exclusive Distribution?
- Exclusive distribution can be adopted as a strategy for some brands to sell their products.
- As the products traded are high end and high quality, it helps in maintaining exclusivity and brand loyalty of the products.
- Having a shorter supply chain management, manufacturer and distributor relations can be maintained well.
- Lesser risk of competitors.
- Both, the manufacturers and the distributors can focus on their particular tasks, this breeds specialisation.
- Helps in better management of production as well as distribution.
- This mode of distribution helps in having a proper control over all the production as well as distribution functions, thereby increasing efficiency.
- Exclusive distribution helps in promoting the products.
What are the disadvantages of Exclusive Distribution?
- No direct communication or trading with the customers, thus it becomes a little difficult for the manufacturer to make customer relationships.
- No diversification as the distribution channel here solely depends on the distributor.
- The distributor looks after the distribution of the products up to a specific area given to him, thus there is a very limited reach.
- There might be a lack of trust between the distributor and the manufacturer.
- There could be chances of disputes between the manufacturer and the distributor.
- It could be a problem to choose the right distributor for the job.
- Makes the manufacturer depend on the distributor for the trade process.
Who use the strategy of Exclusive Distribution?
Small scale businesses that are in the introductory phase or the companies that deal in high end products use the exclusive distribution strategy. In the case of small businesses, as they have limited resources and the company wants to become a profitable one and get returns on the investment made, they appoint a distributor to look after the distribution facility. Here, the distributor looks after a specific region allocated to him for carrying out the distribution and thereby helping the manufacturer’s business. In the case of high-end products, the distributor takes up to products f or distribution and here the exclusivity of the brand is maintained. One of the reasons a company would adopt this strategy is because they have invested a lot of capital in the business and would want to produce a large amount and to get the returns on it. Another reason for implementing this strategy is to maintain the exclusivity of the products. Businesses having high end and high quality products implement this strategy because they want to enhance their brand image and goodwill in the market. This strategy also helps in maintaining a good brand loyalty for the manufacturers.
Context and Applications
This topic is significant in the professional exams for both undergraduate and graduate courses, especially for
- Bachelor of Commerce
- Master of Commerce
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