Distribution Channel Report

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Report on Distribution Channel

Pearl Academy, New Delhi

Luxury Brand Management (2014 - 2018)

Submitted to:

Mrs. Shilpa Thapar  

Submitted by:

Saumakshi Mahana

ACKNOWLEDGEMENT

I would like to thank Mrs. Shilpa Thapar for giving us the opportunity to understand and study the distribution channels and how international brands function in India via this report. I would also like to thank my colleagues for guiding me through the report and helping me with their inputs.

Table of Contents 

1. Introduction

1. Luxury Industry Global Overview

• Growth projections

1. Distribution Channels In Luxury

• Directly Operated Stores

1. Flagship Stores
2. Franchise
3. Joint Venture
4. Licensing
5. Counter in Department Stores

1. Automobile Category

• Distribution Infrastructure

1. Jwellery Category

Global Market

Indian Market

Luxury brands in India

Indian jewellers shift to Luxury Jwellery

1. Detailed Study of Jimmy Choo

• About the Brand
• Distribution
• Licensing
• Revenue Growth
• Revenue Analysis
• Retail
• Wholesale
• Referencing  

INTRODUCTION

In the following report I’ve explored the distribution channels adopted by various luxury brands globally for instance licensing, franchise, directly operating stores and travel retail.

Further, I collected data on the distribution channels followed by various brands which fall under categories like leather goods, fashion, automobiles, jewellery and cosmetics. A detailed analysis on at least two product categories and  a case study on the best practices used by any one brand for store location, number of stores and analyse the location planning.

Luxury Industry Global Overview

Over the past five years, the global fashion and luxury sector has delivered extremely strong value creation. The global luxury market was buoyant through 2012-13; a period characterised by global economic recovery in developed economies such as the U.S. and positive recovery signals from Europe. India continued to hold its position in the global billionaire list with a contribution of 55 billionaires, accounting for a total net worth of USD194 billion. The year 2013 was marked by a slowing Indian economy and diminishing consumer confidence, but it seemed to have little or no impact on the growth of India’s luxury market.

The Indian luxury market grew at a healthy rate of 30 per cent in 2013 to reach USD8.5 billion in 2013. It is likely to continue growing at a healthy pace to reach USD14 billion by 2016. The sector includes luxury products such as apparel, accessories, home decor, pens, watches, wines and spirits, and jewellery; services such as fine dining, concierge services, ravel, hotels and spas; as well as assets such as fine art, yachts, and automobiles. Growth was driven by lifestyle segments such as fine dining, gadgets, hotels, jewellery, personal care and wines; growing at 30 to 35 per cent as the luxury consumer refused to compromise on the ‘luxe' life.

The BRICS region, more specifically China and India, have been in the spot light for the past few years. However, last year, the luxury industry in China faced many challenges related to luxury consumption, regulatory issues, tariff structures, currency reasons. Stores opened in a hurry by brands across categories began to shut shop and the entire global luxury industry was severely affected.

Growth Projections:

India’s economy is much stronger now. The indicators are all favourable. The fiscal deficit, the inflation index, the current account deficit are all healthier & growth driven.

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The percentage annual growth rates projections stand best in the BRICS region at 7.5% in India as against 6.3% in China; 2.1% in South Africa & almost negligible in Brazil and Russia.

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 Distribution Channels in Luxury

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25871-01-BCG True-Luxury Global Consumer Insight-11Mar14-AAc-fb-Mil.pptx

Distribution Channel refers to the path via which the goods and services reach the consumer through the vendor. A distribution channel can be a direct transaction between the vendor and the consumer or may include intermediaries like wholesalers, distributors, agents and retailers. Each intermediary receives the item at a certain pricing point and moves it to the next higher pricing point until it reaches the final consumer.

In luxury the distribution channels used are directly operated stores like either flagship stores or multi-storeyed/mega stores, department stores or shop in shops, licensing, travel retail or duty free stores and franchise or joint venture.

Directly Operated Stores

Distribution channels are adopted not only to differentiate themselves with their competitors but to communicate unique features of the brand to customers which is best done through directly operated stores. They provide a unique shopping experience. They have a centralized supply chain with quick and systematic deliveries.

1. Flagship stores

These are the most primary outlets which usually larger than the standard boutiques. They stock the entire product range. This is a powerful instrument in managing brand image. Their high class construction is often designed by prominent architects. For example Chanel’s flagship store in Singapore. In flagship stores the products are displayed in a very exclusive way.

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Louis Vuitton’s First Global Flagship Store in Brazil

1. Franchise

It is giving the right to an outside individual to operate a store in a given location. The company commits to buy a minimum amount of products for a season. A franchise cannot have products of any other brand in the store. The royalty is given to the brand on the sales. The store design, visual merchandising and products as per the brand’s guidelines. This enables the brand to expand without investment.