Exclusive, selective or intensive distribution: which to choose?

Exclusive, selective or intensive distribution: how to choose

Arthur D'Achon
November 15, 2023 - 8 min reading

How do I choose the right distribution channel for my product or service? This is one of the most frequently asked questions on the subject. So, at Sidely, we've decided to answer it. There are three types of distribution: exclusive, selective and intensive. Each has its advantages and disadvantages. The choice is based on various criteria, the most important of which is generally the marketing positioning of the products.

Follow our guide to understand all the issues involved in choosing a distribution method.

Exclusive distribution

Definition

Exclusive distribution means selling only in a given territory or under a single banner.

Brands opt for this distribution method to concentrate and optimize their efforts on one channel. However, exclusive distribution can also be set up at the distributor's request. In a way, this is the cost of entry for small brands wishing to enter the retail market for the first time. Monoprix often uses this clause.

Example: Monoprix

 

Advantages of exclusive distribution

Collaboration and customer service

By limiting the number of your points of sale, you establish a quality collaboration with your retailers. In return for the exclusivity of your products, you can negotiate merchandising actions and better facing positions. This type of distribution lends itself particularly well to trade marketing, as it gives you the opportunity to work together to develop marketing strategies tailored to your target clientele.

Attendance: mutual benefit

Exclusive distribution of a product generally enables the distributor to attract consumers loyal to the supplier's brand to its point of sale, potentially generating further purchases.

And often, the situation is reciprocal: if you contract with a retailer that has exclusivity clauses on a large number of products (Monoprix comes to mind), you also benefit from frequentation linked to the specific offer that your partner has built up over time.

Brand image control 

As a manufacturer, you have the guarantee that your products are sold in a quality environment, ensuring that your brand's prestige is maintained. 

Increasing product appeal 

Limiting the distribution of your products to a particular brand or territory can give them a special appeal, linked to their "rarity". With the help of your retailers, you could try to create a unique buying experience to further enhance this feeling of exception.

The limits of exclusive distribution

Low coverage and niche markets

The limited number of points of sale means that customers have less access to your products, and therefore fewer opportunities to buy them. Access to mass retailing can therefore prove costly, because even if you make your entry, all the additional potential of this first deal is barred to you.

High risk due to lack of performance

If your exclusive distributor experiences a drop in performance, your entire sales are at risk. It's also common for your products or brand not to perform well in the exclusive chain. In this case, you need to go into the store, take your presence and price readings, and discuss them with the floor managers. Identifying the reasons for the lack of performance will enable you to negotiate a better facing or position.

Supplier prevented from selling in a specific region 

This is a fundamental clause of the exclusive distribution contract, which implies that you undertake not to sell your products directly in the area assigned to your exclusive distributor. This clause is designed to prevent competition with your exclusive distributor in a given area. Remember, however, that this limit is associated with a territory. As a result, you remain free to offer your products for sale directly to consumers - or via other distributors - in other regions.

Selective distribution

Definition

Selective distribution means offering a product or service through a limited number of outlets or chains. Retailers are selected on the basis of their location and/or the expertise of their sales staff.

For example, products that require personalized information and advice, such as tools or computers, but also those that benefit from a particular brand image, such as luxury goods.

Advantages of selective distribution

Distributor expertise

This form of distribution allows you to benefit from the skills and expertise of your distributor. The advantage of this type of distribution is that your distributors know the target customer well, can handle after-sales service, and can respond to customers' specific problems.

As a supplier, this distribution method enables you to create or preserve the brand image of your products. 

Using the location of your distributors

Selective distributors are chosen on the basis of their location. So you'll want to select distributors positioned in areas where the customers you're targeting are located first.

Reduced cost

By restricting the number of distributors, you also limit your geographical spread, which in turn reduces transport and inventory management costs.

Generating traffic for the distributor

In selective distribution, your distributors benefit from your brand's reputation, which can potentially increase their customer base. The quality of your products is reflected in the image of your points of sale, encouraging word-of-mouth and thus increasing your partners' traffic and sales. Use this argument to obtain the commercial benefits you're aiming for in return!

Limits of selective distribution

Complex legal set-up

Selective distribution makes it necessary to create a set of specifications justifying this mode of distribution. Indeed, certain practices, such as a fixed selling price, may be prohibited by antitrust regulations. Your choice of distributors must therefore be based on a list of objective criteria.

Sales staff training

Even if your distributor has its own sales force, you'll often need to support them to ensure that the information and after-sales service they offer consumers is comprehensive and effective.

Low market coverage

By limiting the number of distributors and the areas covered, you inevitably cut yourself off from part of the market. As a result, a substantial communications budget may be needed, with targeted marketing campaigns to create need or desire among your target clientele.

Intensive distribution

Definition

Intensive distribution enables a brand to offer a product or service in as many points of sale as possible. This type of distribution is often used for fast-moving consumer goods, as it maximizes their presence in points of sale. This is the supermarket distribution model.

