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Taking Care

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Opportunities for Action in Consumer Markets

Taking Care of Brands
Through Vertical Integration

Taking Care

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Taking Care of Brands
Through Vertical Integration
Esprit, H&M, Zara, and other vertically integrated brands have captured significant market share over the past few years, growing more rapidly than traditional manufacturers and retailers. By controlling the whole value chain, from manufacturing to retail—and thereby blending product and retail identity—vertical brands can offer attractive economics. With traditional retail channels on the decline, many manufacturers—especially those in textiles, furniture, leather goods, sporting goods, and luxury goods—are choosing vertical integration as a way to better manage their brands.
There are, however, many approaches to vertical integration. To get a closer look at the risks, benefits, and best practices of the various approaches, The Boston
Consulting Group conducted a detailed survey among a number of leading brands. This article presents highlights from that study.

Why Vertical Integration Now?
In a traditional business system, the producer controls product design and development, manufacturing, selling and distribution to retailers, product service, and advertising, whereas the retailer is responsible for store concept and design, store management, product assortment, visual merchandising, and selling to consumers. But traditional retailers, especially department stores, are facing formidable challenges these days. Caught between two types of competitors—specialty boutiques on one side and discounters on the other—retailers are hard-pressed to give the products

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they carry the attention they need or deserve. All too often, consumers find overflowing

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