COURSE SUMMARY LUXURY DISTRIBUTION
M1 MANAGEMENT DU LUXE
Marie-Véronique Contat 1 INTRODUCTION The new issues at stake for luxury distribution 1/ Historical evolution of the luxury sector
2/ Recent evolution of the luxury market . Breakdown by distribution channels . Evolution of the online and off-price segments . Polarization of the markets : luxury brands go global
3/ Luxury distribution structure today . Central dilemna of luxury distribution . Main distribution channels for luxury brands
4/ Global luxury markets in 2014 . Breakdown by geographical areas . Main luxury markets in 2014
Marie-Véronique Contat 2 I/ Historical evolution of the luxury sector
Evolution of the luxury sector
From 1970 to 2000 : structural change in the luxury industry Concentration in the Fashion and Luxury industry and creation of major luxury groups 1987 : Bernard Arnault created LVMH, Richemont and Kering/Gucci Group were created in the same years (respectively 1988 & 1994) From craftsmanship to industry Emergence of marketing and brand stretching New markets, new opportunities : international expansion of luxury brands
Marie-Véronique Contat 3 I/ Historical evolution of the luxury sector
Evolution of the luxury sector
2000-2010 From concentration to consolidation Vertical and horizontal integration Global luxury and new luxury models « Retailization » strategy
2010-2014 : back to operations New acquisitions Focus on the emerging markets
Marie-Véronique Contat 4 2/ Recent evolution of the luxury market
Marie-Véronique Contat 5 2/ Recent evolution of the luxury market Worldwide personal luxury goods market trend by channel 20132014
Marie-Véronique Contat 6 2/ Recent evolution of the luxury market Worldwide personal luxury goods market trend by channel 20132014
Marie-Véronique Contat 7 2/ Recent evolution of the luxury market Online personal luxury goods market trend 20032014
Marie-Véronique Contat 8 2/ Recent evolution of the luxury market Offprice personal luxury goods market 20102013
Marie-Véronique Contat 9 2/ Recent evolution of the luxury market Airport channel trend 2011214
Marie-Véronique Contat 10 2/ Recent evolution of the luxury market Polarization of the Markets : Luxury Brands are Going Global
Total Asia : 41% Total Asia : 36%
LVHM Fashion & Leather Goods Kering Luxury division Turnover : 10 828 B€ Turnover : 6 838 B€
Marie-Véronique Contat 11 2/ Recent evolution of the luxury market Polarization of the Markets : Luxury Brands are Going Global
Total Asia : 46% Total Asia : 46%
HERMES turnover : 4 118 B€ Prada turnover : 3 551 B€
Marie-Véronique Contat 12 2/ Recent evolution of the luxury market Polarization of the Markets : Luxury Brands are Going Global
Total Asia : 34% Total Asia : 12% Total US : 65% Total US : 67%
Coach turnover : 4,8 B US$ Ralph Lauren turnover : 7,4 B US$
Marie-Véronique Contat 13 3/ Luxury distribution structure today
DISTRIBUTION : A COMPETITIVE ADVANTAGE IN LUXURY
The success and development of the luxury and fashion markets is mainly due these last 20 years to their distribution strategy.
Brands such as Saint Laurent which weakely invested in distribution has stagned or decreased their sales. On the contrary, Louis Vuitton, Hermès or Coach have invested in their distribution network and have significantly increased their sales.
Marie-Véronique Contat 14 3/ Luxury distribution structure today
Marie-Véronique Contat 15 3/ Luxury distribution structure today
In a period of tight economy more than ever, distribution is a key factor. Heavy and risky investments, brand image control, payment risks, retailers’sales, e- commerce development…. Are a few of the many challenges that need to be taken into account in a distribution strategy.
How to combine brand management and increase of revenues?
From an economic standpoint, luxury maisons currently face a strong paradox consisting in, on the one hand, maintaining and even enhancing their luxury image and, on the other hand, widening access to their products to an ever- increasing clientele. We always refer to 5 main paradoxes in luxury business:: demand, price, product, distribution, communication.
In the luxury industry, we will always refer to companies as retailers or wholesalers or both. Some brands are retail exclusive, some brands are mainly wholesaler, and some combine both distribution.
Marie-Véronique Contat 16 3/ Luxury distribution structure today
MAIN DISTRIBUTIONS CHANNELS FOR LUXURY BRANDS
RETAIL Subsidiaries, owned stores, franchise stores, concessions in dept stores, outlets shops, pop-up stores.
