Consumer Electronics - Supply Arrangements (Part 1)
The types of agreements that can be entered into by a manufacturer to distribute and market his/her products through intermediaries are exclusive, selective, sole, and non-exclusive distribution agreements.
1) EXCLUSIVE DISTRIBUTION AGREEMENT
- Distributors who sign exclusive distribution agreements can only distribute the products in a particular territory and cannot go beyond that area or sell goods directly to customers that are not located in the territory.
- As part of the exclusive distribution agreement, suppliers are not allowed to directly sell their goods in the territory covered by the agreement or through other agents and distributors.
- Consumer electronics manufacturers in Europe that have signed exclusive distribution agreements include Royal Philips and TE Connectivity.
2) SELECTIVE DISTRIBUTION AGREEMENT
- Signing selective distribution agreements allow manufacturers to select their distributors based on a specific set of criteria.
- According to a survey conducted by the European Commission in 2017, 20% of the manufacturers in Europe have opted to sign selective distribution agreements.
- Consumer electronics manufacturers in Europe that have signed selective distribution agreements include Bang & Olufsen, Asus, and Denon & Marantz.
3) SOLE DISTRIBUTION AGREEMENT
- As part of the sole distribution agreement, only one distributor is allowed to sell every product provided by the manufacturer.
- Similar to the exclusive distribution agreement, suppliers are also not allowed to directly sell their goods in the territory covered by the agreement.
- Consumer electronics manufacturers in Europe that have signed sole distribution agreements include BOSE, Canon, and SENS.
4) NON-EXCLUSIVE DISTRIBUTION AGREEMENT
- As part of the non-exclusive agreement, manufacturers are allowed to sell directly to anyone and also select a distributor within the same territory.
- Distributors do not have any exclusive rights to the products, which allows manufacturers to select multiple distributors.
- Consumer electronics manufacturers in Europe that have signed non-exclusive agreements include Accutone and Elecraft.