E-commerce distribution is part of a product’s online merchandising! Read our online merchandising guide for a full spectrum of the topic.

Should you have a selective e-commerce distribution? And how do you pick retailers? Also, is more always better?

OK, so there is this product that you need to sell online. You have to find retailers. Then you must convince them to buy your product and assort it on their websites.

The question is: how do you pick these retailers?  Do you choose as many of them to maximize sales and coverage? Or do you build exclusive relationships with just a few? In this article, we will help you shape your e-commerce distribution.

Intensive, Exclusive and Selective Distribution Strategies

First of all, let’s have a look at the different types of distribution strategies.

Intensive distribution is a method where you get as many retailers as possible to assort your product. This strategy is relevant if more availability leads to more sales. It’s also applicable if customers have no brand preference for these products. For example, people rarely have strong opinions on cables. If they need a new HDMI cable, they will head to Amazon and buy the cheapest or the one with the best reviews. That’s because most people don’t have a favorite cable brand. If you are selling cables, then the more retailers you have, the better.

Exclusive distribution is the opposite. It means that one single retailer has the exclusivity for a geographical area. Usually, this retailer will only sell your brand and no competitors. This strategy is applicable if supply is limited (think luxury handbags for instance). There are a lot of examples offline: a specific car dealership may have the exclusivity of a car make for their area. For their e-commerce distribution, some brands may give the exclusivity of a product to a website. This is a common practice for limited editions items, or exclusive product launches.

The retailer Sephora has the exclusive distribution of this limited edition Givenchy lipstick.
Sephora has the exclusivity of this limited edition Givenchy lipstick.

A selective distribution is somewhere in between. This is a system in which you determine specific needs for your brand. As a result, potential retailers are those who suit these needs. Most e-commerce brands resort to some degrees of selective distribution. Eventually, exclusive and intensive distributions are just extreme cases of selective distribution. Therefore, we will focus on selective distribution strategy in this article.

On what criteria can you base a selective distribution?

Because most antitrust authorities would consider that a deliberate restraint of trade, a selective distribution is not an arbitrary list of retailers. It is rather a list of reasonable requirements for your product. Here are some examples:

Type of productExample requirement
Complex applianceHome installation service
Electronic devicesPhone helpdesk
ClothesFree returns
Action cameraRetailer assorts compatible accessories
Self-assembled furnitureSite supports PDF downloads
Prestigious jewelryProduct pages have high-definition images

These are just examples; the basics is that the special needs should be justified by the specificities of your product.

Selective distribution in the EU

Since selective distributions reduce competition, the EU has defined a set of rules. As for most EU regulations, the bottom line is that trade impairments are only accepted if they benefit the final consumer. The examples above should be valid in most cases. Your selective distribution is probably legal if:

  • the nature of your product necessitates a selective distribution,
  • you do not discriminate retailers beyond a set of qualitative requirements,
  • the requirements are not excessive.
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Of course, legislation is always subject to interpretation. If you have any doubts about the legality of your distribution, you should probably consult with a lawyer!

What are the benefits of a selective e-commerce distribution?

Having too many retailers is a bad idea

A manufacturer’s first intuition might be: “More retailers lead to more sales, therefore I should target all the relevant retailers in the area.”. Here are a few issues associated with having too many retailers:

  • it is time-consuming and confusing to keep an eye on the behavior of too many retailers (although BlueBoard can help)
  • you won’t be able to maintain a good working relationship with all of them
  • the retailers have a higher probability to engage in a price war
  • excessive promotional intensity can damage your perceived value and retailers’ margins
  • important retailers will grow frustrated by the low margins and refuse further collaboration

Your product is special

It is a manufacturer’s responsibility to have the final distribution in mind. So even if a brand works with distributors and wholesalers, ultimately it is its job to define the distribution guidelines.

With the final customer in mind, the brand must think about all the specificities of its product.  That is, from the most obvious (the product category) to the most anecdotal. Each of those specificities should be linked to a relevant and reasonable requirement for the retailers.

Let’s take an example: imagine your product is a pair of ethical sneakers. Here is a list of reasonable requirements for your selective distribution:

Product specificityRetailers requirements
Product is a pair of shoesShoe retailer or apparel retailer with an important shoe section
High-quality fabric and stitchingThe website should support high-quality pictures and optionally 3D view.
Ethical productThe website should only assort other ethical products or have a dedicated ethical section
Difficulty in choosing shoe sizeThe retailer must offer free returns
Product contains high-quality leatherThe retailer’s warehouse has to maintain air humidity below 40%

All these conditions ensure that the final customer has a positive experience while buying your products. If a retailer is sloppy in product presentation or orders execution, its sloppiness will rub off on you. Your brand could be hurt as a result.

On the other hand, retailers will appreciate if they are not competing with low-reputation, low-investment retailers. They will be keener to promote your products on their website, in their newsletters etc. Paradoxically, having less retailers may well end up boosting your sales!

You can build better retailer relations

Use the results of the previous steps to identify suitable retailers. Key takeouts: the leverage you have with retailers is proportional to the popularity of your brand. If you are a new brand, you may have to make concessions. This is not bad; as your brand grows, you can build better retailer relations and improve your distribution. Furthermore, having a limited number of retailers facilitates mutually beneficial relationships.

Where we pitch in: distribution control

Even with a perfectly defined selective distribution, things can (and will) go bad. In all cases, you should keep both eyes open.

When products are sold where they should not:

  • if you work with a distributor, they could take liberties with your policy
  • goods sometimes get stolen and wind up on shady websites, sometimes in another country
  • a retailer could start selling on a marketplace that is outside of your scope
  • retailers may start selling outside of their attributed geographical scope.
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When products are not sold where they should:

  • your distributor may fail to assort a key product at a key retailer
  • some retailers can go out of stock and not call you or your distributor.

The only way to keep an eye on all this at a time is to use an e-commerce intelligence tool. BlueBoard is an e-commerce intelligence dashboard. We specialize in finding your products online and recording everything about them. We update this information several times per day. Then we display it in a customized dashboard.

Some of our tools or specifically tailored to help brands control their selective distributions. The BlueBoard Report gives you a bird’s eye view of your distribution. You can download it or have it emailed to you every day or every week. It shows the current distribution information (availability, prices, reviews) of your main products at your most important retailers.

The BlueBoard report
The BlueBoard report

Visit BlueBoard.io to see how BlueBoard can help you implement and control a selective distribution strategy or Try BlueBoard for Free!