Advantages and Disadvantages of Selective Distribution

When you to a restaurant wherein buffet there are 20 to 25 food items but you eat only 5 or 6 food item rather than eating all the food items than you are being selective. In the same way in case of distribution companies adopt similar distribution called selective distribution. Selective distribution is a marketing strategy used by the company where they select only a few retailers or distributors from each city or region rather than appointing anyone who applies for distributorship of products of the company. In order to understand more about this concept, one should look at the advantages and disadvantages of selective distribution –

Advantages of Selective Distribution

Lower Cost of Distribution

The first and foremost advantage of selective distribution is that it helps the company in reducing the cost of distribution because imagine if company has to supply the product to 5 distributors only instead of 50 distributors in one location naturally the cost of supplying will be less which in turn will help in reducing the operational cost of the company leading to improvement in the profit margin of the company.

Easy to Manage

Another benefit of this strategy is that it is easier to manage distributors as opposed to intensive distribution due to a large number of distributors it becomes almost impossible to manage all distributors properly. Besides since company has to spend less time managing the distributors it can use this time to concentrate on increasing the sales and improving the production efficiency in the company.

Brand Image

Human beings have this nature of taking things for granted if they are easily available and that is where selective distribution assumes importance because in a way it helps the company in creating a brand image because in the minds of consumer they know that particular product is available at selected locations only and due to it sometimes consumers buy products from those locations only even if it is far away from their home.

Disadvantages of Selective Distribution

No benefit of Substitution

The biggest disadvantage of this strategy is that companies are not able to take benefit of substitution, suppose company distribute products at multiple locations than chances of customers picking the product if substitutes are not available are more as opposed to that situation where due to company adopting selective distribution strategy products are available at selective location only thereby giving company no benefit of substitution.

Dependence on Few Distributors

In this case, since the company has not diversified its distribution network the company is dependent on selected distributors only which sometimes can backfire if distributors are lethargic and undisciplined which in turn can harm the sales as well as the brand image of the company in a big way. In simple words just like in case of investing in stocks you cannot invest the whole amount in one or two companies rather you invest the amount in 5 or 10 companies to diversify your risk in the same way sometimes it better if companies have wider distribution network as opposed to the selective distribution network.

Lack of Market Penetration

Products which are of daily use and require market penetration may not be right candidates for selective distribution because in this distribution strategy companies concentrate on quality rather than quantity, unlike intensive distribution strategy which focuses on market penetration through a widespread network of distributors and retailers.

As one can see from the above that this strategy has advantages as well as disadvantages and that is the reason why the company should first assess the product which is to be marketed and company’s long term goal before applying this strategy in the company.