WHOLESALE Distributors, agents, multibrand retailers, corners in department stores, concept stores
INTERNET LICENSES, MASTER LICENSES and MASTER FRANCHISES DUTY FREE SHOPS
Marie-Véronique Contat 17 3/ Luxury distribution structure today
Marie-Véronique Contat 18 4/ Global luxury markets in 2014
Breakdown by geographical area in 2014
Marie-Véronique Contat 19 4/ Global luxury markets in 2014 Breakdown by geographical area in 2014
Marie-Véronique Contat 20 4/ Global luxury markets in 2014
MAIN LUXURY MARKETS IN 2014
1. U.S.A. 2. JAPAN 3. ITALY 4. FRANCE 5. CHINA 6. UNITED KINGDOM 7. GERMANY 8. SOUTH KOREA 9. HONG KONG 10. MIDDLE EAST 11. RUSSIA
Marie-Véronique Contat 21 4/ Global luxury markets in 2014
Marie-Véronique Contat 22 4/ Global luxury markets in 2014
Marie-Véronique Contat 23 PART ONE
ROUTES TO MARKETS - WHOLESALE
Marie-Véronique Contat 24 ROUTES TO MARKET WHOLESALE
Definition : sales through third party distributors. Traditional formats : department stores, multibrand boutiques. Emerging formats : outlet stores, e-boutiques. Brand moved away from wholesaling during the recession as retailers began implementing sharp discounts. The once-key department store channel suffered a decline so luxury fashion brands are wise to explore other options. Outlet stores, factory shops and online boutiques such as Net-a- Porter offer growth at both the lower and upper ends of the fashion market.
Marie-Véronique Contat 25 ROUTES TO MARKET WHOLESALE
Marie-Véronique Contat 26 WHOLESALE EXCLUSIVE SALES
First brands present their collections at the international fairs or fashion trade shows in Paris, Milan or Frankfurt and sell them on the spot to individual stores or department stores in a given city or given country Here distributors from around the world come looking for new ideas or new products. In the luxury ready-to-wear sector, the different brands present their fashion shows in the same week and all major purchasers come to town with their purchasing budgets (or open to buy).
Marie-Véronique Contat 27 WHOLESALE EXCLUSIVE SALES The fashion brands pay particular attention to purchasers from US or Japan department stores that can purchase large quantities of goods.
At the end of the show, firm orders and cash down-payments are taken for the goods to be delivered later in the year.
Before they come to Paris and Milan, department store purchasers will have prepared their « open to buy » budgets based on each individual brand’s performance over the previous couple of years.
The selling must be done well in advance and if possible at the headquarters of the main national department stores in major countries
Marie-Véronique Contat 28 WHOLESALE EXCLUSIVE DISTRIBUTION
This model preserves the personal relationship to the brand provided that the distribution agreement specifies that sales can only take place in the specified location and by the specified personnel. The advantage in comparison of the exclusive own-brand store network is that this system is much more flexible and the break even-point of a store here is much lower without damaging the brand.
Marie-Véronique Contat 29 WHOLESALE LOCAL DISTRIBUTORS
Local distributors purchase with their own money, build local inventories and sell in their own country.
This is a low investment approach for a luxury or fashion company looking to expand internationally.
A local distributor is generally granted an exclusive right to distribute a product or a brand in a given territory.
Distributors generally represent several brands in order to spread the cost of their sales force between them.
Local distributors assume all financial risks on the brand locally.
Marie-Véronique Contat 30 WHOLESALE LOCAL DISTRIBUTORS
They generally know how to negotiate for the best location in a department store and how to arrange discounts on media advertising tariffs.
They can generally handle a brand’s day-to-day activities very effectively.
Local distributors are not always easy to control and may, in some cases, do their own marketing locally, rater necessarily following what the brand would like.
Distributors are ideal for starting and developing a brand; but when sales reach Euros 10 – 15 million, it may make sense to start a subsidiary.
Marie-Véronique Contat 31 But the differences do not stop here
The principal is very interested in building brand awareness and its standing in a given market, so it tries to push for the largest part of this advertising budget to be spent in media investments. The distributors are more interested in the short term, so prefers immediate promotional activities.
Developing the distribution system is obviously the number-one activity for those who want to build a worldwide business and cannot afford to invest drectly everywhere in the world.
It is the responsability of top management to know directly their distribution « partners »
Marie-Véronique Contat 32 16 KEY LUXURY FASHION DISTRIBUTORS
Marie-Véronique Contat 33 LUXURY BRANDS DISTRIBUTORS
Despite their inherant focus on brand control, luxury manufacturers have commonly relied on local distributors to introduce products to new markets, acknowledging that whilst they might know what is best for their brand communications, design and development, they may not necessarily understand local cultures, retail climates and stores. Whilst houses retain control of distribution in home-markets of Europe and the US, markets such as the United Arab Emirates, Asia and Russia, are often leveraged through a network of premium distributors.
