I received the following question from a reader today, that, with her permission, I would like to share:
I have been marketing to national retailers and have been asked for an exclusive to my product from an independent toy store in (state). I have no idea how much a minimum order should be. I do not have any retailers in (state) yet, but have a few on the hook. Do you have any suggestions on how to proceed?
First, exclusivity or an exclusive agreement is when a manufacturer, sales rep, distributor or other supplier enters into an agreements that limits the number of retailers or other suppliers that may carry a certain product, or product line, within a specified geographic area or types of stores.
These types of agreements can be very lucrative or disastrous depending on how they are handled. After getting ‘caught’ in these a few times in the past, I developed a system ahead of time to deal with them.
Here is what I told her:
Depending on your products, I would not sell to more than one store in a small town. If you are selling in a larger city, an account in different parts of the city is doable. If your buyer wants an exclusive, it is appropriate for you to ask for something in return such as a larger first time order (i.e. double your standard minimum order) and a guarantee of a re-order after XX time. If the account does not re-order according to the agreed schedule, you are free to look for a new account within the ‘exclusive area’.
I would make sure you feel comfortable with the area he is asking for exclusivity. For example, I had one small store want an exclusive arrangement for the entire county! Not doable!!
Since you are selling to national chains, I would be very careful on how you handle this request as it may affect your ability to sell to the chains in the area – which also may affect your ability to sell to the entire national chain as you cannot exclude certain stores within the chain.
Another option you have is to offer them a short term exclusive agreement – say for 6 months to a year. Or can offer to sell to them without the exclusive arrangement, see how it goes and then agree to an exclusive arrangement if your products sell well in their store.
Does anyone have another option for an exclusive agreement? If so, please share with us.