Industry Paul Sherratt


A new way to take brands to market in 2014


This month our regular contributor Paul Sherratt looks at the traditional model that manufacturers take to bring brands to market


Approach During the past fifteen years the landscape of the UK sporting goods industry has changed dramatically. The rise of the multiple brought about the decline of the independent and the overall decrease in the number of accounts available to sell to. Many survivors have radically altered their business model and have begun to specialise or look to the power of ecommerce to open up to a bigger audience as the number of consumers walking past, and even into their stores becomes ever bleaker. The successful retailer of 2014 is a far cry


from its 1990’s counterpart and yet for many manufacturers and brands, their approach to their customer base has not changed. Traditionally global brands looked to local


distributors to penetrate the marketplace on their behalf and many were, and still are, successful. However there are often some inherent issues with a distributor. Brand product ranges and global marketing messages become diluted as the distributor fails to invest in brand equity and concentrates more on their own margin opportunity. The distributor model often fails to work


from a pure brand building and marketing exercise as the distance between brand and end-user becomes too distant. Distributors will often cherry pick, or misrepresent the available product range either because they don’t see it as relevant to their local market or, more commonly, because they do not have the funds to invest in carrying the widest available product range. Distributors who find ‘hot’ brands often find themselves in cash flow difficulties as they rapidly expand and do not have the funds to grow with the brand. So what’s the alternative?


Challenge Traditionally, the obvious alternative to


appointing a distributor was to consider opening a subsidiary. With established brands this scenario becomes more logical. However there is plenty of evidence around the UK industry of subsidiaries that have been


6 SGBGOLF


“Without a doubt, an element of the success of brands represented by country managers has been to listen to local market demands and react accordingly”


opened for the wrong reasons and in the wrong place, at the wrong time. In the current climate the investment can


be a heavy one with support staff, warehousing, sales teams and senior management all pushing the break-even point further away. Whilst subsidiaries do ensure that brand messages and product programmes are implemented effectively, the brand needs to have a critical mass to make progress. In an ever more competitive market this often proves difficult and the business is unable to be flexible enough to meet changes in demand. The evolution of the Eurozone has made


global trading much simpler and with the development of improved shipping, transportation and tracking systems, progressive brands are now starting to challenge their existing European distribution models and an alternative to the distributor or subsidiary approach has emerged. This role can involve a manufacturer offering their whole product range to the market, taking advantage of local people with local market knowledge, shipping and invoicing direct into the UK and managing customer care and operational activities within their existing infrastructure – perhaps even as a shared resource. We know it today, perhaps, as a country


manager role. A country manager role typically involves a pseudo managing director/sales and marketing director role but reporting directly into the head office, perhaps in Europe. Typically the sales team is made up of


agents and support staff operations with IT and finance staff based in the brands global


headquarters rather than the local market. The brand ships directly from their own warehouse to the UK customer and invoices from their central location. The advantages of shared costs and resources are immediately apparent. Many brands are already using these


models incredibly successfully across the UK and global sporting goods landscape.


Complementary brands In the same way that distributors often


carry a portfolio of brands, there are companies that bring together complementary partners that can be taken to market together. The difference is that the entire product ranges of all the brands can be sold and the trading relationship is direct with the brand partner. This vertical integration is vital and ensures


that the retail partner feels closer to the brand source and thus has a greater propensity to buy into the brand activities and philosophy. Conversely, the brand has closer ties with its direct customer base and can liaise and react accordingly. Without a doubt, an element of the success


of brands represented by country managers has been to listen to local market demands and react accordingly – something that is much harder to achieve through distribution partners. The country manager model has the clear advantage that local knowledge is driving the sales initiatives backed up by direct brand resources and direct shipment and invoicing from the brand principal. It seems that the future of this model looks


certain to stay and that umbrella companies can bring huge advantages to allow brands to efficiently and effectively penetrate the UK whilst presenting their entire product range and protecting their bottom line. Of course the subsidiary model is still


relevant and distributors will always be around. However as the global economy continues to evolve, brands should consider all options before taking the next steps to enter the UK (or any other) market. They may find that there is a new model on the block that might just work.


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