IS EXCLUSIVE RETAILING VIABLE?

Exclusive retail outlets are not at all viable...

No matter what vendors claim, exclusive retail outlets are simply not
commercially viable. While the reasons are many, one of the major problems in
becoming exclusive is that the retailer is left at the mercy of the principal. I
am saying this out of my own experience with Compaq for whom we once operated an
exclusive retail outlet.

Every time a new person representing the company would interact with us, he
would set his own terms and conditions for our business. We could not carry on
bearing the whims and fancies of the principal as it was severely affecting our
business.

Ultimately we decided to become non-exclusive wherein we sell products from
whichever vendor we feel comfortable with.

Vendors want to have best of both worlds...

Exclusive outlets work well in automobile industry because that is the only
mode of sales. IT industry must be one of those rare industries where vendors
operate through every possible channel and want the best from each one of it.
Vendors want to sell through three-four tier reseller channel, non-exclusive
retail outlets as well as exclusive ones and at the same time, go direct also.

And even if one decides to become exclusive, no vendor can promise in black
and white that it wouldn’t set up another exclusive outlet close to the
previous one. So how does an exclusive retailer safeguard his business
interests?

Vendors don’t direct customers to us...

Despite all the rosy promises that vendors make, their efforts in directing
customers to a retail outlet is hardly commendable.

Now imagine a situation wherein the vendor suddenly decides to bring down
its advertising spend. What happens to us then?

We cannot have our own marketing team and we can’t afford to spend on ads
ourselves. In such a situation, who would ensure that footfalls to the retail
outlet are regular.

Similarly, business of an exclusive outlet suffers a major setback, if any of
the products go out of stock. In such a situation, we not only lose a particular
sale, we may also end up losing that customer forever.

Customers today demand options...

Today’s customer is a well-informed buyer and he makes IT purchase only
after comparing number of options. Customers prefer to be offered a wide range
of choice.

Eight out of 10 customers get discouraged if we persuade them to buy the only
brand that we sell. On the contrary, they feel empowered if they are given the
freedom to go for a brand of their own choice under a single roof.

Retailers can’t be ambassadors for several vendors...

When a retailer is appointed by a vendor, he is supposed to act as an
ambassador for the vendor’s brand. Now as a retailer you cannot do justice to
any vendor, if you sell similar products from five different principals. By
agreeing to become an exclusive retailer, you indirectly become a part of the
vendor organization.

Exclusive retail outlets not only receive special attention from vendors but
they also enjoy a large number of privileges which other multi-brand outlets and
resellers don’t enjoy.

However, a retailer can use his discretion and business sense to decide upon
which vendor he wants to have an exclusive tie-up with. No vendor forces any
retailer to get into an exclusive agreement.

We have higher support levels for exclusive outlets...

No doubt, we sell through exclusive as well as non-exclusive outlets. But
our support levels for both of these are different. We have special marketing
budgets for exclusive retail outlets and give them prominence in the
advertisements that we come out with.

Not only do these outlets receive regular support from us but many a times,
they also have a say in our strategy meetings. So obviously, exclusive outlets
get a larger share of benefits from vendors.

As far as geographical spread of outlets are concerned, we are very
particular about the location of these outlets. We always make sure that number
of retail outlets in a given geography is directly proportional to the demand.

Onus is on retailers...

As principals, we can only do our bit in terms of marketing/advertising
support and creation of demand. But by no means can we drag a customer to a
retail outlet. The onus is on the retailer to make sure that if customers once
visit his outlet, they don’t leave without making a purchase.

Also, it’s a retailer complete responsibility to have an efficient sales
team in place, which can ensure that repeat sales happen.

Expecting vendors to guarantee for such things is absolutely unjustified.

Customers are very well-informed today...

Today’s customers are very well-informed when they go to make an IT
purchase. If a customer walks into a Canon exclusive outlet, obviously, he knows
a great deal about Canon products.

So it would be wrong to say that the customer would get discouraged if the
retailer tries to sell just that brand in which he deals in. For those
customers, who need to do a lot of pre-purchase market survey, there’s always
an option for them to go to multi-brand retail outlets.

Bottomline is, the way the IT market and PC penetration is growing, there’s
enough potential for both exclusive as well as multi-brand outlets to co-exist.