Marie-Véronique Contat 34 Valiram, Malaysia The Valiram Group operates high fashion and luxury-goods boutiques in domestic and airport retail environments, housing both branded and multi-branded stores that feature some of the world’s finest luxury brands. Recently the group began fragrance distribution in Malaysia, for Cartier, Lalique and Asprey, with plans to grow the business to their other serviced regions, Singapore, Indonesia and Australia. Brands: Bally, Bvlgari, Cartier, Chanel, Chloé, Chopard, Coach, Dunhill, Fendi, Giuseppe Zanotti, Godiva, Hermès, Hugo Boss, Jimmy Choo, Montblanc, Omega, Rolex, Salvatore Ferragamo, TAG Heuer, Tod’s, Vertu, Versace Stores: Eye Spy, Fashion Gallery, Flying Emporium, Luxury Fashion, Podium Motorsport, Swiss Watch Gallery, Vie Beauté, Wear + When
Marie-Véronique Contat 35 Bluebell, Hong Kong The Bluebell Group is an importer, agency and distributor of exclusive lifestyle products, managing a portfolio of fashion, accessories, perfumes and cosmetics, leather goods and homewares brands. They work closely with international brand owners to tailor distribution and marketing direction to match each brand’s strategy and have built a presence in China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand. Brands: Paul Smith, Céline, Givenchy, Fendi, Blumarine, Kenzo, Twenty8Twelve, Moschino, Anya Hindmarch, Barbara Bui, Trussardi, Jimmy Choo, Louis Vuitton, Celine, Marc Jacobs, Loewe, Dior, Fendi, Davidoff
Marie-Véronique Contat 36 Chalhoub Group, Dubai The Chalhoub Group specialises in the retail and distribution of renowned brands within the sectors of Beauty, Fashion and Gifts. They represent a portfolio of over 280 luxury brands, manage over 350 retail outlets and have a presence in 14 countries, partnering with prestigious houses such as Baccarat, Christofle, Christian Dior, Louis Vuitton and Nina Ricci. Brands: Fendi, Swarovski, Christian Dior, Louis Vuitton, Marc Jacobs, Céline, Chanel, Prada, Givenchy, Calvin Klein, Barbara Bui, Christian Louboutin, Dsquared, Kenzo, Lanvin, Paule Ka Stores: Tangara, Faces, Scarpe, Tagz
Marie-Véronique Contat 37 FJ Benjamin, Singapore FJ Benjamin developes retail and distribution networks for international luxury and lifestyle brands across Asia, as well as handling their promotion and brand building within the region. The public company, headquartered in Singapore, was listed on the Singapore Exchange in November 1996. It has offices in 8 cities, represents over 20 brands and operates over 170 retail stores/shop- in-shops, retailing and distributing luxury and lifestyle products and time pieces across Southeast Asia and Australia. Brands: Céline, Rado, Givenchy, Goyard, DeWitt, Girard-Perregaux, Victorinox Swiss Army
Marie-Véronique Contat 38 Genesis Colors, New Delhi Originally spearheading the corporatisation of the Indian fashion industry, building buisnesses for premium designer labels such as Satya Paul, Deepika Gehani, Samsaara, Shobhaa De and Bwitch, Genesis Colors, forayed into the marketing and distribution of world- renowned luxury brands in India, through its new division, Genesis Luxury Fashion. The group services the Indian market through branded stores. Brands: Burberry, Paul Smith, Canali, Kenzo, Just Cavalli, Bottega Veneta, Aigner, Jimmy Choo.
Marie-Véronique Contat 39 Rivoli Group, Dubai The Rivoli Group is a private company, with a diverse portfolio of international luxury brands and network of retail outlets within the United Arab Emirates and lower Gulf States. The group has become one of the largest importers and retailers of luxury brands in the Middle East and retails a wide range of product categories, including watches, writing instruments, menswear, accessories, gift items and eyewear. Brands: Bang and Olufsen, Blancpain, Carl F. Bucherer, Girard- Perregaux, Glashutte, IWC, JM Weston, Longines, Montblanc, Omega, Rado, Rivoli Silks, Tissot, Vertu, Zenith Boutique Stores: Rivoli, Rivoli Eyezone, Rivoli Arcade, Rivoli Gifts, Rivoli Prestige, Rivoli Textiles, Table Art, Tag Heuer, Younly
Marie-Véronique Contat 40 Al Tayer, Dubai Al Tayer Group is a privately-held, diversified company with operations in 12 countries in the Middle East and beyond. Their operations incorporate automobile sales and service, luxury and lifestyle retail, perfumes and cosmetics distribution and engineering as well as interiors contracting. The Group operates over 180 stores across multiple markets in the Middle East, including Bahrain, the Kingdom of Saudi Arabia, Lebanon and Qatar. Their Insignia division retails 26 luxury fashion and accessories brands in 85 locations throughout the region. Brands: Armani, Bvlgari, Bloomingdale’s, Banana Republic, Ford, Ferrari, Gucci, Gap, Harvey Nichols, Maserati, Bvlgari, Boucheron, Bottega Veneta, Dolce & Gabbana, Emilio Pucci, Giorgio Armani, Gucci, Ligne Roset, Yves Saint Laurent
Marie-Véronique Contat 41 Luxasia, Singapore The Luxasia Group is a large scale distributor of fragrance and beauty brands in Asia. Established in 1986, the business employees over 1500 people and operates in ten countries, namely Singapore, Malaysia, Indonesia, Phillipines, Thailand, VIetnam, India, China, Hong Kong and Taiwan. Brands: Aqua di Parma, Burberry, Bvlgari, Calvin Klein, Carolina Herrera, Chloé, Davidoff, Ermenegildo Zegna, Guerlain, Hermès, Issey Miyake, John Paul Gaultier, Lanvin, Marc Jacobs, Nina Ricci, Prada, Salvatore Ferragamo, Stella McCartney, Vera Wang, YSL Beaute Stores: Escentials
