Exclusive Distribution: Definition, Strategy & Examples

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  • 0:05 Understanding…
  • 1:19 Who Uses This Strategy?
  • 2:24 Why Use This Strategy?
  • 3:20 Lesson Summary
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Lesson Transcript
Instructor: Kimberly Winston
The choice of how to distribute a product is an important aspect of a business' marketing strategy. Learn how businesses use exclusive distribution to market its products.

Understanding Exclusive Distribution

What is exclusive distribution? Let's look at each word. When the word exclusive is used to describe something, you immediately picture something that is expensive and not readily available to everyone. Distribution is the method a business uses to move its product from its warehouse to retailers and ultimately to the consumer. You may ask, how is distribution exclusive? Distribution is exclusive when only certain retailers are given the option of carrying a product in its store.

Exclusive distribution is an agreement between a supplier and a retailer granting the retailer exclusive rights within a specific geographical area to carry the supplier's product. Often the supplier severely limits the number of products it supplies the retailer as well.

There are many factors involved in deciding to use an exclusive distribution strategy and determining if exclusive distribution is right for the supplier's product. A supplier needs to understand:

  • What type of product they will be distributing
  • What products will their product be competing against
  • Who the consumer is and why they would buy the product
  • What retail options are available

Who Uses This Strategy?

I know what you are thinking, if suppliers limit the retailers carrying their products, as well as the products available to the retailers, then fewer products will be sold. Why would any business want to limit the number of products it sells?

One reason that a business might want to implement this strategy is if it is a small business. Many small businesses have limited resources and may not be able to produce a large amount of products. This strategy can be advantageous to a small business with an exclusive product.

Another reason that a business might want to implement this strategy is because of exclusivity. Limiting the amount of products allows that the distributor to offer things like limited editions. This is another way for a supplier to brand its product as exclusive. Businesses that carry luxury brands often utilize exclusive distribution as a method of enhancing their brand images. Other types of products that utilize exclusive distribution are automobiles, women's apparel, major appliances and furniture.

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