Burberry Fashion Industry Essay Example
Burberry Fashion Industry Essay Example

Burberry Fashion Industry Essay Example

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  • Published: May 17, 2017
  • Type: Case Study
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Some of the numerous global luxury brands include Burberry, Louis Vuitton, Gucci, Prada, Calvin Klein, Christian Dior, Chloe, Emporio Armani, and Ferragamo.

Despite the global financial crisis, luxury companies have encountered difficulties despite their substantial sales and profit growth in recent decades. These companies are not solely engaged in financial products such as mutual funds, ETFs, and financial indices but are also suggested by economists for long-term investments. The rationale behind this suggestion is that as customer income rises, there will be a greater desire for luxury goods, resulting in an increase in their value. Currently, consumers are buying luxury goods more than ever before due to aspirations for a wealthier lifestyle or personal enjoyment (Truong et al.).

Passariello et al. (2009) discovered that the luxury market experienced an annual growth rate of 8% until the economic downturn in 2008. However, t

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here was a decline of 9% in the fashion industry in 2009.

Burberry (2010) claims that the global luxury sector is valued between 150bn and 200bn. Table 1 from Burberry (2010) presents data on the retail value of the global luxury sector.

Burberry, founded by Thomas Burberry in England in 1856 as a small shop in Basingstoke Hampshire, introduced its first outwear garments for sports when Thomas Burberry was a draper's apprentice at age 21.

Burberry was originally named after its trademark gabardine, which symbolized British elegance and lifestyle. In 1924, the Burberry check was introduced as a lining for its trench coat and became well-known after being featured in The Pink Panther. Burberry also produced special clothing for aviators and expeditionists. Today, Burberry operates in the international luxury business, designing, sourcing, manufacturing, and distributing high-quality apparel, especially outerwear,

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for women, men, children, and non-apparel fashion products. Its global distribution network includes licensing agreements, particularly in Japan (Burberry 2011). Geographically, Burberry is primarily based in Europe, with 27% of sales in the United States and 24% in Asia.

Income turnover from Japanese Licensing also contributes to total revenues. In 2010, revenue from licensing agreements accounted for 8% of the total. Despite the financial crisis, Burberry experienced a slower sales growth but still managed to achieve a slight increase of 1% in 2010, which is considered satisfactory compared to its competitors (Burberry 2010). According to Table 2 from Burberry (2010), the sales distribution across different geographic regions in 2009 is shown. Table 3 from Burberry (2010) illustrates the annual revenue growth. Burberry's products are distributed through various channels including retail and wholesale. In 2010, Burberry had a total of 131 stores, 262 concessions within department stores, and 47 outlets, expanding its presence through digital commerce in more than 27 countries (Burberry 2010). Franchisees mainly operate 97 stores located in emerging markets.

Retail accounts for 58% of the total income according to Table 4, which shows the revenue by channel from Burberry's 2011 data. The role of multiple branding is essential to Burberry's operations as it aims to establish various associations and cater to specific customers. This approach allows Burberry to achieve its primary objective of acquiring new customers while maintaining existing ones. One such example is the Burberry London product line, which serves as the flagship offering. Similarly, the Thomas Burberry brand aims to diversify its presence in Spain and Portugal, as indicated in Table 5.

Table 5 Multiple Brands & Segmentation
Multiple Brands| Segmentation|
Burberry London| Core Product Line

Associated with the Trench|
Burberry Brit| Fragrance Association/Casual Women’s & Men’s apparel line|
Burberry Prorsum| luxury Market- High-End Brand|
Burberry Sport| Fashion Edge/ Younger Appeal, lower Prices|
Thomas Burberry| Distributed only in Spain, Portugal and Greece|
Burberry Black Label, men| Japan & Hong Kong for Young Individuals only|
Burberry Blue Label, ladies| Japan & Hong Kong for young individuals only|

Compare Burberry’s Positioning Relative to that of its Main Competitors. What issues had to deal with?

Positioning selected means that Burberry’s direct competitors are Calvin Klein, Ralph Lauren/Polo, Chanel, Christian Dior, DKNY, Valentino, YSL, Cavalli or D&G, rather than Gucci or LV or Prada. A supportive argument in the same direction could be the total value of the company in prices of 2008 as depicted in Table 6. The distinction between old and new Burberry is the outcome of the multiple brands launched after 2001.

Table 6 Value in Thousands ˆ for Most Luxury Brands in 2008
Source: Hermes (2009)

Table 7 Positioning –Perceptual Maps
Source: Solomon et al. (2009)

Burberry's target market is still wealthy affluent consumers and label-conscious shoppers.

