When we decide to use selective distribution, it means that there are fewer locations where the customer can buy our product. We are not everywhere.
We take this approach when the cost to stock our product is very high. For example for home computers, you might sell through a retail outlet. The inventory cost is very high for that retailer so you don't want to license several retail outlets in a small market to sell your product. Their inventory cost is so high and if you create all kinds of competition for them then you are weakening their position.
Another consideration is whether customers are willing to travel to a location to purchase the product. For high-ticket items like cars, furniture or computers, the customer may be willing to travel to a number of outlets. But for items like toothpaste, it had better be everywhere.
Selective and exclusive distribution is limited distribution strategies.
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