I have been writing distribution strategies for lifestyle brands for a long time. In the ‘old world’ it was all quite straightforward – ‘define the markets, the channels of distribution and the product assortment to drive success’. I would then work from the bottom up to monetise the plan, coming up with a clear strategy on where to sell the brand globally, through which retailer channels, at what price.
Brands, particularly in luxury, had a clearly defined model, backed up with a strongly worded selective distribution agreements to market and sell the brand.
Then the internet came along. I remember in the late 1990’s having heated debates with other colleagues as to whether clothing would actually sell through the internet. We were better leaving this channel alone. The next stage in our paranoia was a total fear of what the internet would do to our businesses – heavy discounting, lack of control of the brand and even more worrying, cross market selling. Up to then, it was easy to confine brand distribution to a single market or country – suddenly the whole of Europe was open in one click. It was hard to think clearly – just a fear that internet-led businesses would swallow up our brands and de-value them.
Fast-track a decade and what a different world. Omni channel – the buzz word that almost everyone I know talks about. Consumer centricity is king – we follow the consumer from their first search for the brand either an online or through an in-store experience, to managing the actual purchase decision (digital, face to face or click and collect) and then keep the consumer happy as we often have to depend on a third party carrier, hoping that the ultimate customer will be happy enough with their purchase to write a positive review.
The biggest impact of the ‘new world’ is the decline in traditional retailing. As consumers change their habits, the need for high street outlets diminishes. In the 90’s, a lifestyle brand launching into the UK would plan to have around 100 stores to cover the market – from premium AAA locations to C level shopping malls. Now it would be surprising to see more than 20 stores, and these would be in strategically important locations. Retail stores are becoming more experiential – look for example at the VANS store near Waterloo in London – where it’s possible to skateboard, hang out with other boarders and of course buy some shoes. As someone who has managed store P+L’s for years, I have found it’s become a real challenge to stay profitable in pure terms of store efficiency. We have had to change and fast – some brands are putting their flagships under the marketing budget and not chase pure ROI per store.
Of course there will be store closures as retailing changes, matched by a rise in online / digital. It’s affecting everyone – Tesco announced store closures this week as they said their consumer habits had changed. Abercrombie will close 180 stores, K Mart 200. We will arrive at a balance in the end though.
Of course there will be upsides – one of the more interesting developments in recent months has been the opening of actual ‘bricks and mortar’ stores by pure player internet-only retailers. Birchbox as announced it will be opening a ‘real shop’ in Soho, Rent the Runway has opened 4 stores in the past year, and Bonobos has said it will open 30 stores in 12 months. I recently heard that Amazon were considering opening a store.