Product differentiation is one of three factors that experts from KPMG believe will determine retailer success as the industry reinvents itself in the 21st century. Exclusivity gives retailers a way to offer a merchandising mix that includes items not available at competitive outlets. It creates an elite image that enhances name recognition for a product and extends a "quality, not quantity" reputation to manufacturers and vendors.

Vendor Perspective

When vendors enter into exclusive agreements, they give a retailer sole right to sell and market their product or product line in a specified geographic territory. The added promotion and marketing efforts executed by the retailer build the vendor's brand while limiting its exposure in the market. A vendor with a new product can build a book of business, or client base, from exclusivity. Regular replenishment orders from the retail partner communicate stability for expansion financing needs. When artists, specialty stores and boutiques agree to create unique selections for galleries and online retailers, they gain what the Arts Business Institute calls an "appreciative audience" that brings repeat business and word-of-mouth attention. Galleries, in particular, play a key role in cultivating collectors for featured artists whose work they display on an exclusive basis.

Retailer Perspective

Integer, an international retail marketing agency, notes that exclusivity helps stores draw traffic by tapping into consumers' natural attraction to scarcity. Sometimes this entails a commitment to exclude competing product lines in order to raise the "hard-to-get" factor. Vendors often provide the retailer point-of-sale material and special perks in such deals. Some retailers use exclusivity to address under-served customer segments or product categories. Others find opportunity in contracting licensed property for an exclusive time period to give customers a reason to shop with them. Having the exclusive rights to sell celebrity-backed merchandise helps a retailer avoid price wars with competitors. Another form of exclusivity, private labeling, gives a retailer price-point and profitability advantages and sets it apart from competitors.

Customer Perspective

Product exclusivity can build customer loyalty for a retailer; its private brands lead competitors to counter with alternatives that ultimately give shoppers a broader, value-oriented selection in the market. According to Dysart & Jones Associates, retailers also turn to exclusive marketing programs to build customer relationships and make them valued. Special offers, discounts for registering email addresses and by-invitation-only events communicate to customers that they belong to a select group. Programs that reward store credit cardholders for reaching purchase benchmarks provide shopping incentives, instill a sense of specialness and underscore a store's appreciation for their loyalty. Retailing business models, such as wholesale clubs, combine an atmosphere of exclusivity and status symbol attitude with competitive pricing to keep cash registers ringing.

Online Perspective

Advertising agreements and sales partnerships represent forms of exclusivity used in online retailing. Exclusive advertising agreements provide a website with a guaranteed revenue stream and give the advertiser sole access to the site's audience. Sales partnerships present opportunities to enter new market segments and leverage brand awareness to increase sales. To prevent showrooming – shoppers consulting brick-and-mortar expertise before buying online — retailers request exclusive merchandise at lower prices.