Examples: consumer products such as Bic, Mars, Herta etc.

Benefits of intensive distribution

Easy product access

By opting for intensive distribution, you make it easier for your customers to find your products, since they can be everywhere. This means your product can be seen by as many consumers as possible, maximizing purchasing opportunities. It also makes it easier to keep track of product availability. 

Low transport and storage costs

Fast-moving consumer goods (FMCG) are generally manufactured in large quantities, which reduces their unit manufacturing costs. By the same token, transport and storage costs per unit are reduced, as the quantities to be shipped and stored are greater.

Finally, good management of deliveries and stocks - correlated with orders received - helps optimize logistics and therefore reduce costs.

Consumer loyalty

With intensive distribution, consumers develop buying habits based on product availability and ease of access. What's more, they become more familiar with your product thanks to the increased visibility of your brand.

Increased product visibility

The more shoppers are exposed to your product, the more likely they are to buy it. The high visibility of your product, its systematic availability, and the intensity of your advertising campaigns all help to imprint your product on the consumer's memory, arouse their desire, encourage impulse buying and therefore... increase your sales.

Global market coverage 

Intensive distribution aims to offer your products in as many points of sale as possible, over a wide geographical area. This type of distribution is justified by the reputation and massive adoption of your brand or products by consumers with varied profiles.

 

The limits of intensive distribution

Low unit margins

Intensive distribution is commonly used for everyday consumer goods, which are subject to competition from similar products. This means you need to reduce your margins in order to remain competitive.

What's more, distributors benefit from increased bargaining power, which often enables them to obtain better prices, thanks to the large volumes of products they are able to sell.

High distribution costs 

At the same time, stock management becomes more complicated as you have to meet the massive demand for your products. Warehousing and logistics entail additional costs linked to the number and variety of partner outlets.

No connection with the end customer

By multiplying the number of points of sale and distribution intermediaries, it is more complicated for the supplier to have control over the way its products are presented to end customers. As a result, the consumer's shopping experience can vary considerably from one store to another.

More complex distributor management

Controlling the actions of distributors becomes more complicated as they multiply. Geographical and cultural differences may require specific approaches.

Price pressure and marketing costs

When competition increases, distributors tend to lower their selling prices to remain competitive. And to improve the visibility of your products, you'll need to boost your promotional and merchandising activities, which will put a strain on your promotional budget. The overall profitability of your operations could also suffer...

Brand control more difficult

In intensive distribution, maintaining the quality of product layout and presentation in-store is complicated. You often lose the ability to control in-store customer service.

Choose the right distribution method for your product

If you offer luxury products, generally with low production volumes but high margins, you'll tend to opt for exclusive distribution. 

-> Monop'Beauty allows Monoprix to offer its own products as well as brands for which the retailer has exclusive rights;

-> La Maison du Caviar has also made this choice, marketing its products in its boutiques (both physical and virtual) as well as developing partnerships with Michelin-starred restaurants.

If you supply a specific product that requires specific knowledge to bring to market, you can choose to market your products through selective distribution.

-> The LVMH group distributes its products via the Sephora brand, which is fully aligned with the prestige image of the French luxury giant; 

-> Regional products are sometimes found mainly in stores located in the areas where they are consumed.

Finally, intensive distribution is particularly well-suited to the marketing of consumer goods, as these are intended to be sold to the largest possible number of people.

-> So giants like Nestlé and Coca-Cola distribute their products to as many points of sale as possible, including supermarkets, petrol stations, online stores, cinemas, vending machines and grocery stores... The strategy of these companies is to be able to offer their products wherever consumers may want them.

Comparison chart to help you choose your distribution method

The distribution method must therefore be based on a number of criteria, a (non-exhaustive) list of which is given below.

Distribution mode Exclusive distribution Selective distribution Intensive distribution
Geographical area Specific zone / Very limited points of sale Specific zone / Limited points of sale Everywhere / Large number of outlets
Type of product Luxury products Need for information / specific training Consumer goods
Price Small volume with high margin Volume with average margin High volume with low margin
Distribution budget Reduced Important Important
Contact with end customers Near Medium No
Easy collaboration with distributors Simple Relative Complicated
Image de marque Highly controlled Controlled Little controlled

Keep in mind that your brand, your products, but also your market, have their own specificities. That's why it's important to build a strategy that matches your environment.

Finally, measuring performance in the field enables you to validate your distribution choices, or to review them. Advanced reporting tools must therefore be put in place to assess the performance of your distribution channels.

The choice of distribution method is therefore crucial for brands that sell their products indirectly, as each method involves benefits and risks. To choose the right distribution method, your starting point will be the nature of your product and its positioning.

But, as we have seen in the table above, other criteria can also be taken into account, such as image management, control of product presentation or the quality of collaboration with your retailers. All these factors contribute to optimizing your distribution strategy and boosting your sales.

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