1. ALESSI Evolution of an Italian Design Factory
Marketing Management
Team C
EMBA ’06

2. How to control and expand distribution without compromising the brand image?

3. Distribution Structure
Distribution and the Brand Image
Challenges
Next Step

4. 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

5. 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

6. Distribution Structure
1983: streamlined distribution system
Manufacturer
Manufacturer
orders - deliveries
orders
Independent
Distributors
Single Country
Independent agents
or subsidiaries
deliveries
orders - deliveries
orders
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

7. Distribution Structure
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.
streamlined distribution system
Manufacturer
orders
Single Country
Agent
deliveries
orders
Retailers
PUSH strategy
Induce cooperation with retailers, keep inventory low, display products, and visibility on shelf spaces to win voluntary co-operation.

8. 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

9. 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
basic
offering
Threat of revocation
Retailer churn=5% in ‘03
Coercive sources
Power
Trainings
Merchandising
Reference value
Identification
Non-coercive
sources

10. Distribution and the Brand

11. 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

12. 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.
Other retailers
Luxury

13. Next Step: Multiple Trademarks