Marie-Véronique Contat 42 Onward Kashiyama, Tokyo Onward Kashiyama is a Japanese clothing manufacturer, distributing clothing under its own line as well as producing licensed garments for big name designer brands. Under the licensing business, the group oversees more than 25 different clothing lines around the world as well as Onward branded pieces for sale in its own boutiques. There are more than three dozen stores currently in Japan owned by Onward Kashiyama and multiple more outside Japan in China, South Korea, France, Italy, and Britain. Brands: Calvin Klein, Jean Paul Gaultier, Sonia Rykiel, Paul Smith
Marie-Véronique Contat 43 BinHendi Enterprises, Dubai BinHendi Enterprises operates twenty-nine fashion, jewellery, accessory and food retail outlets in the UAE and GCC, with plans to expand into metropolitan cities Mumbai and Delhi in India. Today the group has successfully introduced more than 75 world- renowned brands to the UAE in the fields of fashion, watches, jewellery, accessories, furniture and fine dining, quickly developing a diverse retail portfolio of the world’s most prestigious brands Brands: Brioni, Hugo Boss, Paul & Shark, Artioli, Shanghai Tang
Marie-Véronique Contat 44 Bosco di Ciliegi, Moscow Founded in 1991, Bosco di Ciliegi retail and distribute an impressive array of luxury brands throughout Russia, as well as operating multibrand stores Donna Bosco, Bosco Uomo, Bambino Bosco and Bosco Scarpa. The group focus primarily on fashion, accessories, jewellery and timepieces, as well as luxury fragrance and cosmetics. Their stores are located in historic shopping centers such as Petrovsky Passage, Moscow, as well as St. Petersburg, Samara, Yekaterinburg and Milan. The company operates historical department store GUM on Red Square in Moscow, with a façade extending almost 250m along the eastern side of the square. Bosco di Ciliegi purchased the controlling share of the business in 2005 and currently manages almost 200 stores within the complex. Brands: Alberta Ferretti, Armani Collezione, Barbara Bui, D&G, Ermenegildo Zegna, ETRO, Hugo Boss, Jean Paul Gaultier, Jil Sander, Kenzo, La Perla, Max Mara, Moschino, Paul Smith, SportMax, Alberto Guardiani, Casadei, Cesare Paciotti
Marie-Véronique Contat 45 Shreyans, Mumbai Shreyans is a retailer and distributor of luxury mobility, fashion, lifestyle and jewellery brands in India, developed by a USC graduate Ashish Chordia. Chordia identified a tremendous opportunity for luxury brands in the Indian market whilst working for Deloitte in the US, he then began acquiring the rights to some of the world’s most luxurious brands, which he distributes and retails in India today. Brands: Porsche, Ducatti, Netjets, Dolce & Gabbana, Christian Dior, Etro, Emilio Pucci, Fendi, Van Cleef & Arpels
Marie-Véronique Contat 46 Swiss Prestige, Hong Kong Swiss Prestige represents Swiss watch manufacturers in Asia, specialising in the field of mechanical timepieces. Wth offices in Hong Kong, Beijing, Shanghai, and Taipei, Swiss Prestige also represents well-known Swiss watch brands in China, Taiwan, Philippines, Thailand and Australia. Brands: Corum, Eberhard & Co, Greubel Forsey, Hublot, Oris, Roland Iten
Marie-Véronique Contat 47 Sparkle Roll Group, Hong Kong Sparkle Roll Group is a distributor of top-tier luxury goods in the People’s Republic of China, distributing ultra-luxury automobiles, haute horlogeries, haute jewellery and renowned French wines. Brands: Bentley, Lambourghini, Rolls Royce, Richard Mille, Parmigiani, DeWitt, Boucheron, Federico Buccellati
Marie-Véronique Contat 48 DKSH Luxury & Lifestyle, Shanghai DKSH provides market expansion, distribution and retailing services for high-end lifestyle watches, accessories, apparel and household luxury goods across Asia. Their Luxury & Lifestyle division has almost 9,000 retail points of sale, ten company boutiques, 152 shop- in-shops, and 453 brand corners with 323 specialists working in 11 countries. Core markets include China, Hong Kong, Taiwan, Japan, Thailand, Malaysia, Singapore, Australia, New Zealand, and South Korea.
Marie-Véronique Contat 49 Mercury, Moscow Mercury began as a jewellery shop in Moscow over 15 years ago and now generates more than 1 billion euros n annual sales. The group retails and distributes a wide selection of the world’s top luxury goods, including fashion and accessories, jewellery and luxury automobiles. The group also operates luxury department store Tsum, located in a six-story historical building at Petrovka street. It carries more than 1000 brands of fashionable apparel, perfumery and jewelry, as well as “TSUM Globus Gourmet” gastronome, a fusion restaurant, a cigar room, a café and Champagne-bar by Veuve Clicquot.
Marie-Véronique Contat 50 WHOLESALE AGENTS
Best way to enter in a new market if you don’t wish to invest at the initial stage. Selection of the agent is very important You send him a collection each season that he will present to potential customers : multibrand retailers, department stores. You will pay a commission to him on the sales realized in the country. You will set up sales objectives per season.
