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International Marketing Channel Final Exam Please note that in the following text, company names have been written in capital letters to avoid any confusion

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International Marketing Channel

Final Exam

Please note that in the following text, company names have been written in capital letters to avoid any confusion. You are encouraged to include relevant information pertaining to the case from different sources – and you may use any source you wish. If you are lacking certain information, you are welcome to make certain assumptions, as long as you write that they are assumptions.

CASE: VIDDA ROYALLE (VR): www.viddaroyalle.com

VR is a newly-established start-up based in Guimarães in northern Portugal. It was founded in 2020 and is jointly owned by Teresa Silva and a Danish holding company. VR produces luxury bed linen for the most discerning of global clients. Teresa Silva´s family has been manufacturing luxury bed linen for other global brands since 1979. In addition to continuing to supply these brands, the factory, employing 150 people and containing the most innovative of milling production technology, also now produces VR´s own collections. Teresa Silva has worked for several years in the famous textile cluster around Guimarães and Braga regions, and as the third generation of a milling family, has literally grown up with luxury bed linens.

VR´s concept is very simple, and is epitomized in its slogan “Where art meets luxury”. VR forms collaborations with local artists around the world, who produce beautiful designs which can be integrated into the bed linen. The first such collaboration is with local plastics artist, Pedro Guimarães, who has his designs displayed in the luxury mansions of global sports personalities, Prime Ministers, and royal families. As part of the collaboration, Pedro designs collections, and in return, VR promotes Pedro´s art on its own homepage, allowing high-end clients to purchase directly through VR. The other niche area that VR appeals to is the highly customized market: Clients can simply suggest their own designs (even works of art in their own collections) and these can be replicated onto the bedding. Clients can have monogrammed bedding, and purchase handmade gold jewelry in the designs of the bedding. It takes a little longer to order, but there is essentially no personalized design or element that cannot be incorporated in the production process, as the looms have 21,000 bands (on a single milling machine), which ensures the highest quality. VR´s pastel-coloured bedding is made with 100% cotton using Jacquard techniques, adorned with silk designs. These designs are translucent, so they change colour shades as the light changes. All VR bedding is made with 600 thread counts (per square centimeter), which ensures that beddings has a luxurious silky texture (not possible with lower thread counts), but at the same time, is able to “breathe” in warm climates (not possible with higher thread counts). The quality of the bedding is such that it can last for many years.

 

VR is very focused on sustainability. Products are made to order, so there are no large inventories, any residual waste is collected every week (across all firms in the textile cluster) and made into new textiles, the factory is powered entirely by solar energy, is a member of the Global Organic Textile Society, and a percentage of all VR sales during every promotion campaign go to charity (purchasing rainforest land in Indonesia for preservation). These promotional campaigns could be in connection with, for example, Singles´ Day in China, Valentine´s Day, Mother´s Day, and so forth.

 

 

As mentioned above, VR is a new player in this luxury market. There are four main incumbents, FRETTE and SFERRA (both from Italy), PEACOCK ALLEY (from the US) and PETER REED (from the UK). These firms are well-established – FRETTE and SFERRA are from 1860 and 1871, respectively. All have their linen made – at least in part, at Teresa Silva´s family factory in Guimarães. These four firms are deeply entrenched in the Western luxury market, including having flagship boutique shops in the most exclusive high streets in the most fashionable cities of Europe and the US.

 

VR has adopted a different approach to the main players. Rather than focusing on the more saturated Western market, VR´s strategy is based around targeting the burgeoning segment of wealthy people living in Emerging Markets, such as the BRICS countries (Brazil, Russia, India, China, and South Africa). For example, India has 177 of the world´s dollar billionaires, and over 400 households earning over $1m a year, mainly concentrated in Mumbai and New Delhi. Similarly, China currently has 858 $-millionaires. There is naturally a growing upper-middle class in all these and other Emerging Markets, who could afford luxury bed linen. FRETTE and the others have slowly and very gradually entered Emerging Markets, for example, FRETTE has flagship stores in the richer urban areas such as Shanghai, Mumbai, Moscow, and Saigon.

 

There are several routes to market for luxury bed linen producers. The main incumbents prefer ownowned flagship stores in glamourous high street locations or malls, while others sell to boutique retailers selling luxury fashion accessories to consumers. Sales through these outlets have though been very adversely affected by the corona crisis-induced lockdown. Other strategies include selling to hotels, resorts, or to high-end rental properties, but again, demand has been severely affected by covid-19. This has affected the incumbents given the high fixed costs of operating in such expensive locations. Given the costs of the bedding (where a bundle of pillowcases, duvet cover and sheet can often cost €2-3,000), there is a need to develop strong and lasting relationships with retailers who have in-depth personal knowledge of their exclusive clients´ preferences. It is therefore difficult for the four main producers to maintain such relationships during lockdown.

 

Once again, VR adopts a slightly different strategy. As a resource-constrained start-up, it has chosen not to confront the well-established incumbents head-on. VR´s focus is on a niche strategy of people who live at the intersection of “art” and “luxury linen”. For example, its products are in its first luxury hotel, The GRAND PALACE HOTEL, in the diplomatic area of Addis Ababa, Ethiopia, next door to the UN´s building, which is frequently visited by diplomats and businesspeople. The hotel, equipped with luxury suites, spas, and even riding stables for guests, is based on the theme of displaying beautiful Ethiopian art and furniture in its restaurants and Presidential suites. Guests can sleep with VR´s bedding here and can buy the bedding in the lobby. There are other areas of synergies – for example, wedding guests staying at the hotel could buy VR bedding as a wedding gift. VR has also entered agreements with an independent agent based in the United Arab Emirates covering the wealthy segments in the Gulf Cooperation Council countries. The idea was that an independent agent familiar with the Gulf region would be better suited to manage the dense relationships needed to sell to retailers or end-users such as hotel chains. Other options include using a franchising system to achieve rapid growth in geographically larger Emerging Markets such as Mexico.

 

 Instead of using bricks-and-mortar stores, VR is focused on using its own and other e-commerce platforms. Traffic is directed to its own platform through social media posts (Instagram, Facebook, Linkedin, Pinterest) and PR activities (VR has already been featured in two large fashion magazines in its homeland). Furthermore, VR has entered agreements to have its collection promoted on thirdpart e-commerce platforms such as Maison & Objet, which is primarily oriented towards potential B2B clients such as designers, hotels, retailers, and so forth.

 

 

 

 

 

QUESTIONS: Please answer questions. Questions are equally weighted.

 

1. What specific conflicts could potentially arise between VIDDA ROYALLE and its independent distributor in the United Arab Emirates, and how could VIDDA ROYALLE reduce the likelihood for such conflict

2. Discuss the advantages and disadvantages of VIDDA ROYALLE strategy of relying mainly on the e-commerce strategy to reach potential B2C and B2B clients.