Okonkwo Prelims

2 Licence operations through third parties, which is challenging to control
and often leads to a diminished luxury status.
3 The Internet, which is a new channel and one of the strategic challenges
luxury brands currently face.
4 Catalogue mail-order, which is a strategy used before the introduction of
modern distribution channels.

The most appropriate medium of the distribution of luxury goods is the DOS
both offline and online. This channel best preserves the brand qualities of
exclusivity through controlled distribution, and prestige through brand image
projection. Licensing is generally bad news for luxury brands in terms of
quality and distribution control. This is the reason that several luxury brands
such as Chloé and Gucci have either completed or are in the process of buying
back their licenses from third party companies.
The distribution strategy of luxury brands also comprises of the tactics for
the services distribution. These services include customer services and after-
sales services. The services aspect of the distribution of luxury goods is often
neglected and wrongly considered as an offshoot of the product. Luxury
brands currently utilize three broad service distribution strategies, which are
the following:

1 Customer service within the brand’s store, wherever the store is located.
2 Customer call centres, which a number of luxury brands have outsourced
to other companies.
3 Online customer services, which remains poorly handled by the majority
of luxury brands.

As previously indicated, luxury brands have an exclusive distribution strategy.
This is also technically known as the vertical value chain systemand is repre-
sented in Figure 5.15. The vertical value chain system indicates that luxury
brands manufacture, wholesale (where this applies) and retail their products
and services with the minimal use
of secondary distributors. This
strategy involves both exclusive
(single channel) and selective
(approved and tightly controlled
dealers only) channels.

chapter 5 143

the art of creating and managing luxury fashion brands

Manufacturer

Wholesaler

Retailer

Figure 5.15 The vertical chain

distribution system adopted by

luxury brands