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
Manufacturer
Independent
Distributors
Retailers
Manufacturer
Retailers
orders - deliveries
orders - deliveries orders
Single Country
Independent agents
or subsidiaries
orders
deliveries
1983: streamlined distribution system
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
Manufacturer
Retailers
orders
Single Country
Agent
orders
deliveries
PUSH strategy
Induce cooperation with retailers,
keep inventory low, display
products, and visibility on shelf
spaces to win voluntary co-
operation.
streamlined distribution system
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.
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
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.
Threat of revocation
Retailer churn=5% in 03
Trainings
Merchandising
Reference value
Identification
Coercive sources
Non-coercive
sources
Power
basic
offering
Services: support in merchandising,
inventory risk, training
service offering
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


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.


Luxury Other retailers
Next Step: Multiple Trademarks