Post on 28-Mar-2015
ALESSIEvolution of an Italian Design Factory
Marketing ManagementTeam CEMBA ’06
How to control and expand distribution without
compromising the brand image?
Distribution Structure
Distribution and the Brand Image
Challenges
Next Step
Why Controlling Distribution?
Control Brand Image Problem of heterogeneity in retailer
strategies over product display Diversity in distribution channels Recovering from price and brand
confusion of past ten years Increase turnover
Distribution Structure
Use distribution as A channel of distribution
• Diversified channels: retail outlets, museum stores, gift shops, … A place to increase brand equity
• Luxury retail shops in Italy
Offering: between shopping and specialty Design-oriented table and kitchen products Shopping goods (not convenience goods!): about 50% purchases
as gifts, wedding presents, Christmas: overall 25-30% of annual sales.
Specialty goods: best sellers like M.Suicide, Magic Bunny, etc…
Consumer side distribution structure ~1983: Change into streamlined distribution system
Distribution Structure
Manufacturer
Independent Distributors
Retailers
Manufacturer
Retailers
orders - deliveries
orders - deliveries orders
Single Country Independent agents
or subsidiaries
orders
deliveries
1983: streamlined distribution system
Hybrid channel administration Indirect for orders and direct for deliveries Agents: independent or company-owned subsidiaries
Benefits: increase of control in distribution, reduction of functional discrepancies, reduction of delivery costs, economies of scale in order management, better mapping in assortment of goods and better services by company-owned subsidiaries
Distribution Structure
Manufacturer
Retailers
orders
Single Country Agent
orders
deliveries
PUSH strategy Induce cooperation with retailers,
keep inventory low, display products, and visibility on shelf spaces to win voluntary co-operation.
streamlined distribution system
Shift in market coverage strategy From intensive distribution to
selective distribution: Agents as independent
entities in exclusive geographical areas
From 9000 retailers in 1989 to
5000 in 2000.
Management of Power in Distribution Channels
Avoidance Strategy Differentiation: design oriented and product naming Focus: Table and kitchen, high-quality Reduction in costs: Reduction in delivery costs by streamlined
distribution system. Lately: Resistance and confrontation strategy
Diversification of channels: selected retailers, own stores, licensing
Controlled distribution system
Management of Power in Distribution Channels Power Management increased by streamlined
distribution system Better control over products and shorter delivery channels
thus reduction of costs of opportunity.
Threat of revocationRetailer churn=5% in ‘03
TrainingsMerchandising Reference value
Identification
Coercive sources
Non-coercive sources
Powerbasicoffering
Services: support in merchandising, inventory risk, training
service offering
Distribution and the Brand
Distribution on Brand Image
Consistent retail experience to strengthen the brand Benefits: Customer Loyalty, more inelastic consumer response,
greater trace cooperation and support, possible licensing opportunity
Shop-in-shop for control over product display, demanding retailer commitment: ask for minimal surfaces
Mono-brand stores: show rooms and flagship stores
’03: 3 moves to expand distribution while increasing customer-based brand equity value: Consistent retail experience Increasing retail penetration in key markets Licensing the Brand for newer types of products like watches
and cars
Distribution Challenges on Brand Image
~80s: Too intensive distribution system Price discrepancy between luxury retailers and
others confusing brand image
Constant control challenge over product display, merchandising and pricing Though selective approach, Licensing still
putting at risk the brand image by partners controlling manufacturing and distribution.
Luxury Other retailers
Next Step: Multiple Trademarks