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How to control and expand distribution without compromising the brand image?
Distribution Structure Distribution and the Brand Image Challenges Next Step
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,
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
Distribution Structure
1983: streamlined distribution system
Manufacturer
orders - deliveries orders
Manufacturer
Independent Distributors
orders - deliveries orders
Single Country
Independent agents or subsidiaries
deliveries
Retailers
Retailers
Indirect for orders and direct for deliveries Agents: independent or company-owned subsidiaries
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
deliveries
Retailers
PUSH strategy
Induce cooperation with retailers, keep inventory low, display products, and visibility on shelf spaces to win voluntary cooperation.
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. Diversification of channels: selected retailers, own stores, licensing Controlled distribution system
Better control over products and shorter delivery channels thus reduction of costs of opportunity.
Services: support in merchandising, inventory risk, training
service offering
Threat of revocation Retailer churn=5% in 03 Coercive sources Power Non-coercive sources
basic offering
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
~80s: Too intensive distribution system Price discrepancy between luxury retailers and others
confusing brand image
Luxury Other retailers
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.