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A leading manufacturer of watches maintains a set of very exclusive networks of retailers (exclusive distribution) that are authorized to sell its watches. This exclusivity ensures that the company can control the service level, distribution, and outputs offered by the retail stores doing business with them. Recently, however, there has been pressure on the company (by Wall Street investors) to expand its products to more and more retailers (intensive distribution) in order to increase sales. What are some of the dangers that the company might encounter when moving from one form of distribution to another?
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Marketing Management
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The danger of moving from exclusive distribution to either selective or intensive distribution may help in the short term, but often hurts long-term performance. Intensive distribution increases product and service availability but may also result in retailers competing aggressively. If price wars ensue, retailer profitability may also decline, potentially dampening retailer interest in supporting the product, and it may also harm brand equity.
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