«Taking care of brands through vertical integration» is a paper from November 2005 by the Boston Consulting Group as a result of a study they carried out regarding the retail market and the possible threats for the manufacturer’s brand.
Are retail market principles a threat to today’s brand effectiveness?
The paper starts with examples from H&M, Zara and Esprit who have obtained sustainable results by controlling the whole value chain. In today’s consumer markets traditional retail principles no longer seem to be a reply to success activities and therefore manufacturers are looking for better ways to manage their way to consumers. It is for this reason that BCG carried out a detailed survey where they studied different ways of integration. The study includes the different types, risks and advantages. The paper presents its highlights.
It is true that today’s retail market faces a different situation being in between specialty shops and discounts. Retailers find it difficult to manage the quantity of products and how to increase the quality of communication towards the manufacturer. As a result, the manufacturer faces a risk regarding its brand effectiveness, precisely the part that is so important to him and often transmitted by a large part though the retailer.
Vertical integration: advantages and risks
One of the approaches of vertical integration is directly operated stores, such like flagship stores. The advantages can be numerous and this type of integration is often found in luxury brands: Versace shops, Luis Vuitton shops etc. It enhances the brand but costs a lot. The paper develops various pro and cons regarding this type of integration.
Read the BCG paper
There is no standard solution to what type of integration should prevail. During the study of the topic, each manufacturer should take into account costs, local specificities, importance of the retailer and its added value and the capacities of the manufacturer.
Marketing Planet invites you to read the full highlights of the study on the website of the Boston Consulting Group:
- About the Boston Consulting Group: «The Boston Consulting Group is an international strategy and general management consulting firm whose mission is to help leading corporations create and sustain competitive advantage. As a truly international firm, our strong global presence offers clients and employees a wealth of cross-cultural experience.» BCG has opened its first office in 1963 and counts end of 2005 2.900 consultants and 60 offices in the world. Visit the corporate website: www.bcg.com