Marie-Véronique Contat 51 Selective vs exclusive distribution
Selective
Involves the choice by the brand of a limited number of outlets in a geographical area to sell its products. Means that the brand relies on a few intermediairies to carry its products. Selective distribution can help the brand gain optimum market coverage and more control but at lesser cost than intensive distribution. A brand may move towards more selective distribution to enhance the image of its products, strenghten customer services, improve quality control and maintain some influence over its prices. The major difference relative to exclusive distribution is that the brand no longer chooses its distribution network. In the European legal context, any sales point that respects the brand’s specifications can distribute its products.
Marie-Véronique Contat 52 Selective vs exclusive distribution
Selective
The direct link between clients and brand has been broken. Advantage : enables wide diffusion of the products, without however making it common. One big disadvantage : « grey market » since the prices are no longer controlled, products arriving from zones with lower prices have the tendency to invade the zones with higher prices. Other disadvantage : difficult to check that all sales points respect the brands’ codes and image.
Marie-Véronique Contat 53 Selective vs exclusive distribution Exclusive
Situation in which only certain distributors are authorised to sell a specific product within a particular territory. Fashion brands may appreciate having control over how their products are merchandised and marketed. Extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area. Example : in a specific country, exclusive distribution agreement with a local distributor. Exclusive distribution means that the brands selects only one or very few intermediaries Common for prestige brands and luxury fashion. Allows better control over the price, promotion, service, image.
Marie-Véronique Contat 54 Selective vs exclusive distribution
Exclusive
As the Brand uses a relative fewer number of distribution outlets, it can maintain good relation with these outlets and as a result, expect an increased marketing effort from it. Compared to DOS network, the system is much more flexible and the break-even point of a store here is much lower. Moreover, it is very easy to have a mixed network (of own brand stores and exclusive distribution) without damaging the brand (examples : luxury brands such as Gucci or Cartier).
Marie-Véronique Contat 55 WHOLESALE : RISKS AND REWARDS
Wholesale : the good Wider market exposure Performance measure alongside competitiors Cost-effective expansion Spreading risk Prestige stores enhance brand image
Marie-Véronique Contat 56 WHOLESALE : RISKS AND REWARDS
Wholesale : the bad Lack of control over brand image Unpredictable purchase patterns Unwanted discounting Less profitability vs retail Lack of visibility Brand over-exposure/Loss of exclusivity Counterfeiting issues
Marie-Véronique Contat 57 Marie-Véronique Contat 58 Marie-Véronique Contat 59 Marie-Véronique Contat 60 Business case : ALEXANDER MC QUEEN
Marie-Véronique Contat 61 DISTRIBUTION STRATEGY
Marie-Véronique Contat 62 DISTRIBUTION CHANNEL
Marie-Véronique Contat 63 Department Store
Multi-brand Store
Concept Store
Marie-Véronique Contat 64 Department Store
PRINTEMPS
Multi brand store
LESPIONNE
Colette
Concept Store
Montaigne
No Boutique In Paris ?
Marie-Véronique Contat 65 ONLINE CHANNEL
Marie-Véronique Contat 66 Official Website
Online Multi-brand Boutique
Marie-Véronique Contat 67 Official Website
Marie-Véronique Contat 68 Official Website
Marie-Véronique Contat 69 ON-LINE MULTI-BRAND SHOPS SELLING ALEXANDER MCQUEEN
http://www.net-a- http://www.matchesfashion.com porter.com
http://www.mytheresa.com/ http://www.intermixonline.com en-fr/
http://www.mrporter.com http://www.harrods.com
http://www.neimanmarcus. http://www.luisaviaroma.c com om
http://www.saksfifthavenue.c http://www.harveynichols.c om/entry.jsp om
Marie-Véronique Contat 70 http://www.farfetch.com http://www.colette.fr
http://www.ssense.com http://www.brownsfashion.co m
http://www.eleonorabonucci.c http://www.selfridges.com om
http://www.bergdorfgoodman.c http://www.yoox.com/fr/fe om mme
http://www.montaignemarket. com
Marie-Véronique Contat 71 Alexander McQueen opens first flagship store in Tokyo
Alexander McQueen opened this week its first flagship store in Tokyo in the district of Aoyama district. The new store which covers 390 sqm on two floors was designed by creative director Sarah Burton and David Collins Studio. Inside the new Alexander McQueen flagship in Tokyo, the brand cites “flora and fauna, real and imagined; the warped perspective of Francis Bacon’s paintings of Popes; the Surrealist artist HR Giger; the Eighteenth Century salon and Rorschach ink blots; primitivism, the human skeleton and the female form” as inspiration for the space. June, 2014
Marie-Véronique Contat 72 NEW !!!
