October 6, 2015

Does Exclusivity Make Sense For Your Food Product?

product exclusiveBetween e-commerce growing, mass store sales growing, convenience store sales growing, retailers these days are under more pressure than ever to figure out how to get customers to keep coming through their doors and, most importantly, to keep making purchases.  One way they’re doing this is by offering customers exclusive products.   While that may be good for retailers, the question is whether that’s also beneficial to you the food producer if you’re approached about exclusivity.

You may be approached by a retailer about bringing your product into their stores but they don’t want you to sell to anyone else.  Depending on the size of the store and their willingness to place a large order, this could potentially be a great deal for your small business.  Here’s a few questions you need to ask yourself and, as appropriate, ask the buyer:

  1. What is the store and is it the right fit for your clientele?  Similarly, will being sold exclusively in this store enhance your brand image and brand identity?
  2. Is the buyer looking for one or two of your products exclusively or the entire line?  Can you sell other products through other retailers?
  3. Is there a radius with this exclusivity agreement.  For example, can you sell to other retailers who are outside of X miles/kilometers of the exclusivity stores or does this agreement prohibit you from selling to any other retailers at all?
  4. Can the buyer guarantee sale orders or sale minimums that they’ll place so that you can predict both production needs and sales revenue.  This also enables you to determine how much sales you may potentially lose by having to say no to other retailers.
  5. Will this require you to get out of existing retailer relationships where your product is currently sold?  Once again, is this for all your products or only a handful of them?  What will this do to those relationships?
  6. Is the buyer willing to guarantee a time period during which they’d place orders or can they cancel the relationship at any time which may, potentially, leave you high and dry if you’ve already told other retailers you can’t work with them.
  7. What percentage of your sales would come from this exclusivity arrangement?  While a big sales figure might be tempting to take, you want to be careful about the proverbial ‘putting all your eggs in one basket.’  Depending on the structure of your exclusivity relationship, if that retailer decides to no longer carry your product(s) would your business be able to continue?
  8. Is the buyer interested in a private label product or are they interested in your brand?  If the thought of exclusively offering your product to a retailer causes you hesitation, you may want to see if they’re interested in having you create a private label product for them.  You produce a product that is on par with what they’re interested in (for which you’re paid) and the retailer gets to put their brand name on it.

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