In exclusive distribution, there is an agreed contract between the manufacturer and distributor. The manufacturer decides to sell the product exclusively through a distributor. Distributors take up the task of delivering the manufactured products to the wholesalers and retailers who then deliver it to the end customers. Exclusive distribution is the distribution strategy in business plan that is chosen by companies that have a high brand value.
When a company decides to limit the number of distributors, they are entering exclusive distribution. The agreement that the distributors make with the manufacturers is that, they will not sell the products of other manufacturers. The products that they sell are exclusively the products of the manufacturer with whom they signed the contract. The manufacturer also makes an agreement that they will only sell their products to their exclusive distributor. Such an agreement made between the manufacturer and distributor makes sure that they have complete control over the product’s distribution.
The distribution channel in business plan depends on the nature of the business and companies choose a plan accordingly.
How Exclusive Distribution Works
If a company wants to establish business in an area but cannot compromise brand equity by opening showrooms everywhere in that area, then the best choice they have is to select an appropriate distributor. The distributor will be exclusive to that company and this distributor will sell the company products.
If the same company wants to start business in another area, they can select a distributor for that area. The selected distributor can be the old distributor or a new one. Companies that are concerned about brand equity will not make the choice of hiring so many distributors and entering into direct business in a region.
The area of the region covered by exclusive distributors will vary according to different factors. Within their territory, they have the sole right to distribute products of the brand they have made the agreement with.The exclusive distributors have the choice of billing the product to smaller distributors and retailers.
What Are the Advantages of Exclusive Distribution?
Better Focus on Business
Exclusive distribution means that the company has a trustworthy alliance with a distributor. They don’t have to worry about losing the distributor because of competition. The distributor is their own, and there is no away the company is going to lose the distributor. Thereby the firm can focus on their business without having to face much pressure.
The company has the distribution in control since they have their own exclusive distributor. They can then invest their time in marketing and advertising tasks.
Increased Product Availability
Exclusive distribution increases product availability. Exclusive distributors are capable to keep stock of considerably large amount of inventory. This implies that the material can easily reach retailers and wholesalers.