When Harvey Norman secured the exclusive distribution of the much-anticipated LG Nexus 4 in January 2013, it wasn’t just the $97 mark-up that irritated consumers, it was also the narrow retail distribution.
Early adopter Cameron, a mechanical engineer based in the Australian Capital Territory, had been wanting to purchase the Nexus 5 through Google Play, but it had been sold out for months, so he a choice: go on Google’s waiting list for a undetermined amount of time of purchase one from Harvey Norman.
“I knew it was an exclusive from the media reports and although I could have waited, I wanted a new phone,” Cameron said. “Harvey Norman has a terrible presence in Canberra — there is only one store in Fyshwick, which is an industrial neighbourhood a long way from anything — while there’s a JB Hi-Fi in every mall.”
LG is certainly not alone in launching a new product or range of products exclusively through a single retailer. Over the past month, Melbourne-based wholesaler Blonde Robot launched the eagerly-awaited Leap Motion gesture controller with Dick Smith and Lenovo unveiled its exciting new Yoga tablet range with partner JB Hi-Fi.
At the Lenovo launch, local managing director Matt Codrington was asked why the Chinese vendor was dealing only with JB for this launch.
“They are one of the biggest retailers in Australia and they have got a great breadth of stores,” he said. “We were looking for a partner that is innovative to match the product and we were looking for a partner that suits our business model.”
That answer seemed a bit vague so I followed with a more pointed question: does launching with an exclusive partner help to hold up Lenovo’s RRPs?
“I guess so — yes,” he replied. “We are still going to be competing against the other vendors, so we have to make sure the product is priced at the right price point. If you are not having retailers competing, that can help, but obviously we need to be competitive in the market itself as well.”
The Leap Motion case is slightly different: the US head office wanted an exclusive partner after similar launches in America and Europe proved successful. Insiders also say that not having to deal with individual proprietors or franchisees at Dick Smith was an advantage.
The cynical view is that the main reason for an exclusive launch is to protect against multiple retailers competing and driving down prices. There are several other practical benefits, however, such as streamlined logistics and marketing, the efficiencies realised from only having one retailer to deal with and it can be an advantage if stock issues are a problem.
Additionally, LG has previously said that by launching exclusively with Harvey Norman, it can allocate resources to train staff and promote new technologies through merchandising more effectively.
Consumers, however, are becoming increasingly frustrated. It is no longer the case that you can walk into any store and expect to find the latest gadget, even from billion dollar global megabrands like LG.
Meanwhile, the retail industry is fragmenting in to ‘have exclusives’ and have nots. Earlier in the year, Narta had its bid for Minimum Advertising Prices quashed by the ACCC. It cited an inability to secure the retail distribution of new technology as a reason for this application.
Betta Home Living is a member of the Narta Group — CEO Graeme Cunningham shared his thoughts on this issue:
“No retailer likes to miss out on business in the early stages of the product lifecycle, and it is not something that happens with our true supplier partners,” he said. “There are times when a supplier launches a product exclusively, but it is mostly technology product and largely due to limited incoming stock being available.
“In this space, suppliers also like to be first to market to demonstrate product leadership, however, those that do this place their relationship and their opportunity for growth at risk.”