May 2014, Dubai: The CEO of a Swedish womenswear brand* is on vacation in Dubai and realizes his longtime Middle East distributor meanwhile operates 10 other brands. The brand’s previously strong position is melting as the distributor’s new distribution favourites get better locations in the new malls. The distributor believes the brand has lost its once strong signature.
January 2014, Berlin: Three years ago the French outwear brand* signed an exclusive partner store distribution agreement for southern Germany. Visiting the newest German stores, the French CSO realizes locations continue to be rather cheap. The distributor argues that the brand doesn’t pay the high street rents.
*Category and country of the brands have been changed, but we encountered cases like these on an almost weekly basis: brand and distributor are locked in an unhappy marriage and can’t find a way to revitalize their relationship.
Growth via partners as a strategy.
If you work in the brand industry you know a hundred stories involving partners. Brands work with “third parties” in retail, wholesale, licensing, sourcing and more. Probably not even a handful of premium brands have expanded internationally without partners at some point. And growth via partners comes in many interesting shapes and sizes:
Example 1: Distributors build brands despite problems at home.
Jack Wolfskin, Germany’s No. 3 sportswear brand, no doubt lost growth momentum at home. But its partner in China moved the brand from being “nobody” in 2007 to 650 POS locations in 2014 – best practice by any measure. A licensing agreement with a Hong Kong manufacturer made this happen, and partner retail in the home country Germany is now getting freshened up.
Example 2: Distributors influence brands’ lives.
Many of today’s well-known brands owe their lives in part to strong distributors. Marc O’Polo originated in Sweden, before its German distributor made it into an international brand, and moved design and headquarters to Germany. Pepe Jeans originated in London, and two Hong Kong manufacturers bought it, moved it to Amsterdam mid-90s and merged it with their other jeans line, Tommy Hilfiger. Esprit, founded in San Francisco, was made a bestselling wholesale brand in Europe in the 80s by its German distribution, before its Hong Kong sourcing agent bought it and listed it in Hong Kong.
Example 3: Acquisition of Distributors as a Growth Strategy.
In summer of 1998, the CSO of Ralph Lauren traveled Europe to review a mainly partner-built European distribution. The new European Union led RL to reassess the markets. In the five years to follow, RL bought back 30 distribution agreements and built its own presence in Europe. Today it enjoys 4,900 POS locations and sales of $1.6bn. If you read RL’s annual report, Europe was then, Asia is now. Acquisitions of distributors and partner stores is a powerful growth strategy – if you know how to balance it like Ralph Lauren.
Distribution is a strong industry – and brands need to manage it.
As Hugo Boss in UK, Timberland in Italy, Prada in Russia, Desigual in Middle East and 1000+ brand business cases prove, growth via partners is a key strategic success factor. The brands’ global partner strategies have built an entire industry of distributors, some operating more than 50 brands and over 500 stores.
The distributors above represent only a small selection of the retail Champions League. But the portfolio of brands is no indication for 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. Understandable, as it is so much easier to follow in the footsteps of 20 peers than to find an own growth path with an own dedicated partner.
But the beaten path in partnerships works only for the top 1/3 of brands – all others risk becoming an adjacency brand. Being a second priority in a distributor’s portfolio automatically gets you weaker locations and weaker store managers, creating an overall mediocre brand appearance.
If this is not your vision of a brand partnership, start to develop partnerships beyond mainstream, with a selection process that makes the difference. Jack Wolfskin in China, Ralph Lauren in Europe and many more cases show best practice often comes from the unexpected partners, from the 3rd row of candidates, people that are hungry and entrepreneurial – the right combination to grow and realize your vision of the brand and not just franchise it.
What are top 10 best practices in partnership management? How do you reenergize your partnership? This and more we cover in part 2 here.