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?
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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
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Use distribution as
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A channel of distribution
• Diversified channels: retail outlets, museum stores, gift shops, …
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A place to increase brand equity
• Luxury retail shops in Italy
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Offering: between shopping and specialty
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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
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~1983: Change into streamlined distribution system
Distribution Structure
1983: streamlined distribution system
Manufacturer
Manufacturer
orders - deliveries
orders
Single Country
Independent
Distributors
Independent agents
or subsidiaries
orders - deliveries
orders
Retailers
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Retailers
Hybrid channel administration
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deliveries
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
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streamlined distribution system
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Manufacturer
orders
Single Country
Agent
deliveries
orders
Retailers
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PUSH strategy
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Shift in market coverage
strategy
Induce cooperation with retailers,
keep inventory low, display
products, and visibility on shelf
spaces to win voluntary cooperation.
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
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Avoidance Strategy
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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
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Diversification of channels: selected retailers, own stores,
licensing
Controlled distribution system
Management of Power in
Distribution Channels
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Power Management increased by streamlined
distribution system
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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
basic
offering
Trainings
Merchandising
Reference value
Identification
Coercive sources
Power
Non-coercive
sources
Distribution and the Brand
Distribution on Brand Image
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Consistent retail experience to strengthen the brand
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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:
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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
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~80s: Too intensive distribution system
Price discrepancy between luxury retailers and
others
 confusing brand image
Luxury
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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