T e h e k e k y e y rol o e l e o f o f t h t e h e s t s o t r o e A be b r e to o Fe F s e t s a a Cr C ist s ian a a n a C u C c u c c o

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1 Luxury Management

2 The key role of the store The store plays a fundamental role in the creation of customer experience journey. In the past it was seen merely as place where company could sell their goods, but now is considered a real temple for the company, a space where they can communicate their values and provides brand experiences. Even if in the past stores were very important because one of the few touch point with the customer, nowadays they maintain their relevance as final place of purchasing phase. Today customers prefer doing their. research online and then acquires the product in stores (ROPO) in order to enjoy the final purchasing experience

3 From manufacturer to retailer The transition from manufacturer to retailer is a must for the luxury and fashion brands Know the customers Move from sell-in to sell-out approach, understand the customer better and enhance the shopping experience. Show the brand According to the brand image and allways with the most updated collection Aquire the margin Control all the margin chain from the production cost to the retail price

4 Luxury & Retail

5 On line Off line in Luxury

6 On line Off line in Luxury Even though shoppers have so many paths to purchase these days, many still want to kick the tires before buying. This suggests that there s some room for improvement across e- commerce sites, including the way items are displayed, product descriptions and even customer service interaction. Advances in 3D imaging and virtual reality could be possible gamechangers down the line, however, attracting more shoppers to buy online without seeing products first-hand in a physical store.

7 The store evolution FROM TO Small secret Boutique Large monobrand store with many product categories Far and mithical Accessible and easy to be visited Only for big occasions Open to various occasions and visatable also not for shopping Today the store is not only the place where the product is sold but a brand declination where the consumer meets the dream

8 The brand perception The brand perception and identity are given not only by the product and communication but also by the store and the way how it is managed PRODUCT STORE COMMERCIAL POLICIES BRAND IMAGE SALES FORCE COMUNICATION

9 Store classification The store in the luxury business is the centre of the commercial strategy. Is flexible to the different enviroment and market development stages BY CHANNEL BY TIPOLOGY D.O.S. Directly owned stores FRANCHISING WHOLESALE multibrand FLAGSHIP CITY DEPARTMENT STORES SEASONAL TRAVEL RETAIL OUTLETS CORNERS SHOP IN SHOP

10 Store classification by channel DIRECT CONTROL INDIRECT CONTROL OWNERSHIP FRANCHISING WHOLESALE + Direct personnel control. Reliable image control Direct customer relationship Maximum profitability + Limited investment Fast coverage + Lowest costs of managment Fastest territory coverage - High costs Real estate investment Limited personnel flexibility Obsolete stock - Limited image control Partner reliability - Lowest image control

11 Franchising contract Duration Location/area Margin Royalty Marketing spending Discount policy Return policy Other Contract duration allow the franchisee to recover the initial investment Describes the store/s type and locations and the area of exlusivity granted to the franchisee. Higher margin than the wholesaler to allow investment recovery Small percentage payed to the company for the brand usage and the know-how sharing Percentage of the genarated sales to be invested by the franchisee an the local market (local ADV, events, billboard) Maximum discount allowed and sale policy Conditions for returnin the unsold merchandising Brand protection, number of employee, training, minimum purchase, payment terms, guarantees.

12 Wholesale/distribution contract Duration Location/area Margin Marketing spending Discount policy Targets Other Shorter duration than franchisee Area of exclusivity (selective distribution) Lower than franchising, in line with competitors Usually called Co-budget (coop-budget), support local marketing activities (local ADV, events, billboard) shared with the brand Maximum discount allowed and sale policy Yearly targets linked to financial bonuses Brand protection, level of display, training, minimum purchase, payment terms, guarantees.