Opening of the first flagship store in Paris en September (rue St Honoré)
Marie-Véronique Contat 73 Alexander Mc Queen
45 stand-alone stores Retail accounts for 36% of global sales Objective 2015: 45% CA 2014 : 250 M€ Objectif 2018 : 500 M€
Marie-Véronique Contat Paris store 74 Business case : COACH
Marie-Véronique Contat 75 DISTRIBUTION BUSINESS MODEL
Marie-Véronique Contat 76 INTERNATIONAL DISTRIBUTION POLICY
In 2014 : 833 COACH operated stores USA In 2014, COACH operated 354 direct operated stores, 169 outlet stores and 940 department stores. Coach has reached a leading position in the US. Although COACH had plans to open more stores in the US, its long- term plan was to increase the international distribution and target international customers. JAPAN By 2005, COACH had taken full control of its Japanese operations. It reached the second position behind Louis Vuitton. In 2014, COACH was present in 180 stores in Japan (21% of their total sales).
Marie-Véronique Contat 77 INTERNATIONAL DISTRIBUTION POLICY
ASIA Beside Japan, COACH’s focus has been the Asia emerging markets. In China in 2014, COACH was sold in 96 stores with retail sales exceeding $100 million. In 2010, they opened a flagship store in Shangai. China is supposed to outdo Japan by 2015.
EUROPE COACH found it difficult to enter the European market. Coach started its expansion in Europe starting with UK, France, Spain and Portugal.
Marie-Véronique Contat 78 INTERNATIONAL DISTRIBUTION POLICY
The first store opened in the department store Printemps in Paris in 2010. It was reported that Bernard Arnault tried to stop Coach’s expansion in the department store. Recently, they entered Galeries Lafayette Department store.
Coach’s European stores have the same products as that of US and Japan but the focus was on higher priced products among the best selling collections. It seems that from 2010, Europe is the priority market for the expansion of COACH.
Marie-Véronique Contat 79 COACH PARIS
Marie-Véronique Contat 80 COACH JAPAN
Marie-Véronique Contat 81 COACH SHANGHAI
Marie-Véronique Contat 82 Coach Inc. profits drop 24,4% in fiscal Q4 Coach Inc. reported today net sales of $1.14 billion for its fourth fiscal quarter ended June 28, 2014, compared with $1.22 billion reported in the same period last year, a decrease of 7%. On a constant currency basis, total sales declined 6% for the period. Net profits fell by 24.4% to 781 million dollars (584 million euros). Coach sales in China sales increased by 20 percent in the quarter compared to the same period a year ago, helped by double-digit growth in comparable store sales. For the year, China sales jumped by 25 percent to US$545 million, accounting for about 10 percent of total sales. By comparison, sales in North America fell by 16%, to 691 million dollars. Victor Luis, CEO of Coach, Inc. said, “The fourth quarter capped a challenging year for the company, most notably in the North America women’s bag and accessory business. However, it was also a year of many accomplishments for Coach, including the successful integration of our retail businesses in Europe, surpassing $500 million in sales in China, and driving Men’s to about $700million in sales globally. Most importantly, we laid the groundwork for our brand transformation. A crucial milestone was the arrival of Executive Creative Director Stuart Vevers last September, who has already had a significant impact on the creative direction of the brand. We also developed our new retail concept, inspired by our New York City heritage, using an iconic materials palette that is distinctively Coach.” Coach recently unveiled its first shoes men’s collection, comprising of 15 models, which will be available in stores from October.
Marie-Véronique Contat 83 Coach launches new retail concept
From April 2014, Coach‘s newly appointed Creative Director Stuart Vevers launched a new retail concept for the American brand. The new Coach retail concept has been designed by William Sofield. “I wanted this to feel like a change,” Vevers told WWD. ”This is a new Coach, and making sure that’s understood was really the key thing. It’s about doing something that feels genuinely authentic to Coach, but very much looks to the future. It’s a bold departure. It’s going to feel like a new message from Coach.” Coach’s Rodeo Drive flagship store which opens this Fall will feature the new retail concept of the brand.
Marie-Véronique Contat 84 Stuart Vevers’ debut collection for COACH launches at Colette in Paris Coach’s newly appointed design director Stuart Vevers’ debut collection was available exclusively at famed Parisian concept store Colette. The store teamed up with the New York design house to introduce their Fall 2014 collection, as well as feature a dedicated Coach window. Colette also played host to two limited edition handbags—the Rhyder, redesigned in a shearling fabric, and the Dakotah, in amber suede—to embrace the new spirit that is embedded in Vevers’ designs. “I was really impressed by Stuart’s first collection for Coach, the very individual character that he’s created and the mix of utility and luxury” said Colette’s founder and creative director, Sarah Andelman. The collection was available from June 30 at Colette’s Rue Saint Honoré location.
Marie-Véronique Contat 85 New !!!
Ouverture September 2015
Coach store rue St Honoré
Marie-Véronique Contat 86 New !!!
