Selective vs exclusive distribution practices can be confusing. Picking the right one for your business is important, but finding a distribution strategy that works is a challenge. Understanding these two methods on their own can help.
Selective distribution means you sell products through a limited number of retailers. Exclusive distribution gives the rights to sell your product to only a single retailer. According to the American Marketing Association (AMA), both are a type of product distribution strategy, but they target different market segments and retailer relationships.
In this article, we'll explore both and help you get the advice you need to find the best fit for your business.
Choosing a distribution strategy that fits your company goals is important for your business to succeed. Selective and exclusive distribution are two methods often picked by companies looking to have a little more control over their brand.
The choice between selective and exclusive distribution can impact many things, such as:
Learning about the differences between these strategies, as well as the benefits of each, can help you decide which one is right for your business.
Exclusive distribution is when a manufacturer grants a single retailer or distributor the exclusive rights to sell their products within a specific region.
The goal with this strategy is to create a sense of scarcity. If the product is only found in certain locations, demand can go up. Buyers can come to see it as something special worth going out of their way for.
Creating a sense of scarcity and exclusivity is a big part of why brands that want to tout themselves as luxury or ‘one-of-a-kind’ choose this distribution strategy.
The manufacturer can be picky about whom they select as authorized retailers and better control the customer’s experience with purchasing that product. You can also target a specific audience when distribution is limited to a single location or area.
Looking at the benefits more closely, you can see that a big part of why it works comes down to customer perception.
When you have a product image you want to protect, exclusive distribution does provide many benefits.
There are risk factors to think about as well. When choosing a single distributor, you are placing your trust in their ability to keep up a specific image. If a high-end retailer suddenly faces financial issues or isn’t seen as reliable, that impact can be passed on to your brand.
Other risk factors of exclusive distribution include:
If you can overcome these risks, exclusive distribution just might be the way to your company’s success.
Selective distribution strategy is a method in which a manufacturer chooses a limited number of retailers to carry their products.
As a manufacturer, you still keep a certain level of control over the brand. In the meantime, you’re also reaching a broader audience than what an exclusive distribution strategy would allow. It’s a good balancing point between market expansion and brand control.
As mentioned, selective distribution still gives product manufacturers a good range of control over their products. Brand perception is a big deal, so picking who gets to sell your product takes a bit of market research.
When choices work to your advantage, strong growth is possible.
Growing a brand requires some trial and error. Selective distribution gives you the freedom to expand. Keeping an eye on the brand’s performance will then allow you to further refine your marketing to a specific audience.
Depending on what your business goals are, you can aim for small boutiques that make it more exclusive, or go for mass-market, nationwide appeal. Both paths can lead to success for you and your company.
It is very important to keep a hands-on approach with selective distribution to avoid the downfalls of this particular strategy. Advantages can turn into negatives if not managed correctly.
This could lead to:
A selective approach is still an effective distribution strategy. You can reduce the risks by choosing channel members with care and setting up a management system early on.
Going with an exclusive distribution network can help you create a brand that gives customers a sense of luxury and rarity.
We'll go over when exclusive distribution is the best choice for your business, and outline the steps to successfully use this strategy. By understanding these factors and following a clear roadmap, you can harness the power of exclusive distribution to drive growth and elevate your brand.
Once you’ve gone over the advantages and disadvantages of different types of distribution, it’s time to take a closer look at your actual product. The product itself, and your company culture, have a role in which distribution and marketing strategies work best.
Exclusive distribution may be the right choice for your business if:
Choosing this strategy can lead to premium pricing and early product adoption. To succeed, you need to set up a system for retailer selection and marketing.
Rolling out your product with exclusive distribution in mind means careful planning and follow through. From the start, you should consider how you want the business to expand.
Look for a dealer with a strong track record in sales. They might already carry something similar to your product, so make sure your marketing strategies are in place. Study their customer base to make sure it matches up with your intended audience.
There should be a clear agreement outlining the responsibilities and expectations of both parties. The goal is to draft something that benefits both you and your preferred retailer. Double check with your logistics team to make sure you can meet inventory deadlines. Set standards for consistency in the quality and quantity of what gets delivered.
Regularly evaluate the success of the partnership. Your market reach with exclusive distribution is limited, so tracking product performance is critical. Be ready to make adjustments as you get a better idea of how items are selling and how customers are feeling about them.
If you’re looking for expert guidance, working with a distribution consultant can help by offering useful tips and smoothing out logistical issues.
What’s the difference between a supplier a distributor and a wholesaler? Not sure? Check out our article and discover how each could impact your business.
Deciding to work with a selective distribution approach will give you a wider market versus an exclusive approach. You can keep the ability to manage your brand control, but you need to be careful about which sales channels you select.