13 The IMAGE trough the retail STORE TIPOLOGY FLAGSHIP STORE CITY/LOCAL STORE SEASONAL STORE DEPT. STORE TRAVEL RETAIL MULTIBRAND STORE OUTLET E-COMMERCE EXCLUSIVITY I M A G E ACCESSIBILITY COMMERCIAL POLICIES CUSTOM MADE LIMITED EDITON SCARCITY PRIVATE SALES SALES PARALLEL MARKET STOCKIST

14 Store classification by tipology Flagship store City/Local store Seasonal store Department store Outlet store Travel retail store Corner/shop in shop Large store with all the product variances in stock and all the services avalibles Mid-size store located in secondary cities, dedicated to serve local clientele. Small store located in touristic spots, usually opened few months, caracterized by unique layout style and assortment. Small store or concession located in a large department store close to other comparable brands. Store located in an outlet complex, dedicated to reduce stock surplus of past collections. Small store usually located in airports deidcated to travellers Small area of a larger multybrand store, dedicated to the brand with a strong layout personalization.

15 The IMAGE trough the retail STORE TIPOLOGY FLAGSHIP STORE CITY/LOCAL STORE SEASONAL STORE DEPT. STORE TRAVEL RETAIL MULTIBRAND STORE OUTLET E-COMMERCE EXCLUSIVITY I M A G E ACCESSIBILITY COMMERCIAL POLICIES CUSTOM MADE LIMITED EDITON SCARCITY PRIVATE SALES SALES

16 Custom made Made to order products in unique samples from a specific customer brief. Re-acquire handcraft and heritage positioning Maximize customer need and satisfaction Guarantee total exclusivity The real industrial challenge is creating unique products, adapting or modifing serial ones, in order to reduce development costs

17 Limited editions Small sub-series of products characterized by a small variance of the standard version usually numbered and sold for a limited time only. Increase the appealing of the brand Generate extra sales Stimulate collecting Low projecting costs Increase product image This tecnique has been recently adopted also by mass market products

18 Scarcity Increase the demand of a product deliberately reducing the quantity offered Increase the appealing of a product Helps the sales of flankers products Push the second hand market Put pressure on distributors Increase price and profit

19 Private sales Small sales dedicated to a selected group of customers by invitation only. Could be dedicated to new products (preview) or to vintage collections vith the objective of stock reduction. Usually held out of store. Please the loyal customer Get first hand impressions on new collections Support sales (moral obligation to buy)

20 Sales Limited time price reduction, usually in predetermined periods of the year, at the end of the season. Usually held in store. Timing concentrated and predictable All the brand at the same time Cannibalization risk

21 Parallel market Penetrating the market with a parallel distribution network, leveraging the price/tax difference in various areas of the world Increase of the consumer base that is not willing to pay the full price Image risk due to fake products and low image point of sale Distribution mess and retail competition

22 Stockist Specialized operators that buy all the remaining product at 10% of retail price Unclear re distribution flow Risk of fake products

23 Distribution models STORE TIPOLOGY FASHION MODEL (Gucci, Prada) COMMERCIAL POLICIES D.O.S. 100% 90% 20 CUSTOM MADE DEPT. STORE 80% 70% LIMITED EDITON FRANCHISING 60% 50% SCARCITY TRAVEL RETAIL MULTIBRAND STORE 40% 30% 20% 10% 0% 80 1 CONTINUING PRODUCT PRIVATE SALES SALES PARALLEL MKT OUTLET SEASONAL PRODUCT STOCKIST

24 Distribution models STORE TIPOLOGY LUXURY MODEL (LV, Hermes) COMMERCIAL POLICIES D.O.S. 100% 90% CUSTOM MADE DEPT. STORE 80% 70% 60% 50% 80 LIMITED EDITON SCARCITY 40% 30% FRANCHISING 20% 10% 20 0% TRAVEL RETAIL 1 CONTINUING PRODUCT PRIVATE SALES SEASONAL PRODUCT

25 The retail future Shopping and browsing are considered by the post-industrial society, social and recreational activities. The stores will follow this trend Growing importance of shopping malls Increasing of total surface Increasing of non selling surface Importance of entertainment Growth of additional services (spa, bar) Extensive usage of new technologies Store segmentation Attention to architecture and environment

26 Thank you