Marie-Véronique Contat 87 FERRAGAMO
Marie-Véronique Contat 88 FERRAGAMO
Marie-Véronique Contat 89 FERRAGAMO
Marie-Véronique Contat 90 FERRAGAMO
Hong Kong
Hanoi Vietnam
Hong Kong
F/W 2014-2015 campaign Beijing Store
Marie-Véronique Contat 91 FERRAGAMO
Distribution system 360 directly operated Ferragamo own stores (DOS) = retail 264 tailored single brand stores or shops-in-shops managed by third-parties (TPOS) and multibrand channel = wholesale Wholesale customers consist of : Department stores and luxury specialist retailers (ex : US) Franchises (ex : China) Stores opened inside airports (travel retail, duty free)
Marie-Véronique Contat 92 Nicholas Kirkwood expands retail presence worldwide
Mar 27, 2014 British footwear designer Nicholas Kirkwood, acquired in September 2013 by LVMH unveiled the first elements of the development strategy of his namesake brand. The decade old British luxury shoe-brand will launch six pop-up stores are set to become a major reinforcement for a distribution network which currently includes three mono-brand boutiques (London , NYC, Las Vegas ) and 150 points of sale in department stores worldwide.
Marie-Véronique Contat 93 PART TWO
ROUTES TO MARKETS - RETAIL
Marie-Véronique Contat 94 ROUTES TO MARKET RETAIL
Definition : distribution managed in-house Traditional formats : company owned/franchised brand stores (directly operated stores : DOS), concessions. Emerging formats : brand websites, social networks, designers’ outlets. Company owned/franchised stores allow brands to control pricing, but as international consumer base widens, their contribution to creating and maintaining a brand image may be even more crucial. Websites and social networking is increasingly recognised as another important brand imaging tool, with the potential to bring new customers into stores.
Marie-Véronique Contat 95 RETAIL DISTRIBUTION FRANCHISES
A franchise strategy is often used by retailers who wish to internationalize because it involves low investment: the franchisee has the relevant local knowledge and invests in buying the stock, staffing the store and paying the rent. It means the franchisee can trade under a recognizable, well-known brand and benefit from national or international advertising campaigns.
Franchising can offer more sales opportunities than standalone stores. It is a low-risk, low-investment strategy and a flexible way of testing a market. Levi’s or Comptoir des Cotonniers both use a franchise strategy within their global expansion programmes.
Marie-Véronique Contat 96 RETAIL DISTRIBUTION FRANCHISES
Definition : the fashion brand, by contract, gives the right for an outside individual to build and operate a store in a given location in a given city. For example, a fashion brand may be contacted by a wealthy individual who wants to open a monobrand store in the city of Kiev, Ukraine. In the franchising contract, the brand grants him an exclusivity for the city of Kiev and he will commit himself to buy a minimum amount of products for each season and to have no other products in the store. The brand will get money from the products sold each season and also asks for a royalty on retail sales (3 to 5% of net sales). The brand will provide support in terms of communication, store concept and staff training. The big advantage of the franchising system is that it enables the development of retail operations without any investment cost. The franchisee will have to respect the brand store design, windows and merchandising.
Marie-Véronique Contat 97 RETAIL DISTRIBUTION JV SYSTEM Another retail system is to have a local partner to run a retail store with a franchise contract, but to do it through a joint-venture wher the fashion brand has the majority of the capital and the local partner no more than 49%. In this case, the brans has much stronger control of the operations and can make major strategic shifts if necessary. The fashion brand, in this case, must finance 51% of the start-up investment and absorb part of the losses during the first years of operation, if there is any.
COMMISSION-BASED AFFILIATION A local partner opens a store, either exclusive or not to distribute the fashion brand’s products. But in this case, the merchandise and even the stocks belong to the brand. The « affiliate » who runs teh store will get a commission (30%) of the sales. This system is close to the franchise, the brand provides support in merchandising and staff training.
Marie-Véronique Contat 98 RETAIL DISTRIBUTION THE DIRECT OPERATED STORE
First distribution system which brings more coherence and the notion of personal relationship Advantages: perfect control over the brand from all points of view and high economic efficiency. An own brand store makes possible to know exactly and in real time which products are selling A major advantage of the own brand store is the human aspect: the sales personnel are really part of the brand; the quality of the link with the client is therefore very strong.
Marie-Véronique Contat 99 RETAIL DISTRIBUTION THE DIRECT OPERATED STORE
It is the only distribution system that completely protects the client from the counterfeiting and enables the company to counter this scourge effectively The major driver to take control of the customer experience in a more complete way. It boosts performance, profit and margin
Marie-Véronique Contat 100 RETAIL DISTRIBUTION THE DIRECT OPERATED STORE
Location, location, location! The store concept : implementation of the Brand Vision Visual merchandising and the corporate brand image The retail issue : retaining customers The importance of stores in customer relationship building Sales assistants must know all about the brand The challenge of Personal Service : Focus on the customer Turn repeat customers into brand advocates Deliver a unique brand experience Develop CRM tools
Marie-Véronique Contat 101 RETAIL DISTRIBUTION DEPARTMENT STORES CONCESSIONS
Concessions Often referred to as a ‘shop within a shop’, concessions are generally located within large department or variety stores. Many designer brands will use this retail method. One retailer is effectively leasing space to another, which can be a flexible way of testing the market and making use of the retailer’s buying and selling expertise. It also means lower investment for the brand and there are potentially higher levels of customer footfall.
