How to Start an LLC

What is Exclusive Distribution?

Among the many strategies to improve your business, obtaining exclusive distribution rights to a product can do wonders for both the distributor and the product’s manufacturer. 

Exclusive distribution is when only one company has the right to distribute a particular product in a specific territory.

            Companies that obtain the exclusive right to distribute a product can gain several advantages.  Anyone who wants the specific product would have to go to the distributor because only the distributor has the right to sell it.  Thus, the right decreases competition for the distributor.  Further, the right might be even more valuable if the product is highly desirable and if consumers are not as interested in competing products.  For example, if Seven Eleven is the only store that may sell Coca-Cola, the store is likely to draw many more customers who specifically want Coke and not any other soda because many people prefer Coke (although realistically, Coca-Cola surely wants its products to be sold everywhere).   

Exclusive distribution rights can benefit the company that produces the product as well.  Only permitting specific distributors to sell your product can enhance your product’s image by making it seem more exclusive to consumers.  Suppose Apple only permits one particular chain of electronics outlets to sell its machines.  This could be a smart marketing strategy because Apple has cultivated an image of its products as being rare and exceptional.  If Apple products were available in many electronics stores, like Dells and HPs are, this wide availability could clash with their image as an exclusive product.  In fact, it can be more prudent for expensive items to be sold under exclusive distribution arrangements because companies often market the items as luxury items, and their exclusive availability would enhance their perceived luxury status.  Conversely, businesses won’t benefit as much from the exclusive distribution of cheap items because they need to be sold in great quantity, which requires being distributed by as many outlets as possible. 

How to Form an LLC Free

Another benefit of granting exclusive distribution rights is geographical exclusion.  If one company is the only outlet in a huge, wealthy market like Europe or the U.S., that company has a great advantage over its competitors.  One example of this is when Pacarc LLC became the exclusive distributor in the U.S. for a Mitsubishi hand dryer called the Jet Towel.  The Jet Towel was unique in its high speed drying ability and low impact on the environment.  Pacarc LLC likely stood to gain a great advantage by obtaining exclusive distribution because tens of thousands of facilities in the U.S. would buy hand dryers, and they all must purchase from Pacarc LLC if they want this particular high-tech brand.  This strategy isn’t flawless though.  It cannot stop other competitors from making similar products and selling those in the same locations.  For instance, the U.K. manufacturer Dyson began selling its high tech Air Blade hand dryer in the U.S. just one year after the Jet Towel made its U.S. debut.     

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