While Bryce Phillips, founder of active sports retailer evo, was skiing in Japan, he was surprised to learn that several skiers at the lodge owned evo products. Although it is evo's intention to become a more global company, the organization does not regularly export to other countries. Yet, even with little export activities, customers from other countries are seeking out evo sports gear.
Evo, short for "evolution," was founded as an online retailer in 2001 and opened its Seattle-based retail store four years later. While the retail store provides customers with a physical location to look for products, the online store allows evo to carry a greater selection and extend its global reach. The company caters to active sports enthusiasts with products like ski gear, wakeboards, snowboards, skateboard gear, and street wear. From the beginning, Phillips wanted to use the Web to spread the word about evo worldwide. "When we think about the future, we think about being a global brand in the context that, for the kind of customers that we'd like to attract, we'd like to attract them all over the world," Phillips said. "And being on the Web, the word travels, and your brand can travel very, very quickly."
Approximately 5 percent of evo's business comes from outside the United States, and the Web's global reach has increased demand for evo's products. Yet despite these favorable global prospects evo has been constrained somewhat in its ability to ship internationally. We are confined in some ways by a lot of our dealer agreements." said Nathan Decker, senior director of e-commerce at evo. He provides two reasons for why vendors create exclusive dealer arrangements with evo: (1) to avoid saturating markets overseas; and (2) to maintain control over their products in order to compete fairly in the global marketplace. By limiting distribution, manufacturers are able to exert some control over other elements of the marketing mix such as price. The evo website contains a list of brands that the company cannot ship overseas due to contractual agreements. If consumers from foreign countries try to order these brands they will receive notification that their order has been canceled.
Because retailers often do not own many of the brands they sell, manufacturers can maintain the right to determine where their products are sold and how much to distribute to the company. This represents a major challenge for retailers that want to go global. On the other hand, large retail companies that have a lot of power, such as Walmart, have a better ability to negotiate with manufacturers on global distribution. As evo grows as a brand, the company may gain the power to negotiate more favorable distribution terms with its vendors. Additionally, dealer contracts cannot prevent consumers themselves from sending the products overseas. As Phillips found out firsthand, the company's popularity has spilled over into other countries. Technology has enabled the company to engage in viral marketing, which aids in increasing the company's global brand exposure. For instance, when mountain gear manufacturer Rossignol decided to launch its skis globally through the evo website, the news was posted on ski websites throughout the world. Evo has also been featured in magazines that have international circulations.
Evo hopes to work with its vendors to make global selling more feasible. "Once we kind of work through that and get the green light from some of our bigger vendors, I think that it'll become more of a strategic focus," Decker said. In the meantime, evo is finding additional ways to increase its global presence. For instance, the company launched evoTrip as a service for adventurous sports enthusiasts who want to travel. EvoTrip arranges the trips with the goal to connect people to local cultures, communities, and sports. In addition to increasing its customer base, evoTrip allows the organization to form relationships with consumers overseas. Global opportunities are likely to increase as evo continues to grow. In 2011, the company released its first customer catalogue, and Phillips has expressed a desire to open more stores across the nation. The organization is also exploring the possibility of expanding its own line of evo-branded products. In doing so, the organization would not be constrained by contractual obligations from its vendors. Creating a global brand remains an important part of evo's endeavors. According to Phillips, "Everything we do, whether it is something we buy or something we sell [or] something we invest in is connected globally.
What are both the positive and negative outcomes from using exclusive dealer agreements that restrict global distribution?