Marie-Véronique Contat 102 RETAIL DISTRIBUTION DESIGNER OUTLETS
Designer outlets In recent years there has been a big increase in the number of large-scale retail outlets,which originated in the USA and have spread to Europe and Asia. Some of these outlet malls are used by designers to distribute out-of-season goods and excess stock. Brands such as Hugo Boss, Jil Sander, Ralph Lauren and DKNY are just some of the names that use this retail method to generate lucrative sales revenue. UK company McArthurGlen is one of the largest owners and leasing agents of such designer outlets, with a number of entire outlet villages throughout the UK and Europe.
Marie-Véronique Contat 103 RETAIL DISTRIBUTION THE SUBSIDIARIES
Subsidiaries are great because they can do a good marketing job. They also have the advantage that their sales are consolidated at full value, rather than at export price. Subsidiaries are expensive: Depending on the size of the country and the type of products involved, having a sussidiary does not make sense if expected sales are not reaching Euros 4 million Subsidiaires require cash: The local inventory of products and the accounts receivables have to be financed by headquarters
Marie-Véronique Contat 104 RETAIL DISTRIBUTION THE JOINTVENTURE SYSTEM
The joint-venture is a susbsidiary that belongs in part to the brand head quarters and in part to a partner who could be the former local distributor.
The system provides an elegant way of smoothing over some of the potential difficulties involved in starting up a subsidiary by leaving open the possibility for the former distributor to play a major role through offering space, back office activities ….
Marie-Véronique Contat 105 RETAIL DISTRIBUTION POPUP STORES Pop-up shops Pop-up shops, also known as ‘guerilla’ stores, have increased in popularity over recent years. The concept of the pop-up store is to trial new or well-known brands within a temporary shop outlet. In times of recession they have proved to be a winning low-risk format for many brands. These temporary spaces, created for the first time in 2004 by Comme des Garçons, have several advantages : - to surprise the usual clientele - to stand out from the competition - to launch or to test new products - to strengthen rarity - to create « buzz marketing » - to make itself desired in a place where the brand was absent - to test a new retailing concept
Marie-Véronique Contat 106 RETAIL : RISKS AND REWARDS
Retail : the good Direct customer contact Control over brand image and pricing Higher margins Transparency of operations Anti-counterfeiting measure Can enhance exclusivity
Marie-Véronique Contat 107 RETAIL : RISKS AND REWARDS
Retail : the bad Expensive to expand Operational overheads Narrower market exposure Can limit brand development
Marie-Véronique Contat 108 DIFFERENCES BETWEEN WHOLESALE AND RETAIL MODELS Wholesale Retail
Product line narrow large
Product objective blockbuster Part of a whole
Advertising and pull push promotion Price elasticity strong limited
Customer link reduced strong (CRM)
Logistics limited key requirements
Marie-Véronique Contat 109 DEPARTMENT STORES
For fashion, department stores are very important because they tend to be opinion leaders and actively look for innovative new brands to promote and develop. It is the case in Japan, US, UK and France for example.
Even if they suffered these last years from the recession and have been also affected bu the development of dos on one hand, and the growth of mass market « selective » brands such as Zara, H&M, Gap or Uniqlo on the other, they remain an important partner for fashion and luxury brands.
Marie-Véronique Contat 110 DEPARTMENT STORES There is two main operatig modes to sell in department stores
Concessions « retail » Corner « wholesale » - The brand manages the point of sale - The DS selects, buys and keeps the retail margin. - The brand pays a rent to DS (25% to 40% - The DS assumes the risks linked to of retail turnover) unsold merchandise - The brand keeps the property of stock, - The DS controls prices and discounts the control of pricing and of merchandising
- The brand finances 100% of investments, - The DS has a tendancy to try to charge the working capital and the risks linked to the brand with costs related to the concept, the stock the sales staff or part of the unsold merchandise - DS minimises investments in furniture and fixtures
It exists another system : consignment stock
Marie-Véronique Contat 111 DEPARTMENT STORES
US major department stores Macy’s, Bloommingdale’s, Nordstrom, Neiman Marcus, Saks Fifth Avenue, Bergdorf Goodman, Barney’s.
UK major department stores Harrods, Selfridges, House of Fraser, John Lewis, Debenhams
French department stores Galeries Lafayette, Printemps, Bon Marché
Japanese major department store MItsukoshi-Isetan-Marui, Takashimaya, Daimaru, Matsuzakaya.
Marie-Véronique Contat 112 PLACES
SHOPPING MALLS Large centers in which no stores has direct access to a parking area ; customer must park and walk to the mall OUTLET MALLS From small factory outlets to big outlet malls Located outside big cities, in the suburbs. Large centers with boutiques where customers can find their favorite fashion brands at lower prices. MAIN STREETS LOCATIONS Generally in small towns FAMOUS SHOPPING STREETS Well-known streets, ideal shopping places for tourists or at week-end. Example : Madison Avenue in NYC, avenue Montaigne in Paris (for luxury) CENTRAL BUSINESS DISTRICT Traditional downtown business district. Ideal place for shoppers during business hours or at lunch time.
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