Take a look at specific products and situations where selective distribution is the best choice. Then, we'll examine the steps to creating a selective distribution strategy that with your goals.
Companies that want to keep a sense of exclusivity but still reach a wide market do well with selective distribution.
While there are many luxury brands that use this approach, it’s also common when products are complex enough to require specialized retailers.
For example, if you are looking for retailers for professional cameras, you would most likely try to find a place that can provide technical explanations. The more complex a product is, the more likely you are to need a sales force that can explain the benefits and features to potential buyers.
Anyone looking to distribute the following products is likely to benefit from a selective strategy:
Not only are these items complex, but they tend to target groups in niche markets. Selective distribution widens out the field of potential buyers, which is necessary when targeting a niche market. Once again, success comes down to the retailers you do end up choosing.
Building a successful selective distribution strategy involves a step-by-step process. There is going to be more to manage, so staying organized from the beginning is a must.
Whether the products are complex or not, chances are you are aiming for a niche group. Take the time to study that group’s needs, preferences, and especially their buying habits.
Look for retailers that cater to your target audience and have marketing strategies that can help you. It’s also critical that they share your brand values.
An easy way to avoid issues with retailers in the future is to set expectations early. Set standards for how your product should be displayed and promoted.
Keep a close eye on the success of your selected retailers. Just because you start with one set doesn’t mean you can’t change. Adjust as needed to match the customer base.
Poor sales performance might not be the retailer’s fault. Take the time to provide marketing materials and even training for employees charged with selling complex items.
Establish strong communication channels with your retail partners. Share updates, marketing campaigns, and other information to encourage useful feedback for improvement.
Your business is going to change as you grow. Consulting with a distribution specialist can help you plan out product distribution strategies that work best for you.
When deciding between selective vs exclusive distribution, it's necessary to look at various elements. The strategies are similar, so it really comes down to the details and company culture.
Factors to consider when deciding between the two strategies include:
Target audience: Find the time to study the preferences and expectations of your customer base.
Product type: Consider the type and expected use of the items to plan promotions.
Brand image: Plan out the kind of reputation you want to establish.
Market competition: Assess the level of competition in your industry.
Growth goals: Look at your long-term business objectives.
By answering these questions, businesses gain a better understanding of their unique needs. With those in mind, determining the most suitable distribution strategy for their products and goals is much easier.
If you’re still questioning these strategies, you may need something that provides an even wider reach. Intensive distribution for widespread mass marketing might be the strategy you’re looking for.
Please note, however, that between intensive, selective, and exclusive distribution, only the last two give you a decent measure of control over brand perception. It might be wise to take some time to establish your brand first and then go after the wider market.
Interested in the differences between direct and indirect distribution? Read our article to learn more!
You should also check that the logistics of distribution makes sense. The more places you need to deliver to, the more you are going to spend on shipping your products to distributors.
Imagine you are launching a luxury watch brand. You need to choose a region with the right demographics and available retailers. Then you have to decide whether you’re going to focus on a specific retailer or a series of related ones.
Consider the comparison between the number of a specific high-end jewelry store, Boutique A, and the number of jewelry stores in general within an average sized city. Excluding some densely populated areas, the average large city in the United States has a population between 300,000 to 600,000 people.
The high-end store, Boutique A, has a limited number of stores within a city, all of which can be reached by a single delivery truck in one day. Only having Boutique A distribute your watches is using exclusive distribution. Using selective distribution, you may have Boutique A and five other jewelry stores.
|Number of Retailers||Number of Possible Locations per Area||Average Shipping Cost*||Total Cost|
|1||3||$50 per stop||$150|
|3||9||$50 per stop||$450|
|5||15||$50 per stop||$750|
|10||30||$50 per stop||$1,500|
*Estimate varies by delivery dimension and location
While this breakdown is simplified, it does highlight that greater complexity comes with greater costs. Should you choose to expand to other cities and regions, those distribution plans will become even more complex.
The choice between selective vs exclusive distribution is tough. The decision ultimately depends on your product, target audience, brand image, and business goals. As you navigate the complexities of product distribution, partnering with an expert can make all the difference in ensuring your success.
At Product Distribution Strategy, we specialize in helping businesses like yours find the perfect distribution strategy that aligns with your objectives.
Our team of experienced consultants is ready to help you make solid decisions for your unique needs. Don't leave your success to chance; let us be your guide on this crucial journey.
To learn more about how Product Distribution Strategy can help you achieve your distribution goals, contact us today at (855) 863-7672, or schedule a personalized, 1-on-1 consultation with one of our experts!
Don't wait—take the first step toward a successful product distribution strategy by reaching out to our experts now!
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