Global brands use wholesale & retail distributors to enter foreign markets. This article provides tips on how to avoid pitfalls and best manage distributors.
Jan 2014, Berlin: Three years earlier, a French outerwear brand* signed an exclusive partner store distribution agreement for southern Germany. Visiting the newest German store, the French CSO realises locations continue to be rather ‘cheap’ and off the High Street. The distributor argues that the brand doesn’t pay High Street rents.
May 2014, Dubai: The CEO of a Swedish womenswear brand* is on vacation in Dubai and realises his long-time Middle East distributor is also managing 10 other brands. The brand’s previously exclusive position is diluting as the distributor’s new favourite brands get the better locations in the new malls opening up.
*Product categories have been changed for reasons of confidentiality, but we encounter these cases in our work with brands and brand distributors every other month. Long time partners are locked in an unhappy ‘marriage’ and can’t find a way to revitalise their partnership.
Working With Brand Distributors
If you work in the branding industry you know 100 or more stories like these involving brand distributors. Brands work with distributors in retail, wholesale and online. Not even a handful of premium brands have expanded internationally without distributors at some point and growth comes in many interesting shapes and sizes.
Distributor Case Study 1: Distributor Builds Brand Despite Problems at Home.
Jack Wolfskin, Germany’s No. 3 sportswear brand, lost growth momentum at home at some point around the beginning of this decade. But its partner in China moved the brand from being ‘nobody’ in 2007 to having 650 POS locations in 2014 – best practice by any measure. A distributor agreement with a Hong Kong manufacturer made this happen.
Distributor Case Study 2: Brand Distributors Extend Brands’ Lives.
Many of today’s well-known brands owe their lives in part to brand distributors. Marc O’Polo originated in Sweden, before its German distributor bought it, moved its headquarters to Germany and grew it to be a company with an esteemed international reputation.
Pepe Jeans originated in London until two Hong Kong manufacturers bought it and moved it to Amsterdam in the mid-’90s. Later they merged it with their other jeans line, Tommy Hilfiger. Esprit, founded in San Francisco, became a bestselling brand in Europe after their German wholesale distributor moved the business to Germany; then its Asian retail distributor bought it and listed it in Hong Kong.
Distributor Case Study 3: Acquisition of Distributors as a Growth Strategy.
In 1998, the CSO of Ralph Lauren travelled around Europe to explore the idea of a mainly partner-built European distribution. The new European Union meant Ralph Lauren had to reassess its distribution strategy. In the five years that followed, Ralph Lauren bought back 30 distribution agreements and and built its own presence in Europe. Today Ralph Lauren Europe has 4,900 POS and sales of $1.6bn. If you read Ralph Lauren’s annual report, acquisition Europe was ‘then’, acquisition Asia is ‘now’. Acquisitions of brand distributors or partner stores is a powerful growth strategy – if you know how to balance it.
Brand Distributors a Strong Industry
As Hugo Boss in the UK, Timberland in Italy, Prada in Russia, Desigual in Middle East and 1000 more other business cases prove, growth via partners is a key strategic success factor. The brands’ global brand distributors have built conglomerates, some managing more than 50 brands and over 500 stores.
The brand distributors above represent only a small selection of the brand distribution Champions League. But the portfolio of brands is no indication of excellence in operations. If distributors have one strength, it’s knowing how to sell themselves when ‘dating’ new brands.
And brands? Most often they go for good looks alone and court everybody’s darling. This is understandable, as it’s so much easier to follow in the footsteps of 20 peers than to find an own growth partner in an unknown region.
But to go with a mass of brands works only for the top 1/3 of brands. All others risk becoming an ‘adjacency brand’. Being the third priority in a distributor’s portfolio automatically gets you weaker locations and weaker store managers – a guarantee for an overall mediocre brand appearance.
If this is not your vision of brand distribution, develop partnerships beyond the mainstream, with a brand distributor selection process that already makes the difference. Jack Wolfskin in China, Ralph Lauren in Europe and and many more cases show best practice comes from a surprise distributor. Often it is the 3rd row candidates that are hungry and entrepreneurial – the right combination to grow and realise your vision of the brand.
So, what are the top 10 best practices in partnership management then? How do you re-energise your partnership? This and more is covered in 10 Tips for Excellence in Brand Partner Distribution.
This is a variation of an earlier post published in retail-intrapreneur.
About the Author:
Whether assisting a US brand group in developing its European partner distribution strategy, or designing and building a partner organisation for a global toy brand, Guido is a fan of managing qualitative growth. As a retail and finance professional originally, he strongly believes partner distribution is the most challenging, but also the most rewarding brand growth strategy. If you want to benefit from Guido’s experience, get personal advice or just exchange some thoughts, feel free to reach him by email or see more from him here.