Distribution is where the profit explodes

From something beneath notice to the key to success

Studying the role of distribution is a very recent idea: until thirty years ago it wasn't considered important, and was left to the sales manager. It wasn't a respectable subject until the rise of the Vuitton group: sales and distribution were left to willing young people inside the company. I did it myself for five years: jacket, tie and briefcase, and off you went to the distributor clients to sell.

Thirty years ago even Louis Vuitton started out in Asia and Japan with shop-in-shops, retailers and department stores, without its own distribution. What was considered fundamental was the product, its design and its image. Distribution meant the client who bought a certain quantity of goods every year and distributed them in his country: you bought at the furniture fairs, during fashion weeks.

Now you only have to go to Singapore, where we supplied the bathrooms for the 40 suites of a five-star hotel, to see the difference: on Orchard Road, the shopping street, there are three major Vuitton stores a few hundred metres from each other. And there is a queue at every one.

La Piadineria's gift

What was the gift the people at La Piadineria had? The piadina isn't a product with sophisticated marketing behind it: it was enough to open in shopping centres, where people are hungry and eat. But they had understood distribution better than anyone, and it was worth an exit of 250 million in 2018 and of 600 million in 2024, when the Permira fund sold it on to CVC. They created the Piadineria brand and developed it into a network of their own outlets, more than 530 in 2025, across Italy and France.

The companies that are only in distribution, without a product of their own, are the ones suffering most today, because they are caught between a rock and a hard place.

The retailer puts it another way: out of the frying pan and into the fire. Above them are the brands that speak directly to the consumer over the internet; below them are Ikea and the big chains; in the middle is the customer who goes round the shops with the floor plan in hand to squeeze out a discount, and the one who, with a bit of nerve, gets the shop to tell him who makes the product and goes to buy straight from the factory. That is where anyone in the middle without a product of their own ends up.

The perfect model

This is the model that a high-end brand should aim to reach. The starting point is the category: bathroom, kitchen, bags, shoes, shirts, whatever suits you. It is the category in which I want to become the reference point for the high end. After the category comes the brand, to which the products are tied. After the product comes distribution: how does it leave my company and my warehouse and get to people's homes?

On one side there is publicity, which leverages the person who represents the brand and whose role is to make it take off. Advertising works on both the brand and the product. The arrow between product and marketing goes both ways: marketing works for the product, but the product also works for marketing. And distribution today is either online or offline: offline, the single-brand store and the shop-in-shop; online, your own single-brand shop and the multi-brand vertical marketplaces, the Yoox or the LuisaViaRoma of your sector. Combining these four channels gives you the perfect method for selling. Then there is delivery and the follow-up that creates referrals, which bring people back to the top of the pyramid.

The shop-in-shop in my sector is a special case, because there is a collection problem: since it sits in the category that is suffering most, distribution, there is a risk that it will raise cash at its suppliers' expense. Not always, of course, but it is pure business-to-business, and you have to watch the payment terms.

How distribution is organising itself

A large kitchen retailer with three shops in the province of Milan wrote: “We have decided to go beyond the idea of distributors, launching our own lines, which we produce and present through contract manufacturers.” He is cutting the space for the established brands, putting them out, and in his shops he sells kitchens under his own name. It is the right move, and I say so against my own interests, because I am involved in certain distribution channels.

It is the only thing distribution can do: what sense does it make for a retailer to keep buying kitchens from well-known brands if the consumer, by walking another five hundred metres, gets a bigger discount on the same product? Smart distributors are cutting the space they give suppliers and selling their own products. Consider the reverse too: if an important supplier, on whom you have built your shop, decides to go direct to private customers, you are stuck.

This is the picture. At the top, the high end with companies that have single-brand showrooms and communicate directly with the end consumer. At the bottom, Ikea and the big chains squeezing prices. And in the middle, the internet cutting out the middlemen. Anyone in the middle without a brand and without a product of their own is the first victim. You have to handle distribution personally, because that is where your company's multiplier changes.

From my book Direct from Milano and from my classroom courses. Figures and examples updated to September 2026.