What is selective distribution?
Often, a certain product or service is available on the market for a long time (a few months or a few years). This causes progressive saturation and decreases demand. As a consequence, the price war begins with an aggressive price decrease among competitors. This process is called price erosion and it is losing for producers because resellers gradually decrease their margin and impose it on providers. This can lead to worsening producers’ financial condition. Are they unprotected to gradual price erosion? No, because there is a tool or rather a strategy called selective distribution. What is it? What are the main rules? Let’s find out in this article.
What is a selective distribution?
To define selective distribution in the right way, let’s get to know the possible ways to sell products that certain brand retailers use. These are:
Exclusive distribution – the sales happen only in own outlets or in one of the authorized retailers
Intensive distribution – used in case of products that have a high rotation that depends on the launch of a certain product to offer of as many shops as possible
Selective distribution – it is a strategy that lowers the competition by a special selection of key clients that will be able to sell a certain product
The selective distribution consists of the first two types and is the best option because it guarantees a high level of security and is effective.