Exclusive vs. Non-Exclusive Distributorship What is an Exclusive Distributorship Opportunity?
Exclusive distributorship opportunities allow a manufacturer to designate a single distributor, of their choice, to have sole distribution rights to resell their product(s) or service(s) in a pre-determined marketplace or sales territory. When you enter into an exclusive distributorship opportunity you will be free from competition from other sellers of the manufacturer’s product(s) or service(s) in your designated distribution area.
The benefit of working in an exclusive distributorship is you will work in partnership with the manufacturer for a set period to sell a product or service in a specified market. Exclusive distributorship allows for greater commitment to success by both the exclusive distributor and manufacturer. Both parties will have the ability to invest in the relationship and work together on the sales and marketing process; focusing on effectiveness rather than just solely on cost. As an exclusive distributor, you will be able to develop a market without fear of another reseller or distributor reaping the benefits during your contracted term.
On the other hand, in an exclusive distributorship opportunity, it’s important to know that you will be held to greater accountability and commitment. In fact, some exclusive distributorship opportunities will require you to pay an upfront fee or require distributors to provide a guarantee of order levels. Some manufacturers may also require you to agree to invest in marketing or business development, upfront, in order to obtain or maintain your exclusive distributorship opportunity.
What is a Non-Exclusive Distributorship Opportunity?
Unlike an exclusive distributorship opportunity, a non-exclusive distributorship opportunity, allows a manufacturer to give multiple distributors rights to resell their product(s) or service(s) in a certain territory or marketplace. When you enter into a non-exclusive distributorship opportunity you can expect to have competition from other sellers of the manufacturer’s product(s)/service(s). Although non-exclusive distributorships lack the “comfort” of exclusive distributorships, they can provide competition which can be a great motivator for the right individual!
Another benefit of working in non-exclusive distributorship opportunities is being able to share in the business development of a market with other resellers or non-exclusive distributors, which can significantly cut back on start-up and overall marketing costs.
Considerations for Exclusive Distributorship Opportunities and Non-Exclusive Distributorship Opportunities.
Before entering into an exclusive or non-exclusive distributorship opportunity, there are several key factors that should be taken into consideration before signing a contractual agreement. (Before entering into any contract, we advise seeking legal counsel.)
Term – When does the exclusive or non-exclusive distributorship begin? When does your contract end?
Distributor Obligations – What are the manufacturer’s expectations from your exclusive or non-exclusive distributorship relationship?
Supplier Obligations – What are the manufacture’s obligations to their distributors and more importantly, are these obligations in line with your needs and expectations as an exclusive or non-exclusive distributor?
Order Procedure – What is the process for exclusive and non-distributors to place orders? Is the process fast and efficient? One of the worst nightmares for any new distributor is to keep customers waiting or not delivering on what was promised.
Payment Terms - What are the distributor’s payment terms for merchandise to the supplier?
Confidentiality Obligations – Are there confidentiality concerns during and after the termination of the exclusive or non-exclusive distributorship?
Warranties – Is there warranty protection for merchandise sold during your exclusive or non-exclusive distributorship opportunity and for how long?
Limitations and exclusions of liability– Are there caveats and limits of liability for exclusive and non-exclusive distributors by the supplier?
Termination – What are your obligations if either you or the supplier decide to terminate your exclusive or non-exclusive distributorship? How much notice should be given?
Whether you are considering entering into an exclusive distributorship or non-exclusive distributorship opportunity, it’s important to do your research to ensure that you will be provided ample support from the manufacturer either through direct support and/or coaching. In addition to this, both you and the manufacturer should have a measurement system in place so there is a way to effectively track your progress towards your exclusive or non-exclusive distributorship opportunity sales goals. If either one of these components is missing, the success of your distributorship opportunity will be difficult to gauge or accomplish.
Hope this clarifies for some,
Kokomak