The place of distribution

The place of distribution refers to the channels that are used to make products and services available to customers. Retail channels are most effective when they meet the consumer's expectations in terms of location, convenience and product assortment. For luxury brands, there's the additional task of brand protection in the distribution channel choice. This is because one of the important features of luxury brands and any brand that desires to maintain an exclusive brand aura is a tightly controlled distribution channel. This means avoiding or minimizing the use of middlemen and licences or franchises in order to retain control of where the products are sold. For example when Gucci and Burberry licensed their brands to multiple manufacturers and distributors, their brand values plummeted downwards. However, the buying back of the licences led to the increase of the brands' strengths and appropriate brand positioning.

Tightly controlled distribution is nonetheless not a magic formula for the success of luxury goods distribution. There are other relevant calculated factors that have to be considered in the design and implementation of distribution strategies. Luxury brands currently utilize four broad strategies in products and services distribution:

1 Directly Owned Stores (DOS), which could be in the form of stand-alone stores or retail spaces within high-end departmental stores.

2 Licence operations through third parties, which is challenging to control and often leads to a diminished luxury status.

3 The Internet, which is a new channel and one of the strategic challenges luxury brands currently face.

4 Catalogue mail-order, which is a strategy used before the introduction of modern distribution channels.

The most appropriate medium of the distribution of luxury goods is the DOS both offline and online. This channel best preserves the brand qualities of exclusivity through controlled distribution, and prestige through brand image projection. Licensing is generally bad news for luxury brands in terms of quality and distribution control. This is the reason that several luxury brands such as Chloe and Gucci have either completed or are in the process of buying back their licenses from third party companies.

The distribution strategy of luxury brands also comprises of the tactics for the services distribution. These services include customer services and aftersales services. The services aspect of the distribution of luxury goods is often neglected and wrongly considered as an offshoot of the product. Luxury brands currently utilize three broad service distribution strategies, which are the following:

1 Customer service within the brand's store, wherever the store is located.

2 Customer call centres, which a number of luxury brands have outsourced to other companies.

3 Online customer services, which remains poorly handled by the majority of luxury brands.

As previously indicated, luxury brands have an exclusive distribution strategy. This is also technically known as the vertical value chain system and is represented in Figure 5.15. The vertical value chain system indicates that luxury brands manufacture, wholesale (where this applies) and retail their products and services with the minimal use of secondary distributors. This strategy involves both exclusive (single channel) and selective (approved and tightly controlled dealers only) channels.

Figure 5.15 The vertical chain distribution system adopted by luxury brands




Figure 5.15 The vertical chain distribution system adopted by luxury brands

Unlike consumer goods, the distribution of luxury goods and services comprises of a one-track direction, making it easily manageable. In addition, several new distribution opportunities like the Internet provides optimal tools for enhanced services, long-term customer relationships and improved direct marketing methods. As noted in earlier chapters, luxury consumers desire personal attention and customized services and this can be achieved through online customer services powered by the Internet.

The choice of the appropriate distribution strategy results in increased sales and profitability, competitive leverage, customer satisfaction and brand loyalty. Most importantly, it portrays the language of the brand.

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