However, Burberry is worn by various socio-economic groups including not only royals and aristocrats but also hip hoppers or hooligans. This has led to a significant problem for Burberry in recent years. The brand has lost its prestige and prominent qualities, and its core customers have seen the iconic Burberry check become associated with a style tribe known as the ‘Chavs’. This demographic consists of young, working class individuals, both male and female, who are known for wearing designer labels without much taste and allegedly causing trouble (Prentice Hall 2005). This trend has been further fueled by the widespread availability of counterfeit products.

The impact of these

individuals on Burberry has been significant, as they have changed the brand's image and meaning in ways that were not anticipated. This has affected Burberry's core customers, who now view the brand differently due to its association with individuals such as taxi drivers. As a result, some customers are no longer interested in the famous 'check' pattern. This negative effect led to some UK retailers discontinuing the brand. On the other hand, competition from Gucci and Versace has intensified, as these brands are known for their high quality, customer-focused designs. Burberry now faces marketing dilemmas in a turbulent financial environment, such as retaining current customers or acquiring new ones. They must also decide between brand expansion or fortification, and whether to emphasize product performance or brand image. Additionally, they must consider balancing classic designs with fashion-forward options and prioritize sales generation or brand-building activities. Another challenge for Burberry is finding the right balance between exclusivity and accessibility.

Exclusivity can sometimes hinder accessibility, and Burberry experienced this firsthand. The brand was once synonymous with inspiration, but as a result, sales growth began to decline. We now focus on retaining our classic customer base while also appealing to a younger audience for continued success.

By utilizing differentiation and refreshing schemes, we are able to thrive in these three conflicting areas. This is achieved not just by creating fashionable products, but also by promoting them in a way that polishes frames of reference (Slide share 2002). The brand imaginary and brand feelings are crucial, as a considerable portion of brand equity relies on intangible factors. We intervene to fulfill customers' cultural, psychological, and social needs. An example of this is

Burberry, a brand that embodies all aspects of British royalty. In the 1920s, Burberry provided funding for expeditions, and in 1911, the Norwegian explorer Captain Roald Amundsen was equipped by Burberry and became the first person to reach the South Pole.

Three years later, the trench coat was created to accompany the British army, while Burberry was granted a Royal Warrant by Queen Elizabeth II in 1955. However, the brand's current policy for special occasions is more mainstream. Burberry's foundation aims to support inventive ideas from young entrepreneurs, but it falls short in achieving exclusivity.

On the other hand, there was a decision to relocate the women’s spring show 2010 from Milan to London, which marked a policy shift. This move helped reconnect with Burberry's British heritage and gained publicity and editorial coverage. Ultimately, the question is how to achieve the aforementioned goals and satisfy customers' expectations. Burberry does well in these areas by reexamining the use of their signature ‘check’ pattern, leveraging social media and celebrities to regain their uniqueness. Additionally, pricing and investments have been effective tools. Digital Marketing has been used to minimize marketing tradeoffs. Luxury brands are debating whether to build their own social networks. The concern is whether social media makes brands too accessible, diminishing their value and perception of affluence. Burberry, along with Mercedes and Gucci, launched their own social networking site called ‘Art of the Trench’.

With over 2,000,000 fans on Facebook, Burberry's decision to create its own network has raised questions regarding the need for it. However, Burberry is not abandoning its Facebook community; rather, it is providing users with an additional and more exclusive platform.

According to the Financial Times

(2009), Burberry will utilize Facebook to increase traffic to their site 'Art of the Trench'. By personalizing the brand experience and targeting a select group of users, Burberry aims to isolate potential long-term customers. This exclusive website enables Burberry to reach individuals who may not be active on Facebook or Twitter. Nevertheless, the sustainability of this approach relies on how these users are treated.

In September 2010, sales experienced a significant increase of 50% (Utalkmarketing 2010). As an example, Burberry's creative director, Christopher Bailey, enlisted the help of Scott Schuman from The Sartorialist to launch a website featuring photos of individuals wearing trench coats on well-known city streets. This collaboration serves as a strategic move for Burberry, allowing them to tap into Schuman's fame and reach various audiences. Whether the individual is a consumer, fashion enthusiast, or industry professional, they are familiar with Scott Schuman. Consequently, Burberry plans to utilize Schuman's diverse following to gain more widespread recognition. Additionally, Burberry is also testing out user-generated content.

