Managing the downstream process of SCM luxe – Distribution (Part 2 of 3)

SCM-luxe is characterized by a much shorter downstream value chain as compared to the upstream processes. This is because most luxury goods need to have much closer contact with the customer and prefer to keep the distance between them and the customer to the minimal

Distribution

Normally luxury firms sell directly to the retailer or point of sale avoiding the multi echelon route of having wholesalers and distributors. This helps keep direct customer contact and build competencies in being able to responding to the customers pulse (crucial in the fashion industry!). A better control of how the brand is projected and marketed is another reason to forego a multi echelon distribution chain. Some companies use the distributor network of their country franchisees (see POS below) on a licensee basis to reduce costs and maintain efficient distribution of goods

Point of Sale

The retailer is the focus of the luxury firm and this is where significant investments are made in the supply chain. Uni-brand boutiques which reinforce brand values on a high street is an expensive strategy that most high end “true” luxury firms adopt.  One way of reducing the costs of maintaining a network of uni-brand outlets is to build a franchisee model where the store layout, location etc is strictly controlled and administered by the luxury firm.  Multi brand outlets are also favored for premium products and is a less expensive option – display in this case has to be administered and managed very coherently so that its brand value is not compromised nor diluted. Similarly high end department store corners is another inexpensive option (department stores here indicate the higher end of the market such as for example Galleries Lafayette in Paris or Harrods in London). Location, corner display, other products displayed in terms of completion all play an important part f this strategy is chosen.