Why intermediaries want to be exclusive distributors for a product?
Discussion: There are a number of reason that the intermediaries my want to have exclusive rights to a product. The intermediary are in some case very resourceful. They believe that they have the production capability to produce the products that they are intermediaries for and they can maximize their profits by first insuring the commission they secure in the sale of each product and second by making profits when their production capabilities are utilized. For example we have an intermediary for Samsung LED’s in China. As we all know that Samsung is a Korean company. The Chinese intermediary might have connection with LED manufacturers in China and send may be willing to produce the Samsun LED at China. This also benefits the mother company in Korea as they will save on shipment and production costs. The same reduces cost for the end customers as well as was found by Stennek (2014) in a study where he suggested that exclusive right of sports channels to intermediaries reduces the costs for the viewers.
The other reason could be that the intermediary want to be the only one in the market selling a product. This way they can ensure that there is no competition and they are the only channel to access a product. For example an intermediary might want to be the only one in the British market to sell an American Halloween Candy. We can look at it from the profit point of view as well. For example if I have the exclusive rights to sell Sony Batteries in American market then you can imagine the profit that will be making.
If an intermediary is exclusively selling a quality product, there is a rapid increase in the trust level of their customers. The intermediary can use this trust to make their share for other product in the market. For example if a sports shop has exclusive rights to sell Golf Balls made by the Adidas in a certain city. They will attract rich customers who can then be presented with other expensive products like T-shirts and other sportswear for sale.