An exclusive arrangement

Posted: November 2, 2011

Exclusive deals between brands and distributors in individual territories are common, and with good reason. Such agreements can benefit both parties; the distributor acquires every retailer who wants the product as a customer and it can set a wholesale price it is comfortable with, while the brand gets a sales team who will give its products more focus. It is also easier to establish who is selling what, allowing the brand to direct support to those who most deserve it.

I am always a little surprised when brands enter into exclusive deals with individual retailers though. There might well be sound commercial reasons to do so, for example if there is only a limited amount of stock available and one retailer is happy to buy the lot, but such deals can run the risk of alienating other stockists in the long term.

Also, retailers who are unable to sell such a product will inevitably try to turn their own customers against it. When their sales staff are asked if they have the item in stock they are far more likely to give the customer spurious reasons why they are not carrying it [“It failed our quality control tests,” I was once told in an electronics store] rather than admit they have been cut out of the supply chain. Sour grapes maybe, but who knows how many potential customers will take such responses at face value and buy an alternative, which is in stock and which the salesperson heartily endorses?

There are no obvious downsides for the retailer who has signed the exclusive deal and several upsides: it gets all the sales that are made, it doesn’t have to price-match competitors and the increased kudos that results – in the trade and with consumers – should not be underestimated either.

When the big retailers make ‘exclusive’ requests there are ways of complying with them without upsetting other customers though – an example could be to let them be the only ones selling the item in question in a particular colour. Another is to do what the makers of We-Vibe 3 have done, allowing Ann Summers to have it exclusively for a limited period.

I would be very interested to hear your thoughts on this subject, particularly with regard to We-Vibe 3 – please email with your views.