The manufacturer or seller must also determine whether the distribution contract is exclusive or not exclusive. In an exclusivity agreement, the specified distributor is the only distributor with the right to sell the product in a geographic region or in several regions. If the agreement is not exclusive, the manufacturer or seller can supply other distributors who sometimes compete in the same market. A clearly written exclusive distribution agreement allows both parties to terminate the contract with an appropriate termination – for example 60 or 90 days – or in specific clearly defined circumstances. These provisions recognize that a company`s objectives on the first day may be significantly different from those of the first day of the seventh year. The post-termination clauses, which suggest how the relationship may expire, lay the groundwork for a new participation in the future. Well-written non-competition and confidentiality provisions serve a similar purpose. Exclusive distribution is common for high quality or complex products that require a high level of knowledge and know-how. Staff may need special training to sell the affected products. Pharmaceuticals are a good example of this concept. In addition, if customers buy something like a car or electronic device, once the sale is complete, customers may need special services such as repairs or maintenance. An exclusive distribution agreement defines the territory or markets in which the contract is applicable, as well as the understanding of the products for sale and the associated language for advertising or online offers. The agreement should include margin and return rules for both distributor and manufacturer, as well as all expectations for financial or support support on both sides.
For manufacturers, the main advantage is to be able to bring know-how to the point of sale, so that they can instead concentrate their resources in-house. Exclusive distribution contracts help secure a long-term distributor and immediately invest in the distribution company. Most exclusive or exclusive distributors take the risk for the supplier to store large quantities of goods, giving the supplier valuable space and money to focus on its own efforts. Selective distribution is the case when the supplier designates a distributor under a “selective distribution system” in which it appoints additional distributors only if they meet certain criteria. It is a unique system specifically used to allow the supplier to retain control of its distribution network, particularly with regard to quality control, while working with EU and UK competition rules.