By Donny Lowy
Wholesale exclusivity can be a highly profitable arrangement for both wholesaler and reseller.
Through a wholesale exclusivity arrangement both the wholesaler and reseller make business commitments to each other.
There are various forms of exclusivity that can be engaged in, but I would like to focus on the following three.
Through this arrangement the wholesaler agrees to only sell his products to one reseller per market. A market can be defined as a set geographic area, or as a type of market segment.
For instance, a reseller can have the exclusive right to sell the wholesaler’s products to dollar stores, or to sell the products in a specific city or state.
The agreement between the wholesaler and retailer can stipulate that as long as the reseller maintains a level of buying volume he will have first call on new merchandise.
This is a great arrangement for resellers when the product is available in short demand and there are many resellers who want it.
An exclusive wholesale arrangement can be based on price. Provided that the reseller can buy at a set volume, he or she will be entitled to buy their wholesale merchandise at a greater discount than offered to other resellers.
Wholesale exclusivity arrangements are beneficial to both wholesalers and retailers for the following reasons.
Wholesalers benefit since they can count on a certain level of repeat business, which is especially important to wholesalers who have high customer acquisition costs. Once they have formed a customer relationship with the reseller they can count on repeat business.
Having a reseller buy in larger volume is also beneficial to wholesalers who work with small profit margins.
Resellers also gain from these arrangements because they can receive exclusive access to the wholesalers’ products, the right to buy products first, and larger price discounts than their competition.