?

Does anyone have thoughts on product exclusivity clauses? Pros, cons?

Seems like it's worth it for early stage brands trying to get their products into stores?

Please sign up to comment

I only wish I had thought more when Ford Motor's attorney Mark Sparshu asked me about exclusivity from the 9th floor of world headquarters in Dearborn Michigan. My response was you could not afford it and neither could I. My intent was not to hurt anyone's feelings but evidently I did. At that time they had 168 billion in annual revenue and may have never heard before that they could not afford something. He hung up. A better answer would have been I would consider 1 year of exclusivity in exchange for developmental funding and perhaps we could have done business. Long before GM went bankrupt I predicted their bankruptcy if they did not get a license for my product and then of course it happened.

There are definite pros and cons to exclusivity; and I've been associated with both sides.

Pros: It's a very nice selling tool when trying to close a (potentially) large account. Anything that can give you an advantage over your competition and allows the target account to have a competitive advantage over their competition is a win-win.

Cons: If that retailer fails to execute (internally, with the product launch) then it does not matter how good the product is, it's dead. No one else will want that product.
Conversely if the product takes off you're going to have phone calls from many other accounts wanting to buy the product. If you are truly exclusive you will have to refuse those offers. That may be more expensive in the long run.

About a year ago I read an article in a business magazine that featuring a founder talking about exclusivity. He had big companies (Google, Apple, Microsoft. etc.) wanting exclusivity for his product. He refused all of them; they all ended up using the product anyway (or at least a version of the product).

From my personal experience an exclusivity arrangement feels like a partnership. And when the business was good it was really good. Until the account's business starting turning south and they started shopping competitive brands. Shopping other brands actually made their southward turn worsen.

My personal take on exclusivity is that I will offer it to accounts on one condition-- the account gives me the project to spec out and then they give us the business. If the product stemmed from their concept then they should have the exclusive rights to the product, in my opinion. Otherwise money talks; it's a free market and anyone willing to pay for a product will be able to purchase it.

Some good points here. I’ve found exclusivity on products can be a good tool to help secure business but also help manage the different distribution channels/customers for a product line. There are usually ways to spin an exclusive agreement to benefit all parties, the manufacturer/brand and the retailer.

There’s usually some way to do a limited exclusive (ie sell Target but not Walmart or Sam’s but not Costco) and still sell it to others that aren’t direct competitors. Or create a variation on the item, different colors, size, minor fratote adjustments, accessories etc from one account to another.

Some items of course are just too good to give and exclusive on, but that’s more rare and if the item is that popular, you won’t need to have this conversation and can pick your retail partners.

There are a ton of useful comments here. Thanks for taking the time to share so much information. Great stuff!

Charles Flemming

Chess Kingz Brands

Product exclusivity clauses are always destructive to the community, to the developers, and to creativity as a whole. It limits the medium, and method of backup available and has lead to several total erasures of source code, which, in North America, is required by law, once published, to have backups submitted to the government. But hey, that's all too often ignored and never really enforced.

Do not do exclusivity deals, ESPECIALLY with epic games and other tencent subsidiaries, as they are unscrupulous. and I'll personally boycott all products produced by a developer during the duration of an exclusivity contract with them.

ALWAYS HAVE AN ESCAPE CLAUSE based on controversy and negative publicity if you do decide to be an enemy of creativity and reason, and sign with exclusivity...Seriously, leave exclusivity to the consoles, dont bring it to PC gaming.

Aaron Stephenson

Perishables

If you are going to offer an exclusivity to a retailer who sells on the Internet
you may need to "white label" your goods. Change the brand name, style number, UPC code, etc.
The reason is when a company like Walmart or Amazon uses their programs to Scrub the market place looking for the lowest price and matching it they have a harder time making the comparison.
This is assuming you want to continue to sell other customers.
Just a thought.

The furthest I will go on exclusivity is to tell a store that I will not call on a nearby competitor. However, I point out that the companies I represent have no legal right to refuse to sell to any legitimate retailer, so there is no cause for complaint if the products show up in that nearby store.

First, exclusivity or an exclusive agreement is when a manufacturer, sales rep, distributor or other supplier enters into an agreement 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.

In the early years of my sales rep business, I offered exclusive sales agreements to most of the buyers who asked for it. I used exclusive sales to establish a good solid relationship with stores by accommodating them any way I could. After a period of time, though, the arrangement unraveled.

One particular time, I promised to sell a certain product exclusively to one gift store. After nearly a year later, the first store did not re-order the product. I forgot the promise I made to the first store and sold the product to the tourist shop across the street. The first buyer had ‘words’ for me when they discovered the product in the neighboring store.

Embarrassed as I was over my mistake, I did my best to interest the buyer in products I felt would sell better for their store than the product which was doing well in the tourist shop. In the end, I smoothed over the problem with the first gift store buyer, but I learned a very valuable and painful lesson about making promises to buyers!

As time went on, I learned to scrutinize at this type of arrangement more closely. If a buyer wanted exclusivity on a product, they needed to offer me something concrete.

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.

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!!

If 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.

Dealing with small towns and small stores forced me to develop a system where stores within the same town did not carry identical products. I openly shared with buyers which products were in the neighboring stores in their towns. This practice helped the store retain their trust in me and made it easier to keep each buyer happy. After a while, I got fewer and fewer requests for exclusivity, mostly because I had developed a system to manage potential product saturation.

I give no one exclusivity. A retailer? Maybe exclusivity for an area but no one sells everyone.

JEFFREY Landsman

L and L Specialty Foods

One important addition to the valuable comments below would be that (depending on the type of product and retailer) you can push for a volume agreement in return for exclusivity. We deal with setting up distributers in a variety of countries and almost all exclusivity deals are completed with a volume promise.

Saltuk Doganci

Faceables Brick & Stone

Agree with Bill, over and above, the right retail partner will drive sales and visibility through their social and print advertising which will grow your demand and allow you to negotiate new distribution as the exclusivity timeframe comes to an end.

Many retailers ask brands for exclusivity on a product. Exclusivity allows the retailer to be the only outlet for the product in a particular geography or region, and it allows the retailer to differentiate itself from the competition. For brands this can be a major decision to wrestle with; granting an exclusive may make it easier to land a product at a premier retailer, but it can also limit flexibility. A qualified rep can help you navigate the pros and cons of exclusivity.

makes sense. thanks!

Charles Flemming

Chess Kingz Brands

Welcome! We’re helping each other get products to market and sharing our stories.

Join us!