Among the 4 Ps of Marketing, it may seem that Place may be much less ‘sexy’ than the other 3. This is because it’s easy to associate distribution with “mere” logistics and supply chain management, rather than with the customer experience.
In actual facts, managing your distribution effectively provides a real long-term competitive advantage to your company and lets you connect with your audience in a much more interesting way than through short-term promotional strategies.
High-end fashion companies have been able to address the challenges of distribution by developing a forward integration strategy which is aimed at establishing and controlling the relationship created with their customers. This achievement, however, comes at a very high price, both in terms of upfront cost, as well as in terms of management and operations. Not every player may actually afford it.
Fashion brands, have to start with deciding if they are looking for a wholesale (B2B) format or for a retail (B2C) format. Let’s see how fashion brands, choose between vertical distribution (company-owned) as opposed to intermediated distribution (through third-party retail).
In B2B distribution a company works through a distributor which will be in charge of connecting the company’s products to the final consumer.
A choice towards intermediated distributions, on the other hand, makes it harder to keep higher margins, because of the longer pipeline.If we analyse B2B fashion brands under the lens of Porter’s 5 forces model, we are quick to notice that owning the retail outlet helps in delivering aspirational factors associated with fashion products. Unless this type of exclusive experience is delivered the profit margins are much more likely to be limited by the thresholds set by larger players. Moreover, not owning the distribution channels accounts for a longer time to market (TTM), making a company less reactive to faster fashion trends.
In B2C distribution a company will instead pursue a sell-out approach whereby a company will own and manage proprietary retail locations.
This accounts for the development of a different marketing mix, and for the creation of a whole new company department, as many more decisions need to be taken in order to pursue vertical distribution. These decisions can be split into two, related to both intangible and tangible value delivered through the distribution chain.
Without further hesitation, we are quick to realise that in reality only large and established companies are capable of developing this type of infrastructure. Furthermore, this approach will often be conducted in an omnichannel perspective whereby retail and e-commerce dynamics will overlap. This accounts for additional challenges as a brand will need to manage their brand coherently in a variety of situations (both physically and digitally) to create a value promise which is consistent across every touch point.
From this analysis, we can easily understand that if we compare only the operational aspects of product distribution, a B2B format will be a much better choice, as the missed ‘extra profit’ will be balanced by low investment access and minimal resource allocation (both human and financial).
At the same time, very few fashion brands sell products. Most maisons sell a dream at premium pricing due to the intangible elements belonging to a brand’s heritage. This is why most fashion brands over the last few years have pursued a vertical integration strategy and focused on creating new retail concepts and formats which to some extent disregard the physical product, in comparison to the other ‘theatrical’ functions provided by a flagship or self-standing store.
At the same time, no pun intended, fashion brands realised that there is no one-size-fits-all approach to distribution, and different formats will be required to cover effectively each consumer behaviour, price segment and demographic profile.
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