Power of retailers

As we have seen in previous articles, most perfumes are sold through selective perfumery. So we can now ask what is the bargaining power of retailers in this market? Is it comparable to the massive retail stores?

We all know the power of retail stores such as Leclerc and Carrefour there is a lot of brand to sell so their power of negotiation is really high. But it’s not the case in selective perfumery. Indeed, it is a highly regulated market which must meet specific standards. The principle of selective distribution allows, as its name suggests, a producer (usually a great brand that wishes to protect) to select a limited number of distributors authorized to sell its products. In other words, the business strategy of the brand is to deliver marketing authorizations for its perfumes to a few stores. Why? First, to control its image. The distribution of these products must meet strict codes presentation and sale is accompanied by personalized recommendations. These qualitative services are part of the brand strategy. To allow a website to sell their products, perfumers may impose and to have a real selling point. This is the case for example of Marionnaud. Because without this real selling point, the qualitative service, which is part of the reputation of leading brands, is no more guaranteed.

Naturally, this regulation is also a way to "hold" the market and prices and avoid the uncontrolled braderies installation. 

  Selective distribution also limits counterfeiting and the establishment of a parallel market, which are hitting the luxury professionals. A market that nevertheless seems well established on the Internet, judging the number of sites, mostly American, which sell branded perfumes.

On this market, the negotiation is more on the type of product than on the price. Because the final customer is willing to pay an high price for a quality product. 

The power of negotiation is not so high on that luxury market because of the lack of competition. The suppliers keep the power because of the brand image. But in this market too, retailers begin to launch Private Label. Not to be in competition with luxury brand, but to be in competition with the product on mass retail market. 

Article posted by Johanna