Being in the wholesale industry, you’ve probably come across the term product exclusivity or perhaps have even been approached by retailers requesting exclusive selling rights for your products or brand.
This might be tempting for a retail stockist, but what are they actually gaining from exclusive access? And more importantly, is it worth sacrificing your sales?
In today’s post, we’ll explore whether or not offering exclusivity can be beneficial for you as the wholesale brand.
First, let’s have a look at product exclusivity in more detail.
What is product exclusivity?
Product exclusivity is when a brand exclusively agrees to sell its products through a limited number of retailers or, in some cases, only through one retailer or distributor.
Exclusive product distribution is a common tactic used by wholesale brands and retail partners alike. But how effective is it? And what are some of its potential drawbacks?
There are no general rules.
Product exclusivity is a powerful sales tactic, but it’s not necessarily effective with every wholesale brand. The best use of product exclusivity comes when a company has multiple retail stockists that sell their products. If you have just one retailer selling your product, there is no guarantee that offering product exclusivity will help you generate more sales or awareness.
In fact, if you offer an exclusive product and don’t see an increase in demand at that one store, your overall sales might actually decrease because customers know they can’t find your product anywhere else, which they could interpret as no demand for your product.
Offering exclusive products to one retailer could hurt your bottom line instead of helping it.
Some reasons why you would say yes
Depending on the retailer (chain stores, independents etc.), each will have a different customer base. If a product is exclusive to a particular retailer, especially larger stores, then you can leverage that credibility when marketing your brand.
Wholesalers tend to generate higher margins than retail stores because of their higher sales volume.
If your brand is new and is not well known in your market, then offering exclusivity can help build awareness about your brand. By giving a retailer exclusivity, you can also help them promote your product and increase its visibility within their store and amongst customers. If your wholesale business already has strong sales channels with high margins and low risks, then exclusive deals may not be worth it as they will likely bring down your overall profit margin.
For example, a small rural town in New South Wales might have only two retail stores. You would provide exclusively to one store to eliminate conflict between retailers while building a loyal relationship with a retail stockist for your brand.
Some reasons why you would say no
Exclusivity might be a deal-breaker for some retailers, specifically if they are a large retail chain. They have the buying power and large customer base to demand exclusive rights. Although it might be enticing on the surface, and in many cases, brands will say yes. However, you will have to be able to meet all their requirements, such as the ability to fulfil large orders and meet deadlines to sustain a healthy partnership.
Offering exclusivity may alienate other retailers and could potentially deter them from carrying your products in the future.
Remember, situations and circumstances change all the time, so it’s best to avoid burning bridges.
Offering exclusivity can make you lose out on other opportunities, such as selling directly to consumers online or through retail pop-up shops.
Methods to implement product exclusivity?
There are ways you can implement product exclusivity without necessarily alienating your retail partners.
The first step is to establish product exclusivity as a viable option. If your brand/retailer relationship works in a way that you have leverage, then doing so should be relatively easy.
Once established, here are some potential methods of implementing product exclusivity:
Waiting lists: If your products are particularly in-demand, you may wish to institute waiting lists for new inventory so that only certain stores can sell your items. This might work well if you’re launching a limited-edition collection or want to ensure that certain retailers will always get your newest pieces.
Distribution agreements:
In addition to waiting lists, distribution agreements (which determine which retailers carry which brands) can also help with product exclusivity. A distributor agreement ensures that if one retailer carries your brand, they won’t be able to accept any other brand with products similar to yours and vice versa.
Product design/packaging:
Another option is to make your packaging or products themselves unique. For example, you could make specific garment colours or include unique tags/labels that only certain stores would use. This isn’t as effective as a waiting list or distributor agreement but is an option.
Location agreements:
Finally, if you have multiple retail partners, you can also try negotiating location agreements. These are like distribution agreements in that they determine which retailers carry your products—but they’re more specific. For example, you could agree that one retailer will only sell your products online and another will only sell them in their brick-and-mortar store.
Another form of location agreement is based on the actually location or region where the store is located. For example, only provide to one retailer per street, shopping complex or even town if they are in a very small town.
This ensures that consumers will buy from a specific retailer (or at least be unable to buy from any other) but doesn’t restrict their product choice as much as a waiting list or distributor agreement would.
When it comes down to it, there’s no one right way to implement product exclusivity—just choose whatever method makes sense for your brand and retailers.
Separate product range:
Another option is to make specific products available to certain retailers within your range. For example, you could offer a full line of women’s clothing to one retailer and just handbags/shoes to another. This can help ensure that your products are sold in stores where they’ll be most popular. This method can work particularly well if you offer various styles or types of products. You can determine which type of products will fit in and complement existing products that the retailer already stocks from other brands.
Product exclusivity benefits for retailers
Before contemplating whether offering product exclusivity is a good sales tactic for your brand or wholesale business, it’s worth identifying what retailers will get out of it and how it will impact them, whether good or bad.
Some retailers may even request exclusivity for obvious reasons, such as wanting to be known as a store that only stocks products from one brand. Other times, they might do so to attract customers who want that particular product brand and to eliminate competition for that product or brand.
Moreover, offering exclusivity can give retailers marketing leverage against their competitors.
With that said, retailers with exclusive rights will need to show results and be able to keep up with expected sales revenue. Having obtained exclusivity will mean more marketing for that exclusive brand and pressure to reach targets, or the retailer can risk losing the brand altogether.
Conclusion
Offering product or brand exclusivity can be highly beneficial in many ways. However, there are also risks in placing all your eggs in one basket; what happens if one of your exclusive retail partners goes bust or decides to stop stocking your product? A more sustainable approach is to offer discounts and incentives to retailers who place larger orders – this way, you can still get more visibility while maintaining access to as many customers as possible.
Before signing a product exclusivity agreement, both the wholesale brand and retailer need to be aware of all possible impacts and outcomes and perhaps an exit strategy for both parties if things don’t go according to plan.
Keep in mind that depending on the extent of the exclusivity, it is against the law in Australia and possibly other countries as well.
