As we all know, a dealership is a business authorized to sell a specific brand of goods or services.
They typically operate under a contract with the manufacturer or brand owner, allowing them to represent the brand and sell their products within a specific territory.
In simpler terms, dealerships act as middlemen between manufacturers and consumers.
Since you are not required to start a business from scratch and are instead partnering with an already well-established brand, the dealership business is very popular in India.
It is one of the easiest ways for newcomers to enter the business field. In India, there are two common types of dealerships: exclusive and non-exclusive.
This article will explain the differences between these two types to help you decide which one suits you best.
Exclusive Dealership
In an exclusive dealership, a manufacturer or brand grants the right to sell their product or service to only one dealer within a specific territory.
So, if you become an exclusive dealer, you are the authorized seller of that brand and have the sole right to sell that particular brand’s products within a specific territory or area.
The size of the territory may depend on your location.
For example, if you are from a small town, you may become the authorized dealer for the whole town, while if you are from a large city, you may be the authorized dealer for a specific area within that city.
Advantages:
- Exclusive dealers get better pricing from the manufacturer due to their exclusivity, leading to higher profit margins.
- You don’t need to worry about other dealers selling the same product in your area.
- You can build a closer and more strategic partnership with the brand or manufacturer.
- Exclusive dealerships often come with higher levels of support and commitment from the brand, including marketing assistance, training, and priority access to inventory.
Disadvantages
- The brand or manufacturer has more control over your business. They typically restrict the dealer from selling competing brands’ products within the designated territory.
- An exclusive dealership may require a slightly higher initial investment due to minimum requirements for inventory purchase and marketing and promotion to maintain the brand image.
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Non-Exclusive Dealership
In a non-exclusive dealership, a dealer can sell products from multiple brands in their shop.
Dealers under these agreements have more flexibility in terms of the products they can sell, as they are not bound to a single brand. It is easier to obtain a non-exclusive dealership compared to an exclusive one.
Advantages
- You can offer a wider range of products or services to customers.
- You don’t need to invest a large amount in one particular brand and can instead offer variety from different brands.
- You have more control over your shop and can include or exclude products and brands as per your choice.
Disadvantages
- Non-exclusive dealers typically have lower profit margins compared to exclusive dealers.
- Brands or manufacturers provide less support to non-exclusive dealers compared to exclusive ones.
In India, both types of dealership agreements are common across various industries, including automotive, building materials, electronics, and consumer goods.
The best choice between exclusive and non-exclusive dealerships depends on the market conditions in your location and your business goals.