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!): as gifts, wedding presents, Christmas: overall 25-30% of annual sales. about 50% purchases Specialty goods: best sellers like M.Suicide, Magic Bunny, etc…  Consumer side distribution structure  ~1983: Change into streamlined distribution system

Distribution Structure

Manufacturer orders - deliveries

Independent

Distributors orders - deliveries Retailers 1983: streamlined distribution system Manufacturer orders Single Country Independent agents

or

subsidiaries orders deliveries 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

streamlined distribution system Manufacturer orders

Distribution Structure

orders Single Country Agent deliveries  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.

Retailers  PUSH strategy  Induce cooperation with retailers, keep inventory low, display products, and visibility on shelf spaces to win

voluntary co operation

.

Management of Power

Distribution Channels in

  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

Distribution Channels in

 Power Management increased by streamlined distribution system  Better control over products and shorter delivery channels service offering thus reduction of costs of opportunity.

Services: support in merchandising, inventory risk, training basic offering

Threat of revocation Retailer churn=5% in ‘03

Trainings Merchandising Reference value Identification Coercive sources Non-coercive sources Power

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 customer-based brand equity value:

while

increasing    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