exclusive distribution channel
An exclusive distribution channel is one that is difficult for outsiders to access. For example, it is often difficult for a new firm to get access to shelf space in supermarkets. This occurs because retailers tend to prefer to carry the products of established manufacturers of foodstuffs with national reputations rather than gamble on the products of unknown firms. The exclusivity of a distribution system varies among countries. Japan’s system is often held up as an example of a very exclusive system. In Japan, relationships among manufacturers, wholesalers, and retailers often go back decades. Many of these relationships are based on the understanding that distributors will not carry the products of competing firms. In return, the distributors are guaranteed an attractive markup by the manufacturer.
As many U.S. and European manufacturers have learned, the close ties that result from this arrangement can make access to the Japanese market difficult. However, it is possible to break into the Japanese market with a new consumer product. Procter & Gamble did during the 1990s with its Joy brand of dish soap. P&G was able to overcome a tradition of exclusivity for two reasons. First, after two decades of lackluster economic performance, Japan is changing. In their search for profits, retailers are far more willing than they have been historically to violate the old norms of exclusivity. Second, P&G has been in Japan long enough and has a broad enough portfolio of consumer products to give it considerable leverage with distributors, enabling it to push new products out through the distribution channel.
Exclusive Distribution Channel
A channel that outsiders find difficult to access.
ANOTHER PERSPECTIVE Spotify and Coca-Cola Form Marketing Partnership
Swedish music-streaming service Spotify gains access to Coca-Cola’s global marketing engine, and Coca-Cola can use Spotify tunes in its online marketing. Spotify is hoping that Coke will teach the world to click its play button. The Swedish digital music service on Wednesday announced a broad-ranging marketing deal with Coca-Cola Co. that could help turbocharge the number of people who are exposed to, and ultimately sign up for, Spotify. Although the partnership does not involve any money changing hands, both parties describe it as invaluable to their efforts to market their products. For Spotify, the burgeoning music-streaming service that launched in the United States in July, getting access to Coca-Cola’s formidable global marketing engine will come in handy as it expands its international footprint. Spotify operates in 13 countries, mostly in Europe, but has said it plans to launch its service in additional markets. In return, Coca-Cola can now use Spotify’s service to instantly add music to its online marketing repertoire. For instance, the drink giant can add songs to its Facebook page via Spotify without having to negotiate licenses for each tune. (Spotify already has financial agreements with major record labels to pay royalties for every song that is played on its digital service.)
Source: From Alex Pham, “Spotify and Coca-Cola Form Marketing Partnership,” Los Angeles Times, April 18, 2012. Copyright © 2012. Los Angeles times. Reprinted with permission. http://articles.latimes.com/2012/apr/18/business/la-fi-ct-spotify-coca-cola-20120419.