SHOULD I OFFER AN EXCLUSIVE AS PART OF THE DEAL?

Exclusive listings are near the top of most Buyers' shopping lists when they are looking for new products as they help to differentiate their range, offer the chance to drive lasting growth in their market share, as well as some degree of profit protection.  But does it work both ways?  Are there similar benefits for new brands in return for shutting down other sales avenues, or is it a one way street?

In this article we answer that question by looking at it from both sides and the benefit of 20 years experience in the trade...

In recent years the sustained growth of the Discounter channel has revolutionised the Grocery trade, completely disrupted the traditional business model and presented the big Supermarkets with huge challenges they are only just coming to terms with.

At the recent Sainsbury’s IGD conference Paul Mills-Hicks explained their strategy.  Sainsbury’s stock 34,000 SKUs, compared to Aldi with 3,000.  To be competitive Sainsbury's need to match Aldi on the range they both stock, but this is only a hygiene factor to stop existing customers leaving their Stores to get a better price.
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To give Customers a really compelling reason to visit their Stores, Sainsbury's wants to leverage their bigger Range as a key weapon in the fight to build a much more distinctive proposition.

Sainsbury's are looking for products which are meaningful to consumers - which either target new consumer needs, new usage occasions, or by unlocking increased value from existing occasions.  A distinctive range by definition drives up demand for exclusive products, it's central to the whole corporate strategy, and is a great example of where it can be the right thing to do if you are a  challenger brand.

As a supplier the key thing to look at is why your Buyer wants your product exclusively.  In Sainsbury's case its driven from the top, and means the trading team is 100% committed to making the the strategy work, and this should feed through to each individual brand.

Sainsbury's want to make a statement about their range which potentially unlocks deeper distribution for exclusives vs non-exclusive products, and sustained support to make the exclusives as visible as possible to shoppers, for example through secondary display or through other marketing levers.  Thats not to say its a free ride - each and every product still needs to perform, but it should mean tangible benefits for the supplier for sacrificing sales in other retailers in the form of higher rate of sale and other opportunities throughout the year.

It should also give you an opportunity to create a fantastic story of product performance when you do want to expand further, but there are still watchouts.  Be very careful on what you are agreeing to - is it exclusivity on this SKU or your whole brand, and for how long, as if agreeing to a 3 or 6 month exclusive period means you miss a range window in another target retailer you could be locked out of their range for much longer, and clearly the longer the period of exclusivity, the more you should be seeking in return.

At the other end of the spectrum you may find yourself being asked for an exclusive when none of these benefits are on offer.  Sometimes the ask comes because the Buyer wants to solely protect their profit - replacing a product they have to match the market on price with, with one they don't.  Retail prices are often set at levels out of touch from the rest of category tiering and minimum volume results - not only would you not be selling much in retailer A, but you now can't sell to retailers B, C & D!  

Even when this is not the case, beware signing an exclusive deal with one Buyer with verbal promises of high levels of support for your brand, which has not been documented when they change roles.  Project yourself forward a few months and ask yourself what the minimum they need to have delivered to make it worth you agreeing to what they want, and add that to the deal you sign.

What this all boils down to is how committed the Buyer is to making your product work in their Stores.  If they are going to really shout about your product to their consumers because its exclusive, then that can be invaluable support and a great launchpad into the rest of the Grocery market - just be clear on what you are getting before you sign!

Masterclass 23rd August
For more support in developing your distribution strategy and growing your brand in Grocery, we are running an evening masterclass in London on How to Sell to Supermarkets, based on Simon’s 20 years experience working in the trade, including over 10 as a Buyer for Tesco and Sainsburys.
 
This includes a detailed review of how and when Supermarkets actually buy, how to create a killer pitch, where to source all the insights to back this up and how to approach negotiations to get the deal you want; as well as live case study (we could pick your brand!) and extensive Q&A.
 
For more details please click here…