ALESSI

Evolution of an Italian Design Factory

Marketing Management Team C EMBA 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
1983: streamlined distribution system

Manufacturer
orders - deliveries orders

Manufacturer

Independent Distributors
orders - deliveries orders

Single Country
Independent agents or subsidiaries

deliveries

Retailers

Retailers

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

streamlined distribution system Manufacturer

orders

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.

Single Country Agent

orders

deliveries

Retailers

PUSH strategy

Induce cooperation with retailers, keep inventory low, display products, and visibility on shelf spaces to win voluntary cooperation.

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. Diversification of channels: selected retailers, own stores, licensing Controlled distribution system

Lately: Resistance and confrontation strategy

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.
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

Trainings Merchandising Reference value Identification

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
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.

Next Step: Multiple Trademarks