In the business world, the name of the game is making money. The more sales you have the higher the chances that you are making a profit. Although getting your product out into the marketplace and selling as much as possible is a worthy business strategy, it sometimes happens that there is too much competition in that market segment to justify the amount of effort you’re putting in to sell your goods/services.
This is the time that you need to step back and start thinking about ways of minimizing the competition that you’re facing and maximizing your profit with the least amount of expense and effort. When you’re considering this, the selective distribution strategy can be one of your options.
In short, selective distribution is about hand-picking the retailers who are going to sell your products. You ‘select’ them and make them the only places where your goods can be found. By making this selection, you’re adding exclusivity value to the product and that makes it more desirable to have. You then only distribute your goods to the selected retailers and ensure that only these retailers can sell your products. That, in a nutshell, is what selective distribution is about.
Selective distribution is employed as a strategy by many companies. Brand names are well-known for the fact that they can only be purchased from certain stores. Designer goods like clothes and shoes can also only be found in selected stores/boutiques. This means that the producers of the merchandise is creating a greater demand for the product in question by only distributing to certain markets through hand-picked retailers. If you consider how much designer clothes and other goods cost, it is still amazing that there is a demand for them. The added value is of course the exclusivity afforded to the brands through selective distribution.
In recent years a trend has emerged where certain foods can only be bought from exclusive stores. The quality and availability of the food is guaranteed, so the value-adding exclusivity has another benefit: quality food. These stores will also only stock brand name produce that will only be found in their stores and nowhere else. So, although you’re buying lettuce (which you can get from almost any other grocer), the brand name lettuce is guaranteed to be fresher, tastier and better packaged to ensure long-lasting freshness. This is what the shopper for exclusive goods is looking for.
Selective distribution is a very successful method of selling your goods and services. It does however have some disadvantages. Selling to a smaller market segment means that your sales are smaller. To make enough profit, your price will therefore have to go up. Unless you have a really good product, you may find yourself out in the cold — exclusive or not.
The whole strategy revolves around what your customers want and, most importantly, how much they are prepared to pay for something only found in certain stores – the exclusivity.