Role Of Distributors

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Distributors' acceptance of the two product lines was critical for L'Oreal's successful launch of both Synergie and Belle Couleur. At one time, manufacturers had more control in the channel of distribution than retailers. Retailers, however, had been gaining power as a result of the increasing size of retailers, the development of chains with their central buying offices, and the proliferation of new brands with little differentiation from brands currently on the market. Retailers had also increasingly been offering their own private-label products, since they earned a higher percentage profit margin on their own brands.

Following are the criteria, listed in order of importance (3 being "most important"), that retailers used to evaluate new products.

1. Evidence of consumer acceptance 2.5

2. Manufacturer advertising and promotion 2.2

3. Introductory monetary allowances 2.0

4. Rationale for product development 1.9

5. Merchandising recommendations 1.8

L'Oreal's own goal for developing new products was to introduce only those products that had a differential advantage with evidence of consumer acceptance. It did not want to gain distribution with excessive reliance oil trade deals or higher than normal retail gross margins. L'Oreal also wanted to have its Garnier product lines extensively distributed in as many different types of retailers and outlets as possible. This approach to new product introduction had been effective for L'Oreal, and it currently had a positive image with Dutch retailers. L'Oreal was perceived as offering high-quality, innovative products supported with good in-store merchandising.

For L'Oreal's current products, 35 percent of sales came from independent drugstores, 40 percent from drug chains, and 25 percent from food stores. For all manufacturers, drug chains and supermarkets were increasing in importance. These Stores required a brand with high customer awareness and some brand preference. The brands needed to be presold since, unlike independent drugstores, there was no sales assistance.

Introducing a line of products, rather than just a product or two, resulted in a greater need for retail shelf space. Although the number of new products and brands competing for retail shelf space frequently appeared unlimited, the space itself was a limited resource. With Belle Couleur, L'Oreal had already addressed this issue by reducing the number of Belle Couleur colorants it planned to offer in the Netherlands. Although 22 shades were available in France, L'Oreal reduced tile line to 15 variations for the Netherlands. As a result, 1.5 meters (about 5 linear feet) of retail shelf space were needed to display the 15 shades of Belle Couleur. Synergie required about half of this shelf space.

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