This social step may have debatable results in terms of aesthetic, but if a user does a phenomenal job, Burberry will recognize their potential and incorporate it accordingly (Fashionably Marketing, 2009). However, some are concerned that this network may attract bargain hunters related to Burberry's factory outlets, which could commoditize the brand. This can be avoided with proper handling. Customers who shop through Burberry's main website and retail stores, as well as outlet stores, understand the differences. It is a solution based on the customers' mentality in the fashion industry (Fashion Industry Network, 2009). Burberry live-streamed its Spring/Summer 2011 women's wear collection to its 25 flagship stores worldwide.

The virtual

fashion show provided customers with the opportunity to browse and make purchases from the collection through a Burberry-designed iPad app (Enterprise Innovation 2011). On the Burberry website, users can interact with motion-responsive images and videos by clicking, rotating, and dragging them 180 degrees. Additionally, individual products and models respond to user commands, allowing shoppers to find items that meet their desires (Utalkmarketing 2009). Lastly, Burberry has embraced mobile commerce by creating a mobile site specifically designed for iPhone and Android users.

According to a recent online trend report by digital marketing agency, Burberry is ranked fifth in 'Digital Iq' among top companies (Business of fashion 2010). This survey is significant as it reveals that visitors often come from other retail sites, indicating their inclination to visit multiple similar sites. Surprisingly, a brand's social media popularity does not necessarily correspond with the number of site visits and market share. It is interesting to note that Burberry holds the sixth position.

The popularity of Red-Luxury 2010 on Facebook far surpasses its meager 5 percent market share of site visits. According to Table 8 Digital IQ Ranking for Luxury Brands from Business of Fashion (2010), there is a potential for improving marketing tradeoffs through pricing and investments. Brand extensions such as Burberry Brit are being used to target a new market segment, but past research, including Aaker (1997), suggests that these extensions may dilute the brand and diminish its luxury status. Customers who aim to demonstrate wealth and upper-class status often rely on product prices to signify this. As brand extensions are priced lower, they may reduce the perception of quality and luxury.

The composition of the step down product

holds significant importance as it can impact the core brand in both positive and negative ways (Vigneron and Johnson 2004). Consequently, Burberry should implement a premium pricing strategy that incorporates notable quality cues while minimizing discounts and markdowns. Burberry is more affordable compared to traditional luxury goods, yet it still maintains a perceived level of prestige that distinguishes it from middle range or fast fashion products like ZARA (Euro monitor 2005).

Limited accessibility is guaranteed by price premiums. The idea is for middle class consumers to only be able to occasionally afford to purchase the brand. If these purchases become habitual, it can lead to brand dilution. To ensure that the brand remains affordable while still maintaining an aspirational image, investments must be made to create a prestigious brand environment that appeals to consumers as exclusive, even if some products are made in China.

Investments in prestigious stores, advertising in glamorous magazines, seasonal fashion shows, and well-known designers are practical measures that Burberry should take (Kowalzyc 2008). However, it is worth considering if Burberry should proceed with a restrained use of their iconic 'check.' While the Burberry 'check' is widely recognizable and a valuable asset for the brand, its overuse can lead to diminishing returns. By incorporating a more subtle and intimate feature, Burberry can effectively communicate with its core customers. One way to achieve this is by reducing the production of products that prominently feature the 'check.' Currently, the product mix consists of 40% without the 'check' and 40% with a subtle use of the pattern.

Concluding, it is important to remember that a brand is not only about its association with popular symbols. The phenomenon of

celebrity endorsement often triggers this trend. In the case of Burberry, Emma Watson has taken on the role previously held by Kate Moss in their advertising campaign. This is an example of celebrities endorsing the brand, where individuals with positive and influential associations are linked to the brand (WWF 2011). Along with influencing customers, a celebrity should also be capable of inspiring companies.

These days, it is important for someone to be able to create new aspirations and not just promote shallow luxury. Endorsing brands now means improving social and environmental performance. For a company competing in a mature and masstige market, added value can come from having superior environmental and social performance based on authenticity and sustainability values, instead of relying solely on exotic products (WWF 2011). The rise of modern technologies has also led to an increase in counterfeit products. Some of these counterfeits are so well-made that they are almost indistinguishable from genuine products. This is partly because customers believe that luxury brands are often overpriced (Nielsen 2008), and also because the quality of counterfeit products has been steadily improving, sometimes reaching the level of the real brand.

Cost minimization is the main goal of luxury brands, which has led to the implication that consumers' attitudes towards these brands serve a social adjunctive function or a value expressive function. As De Bono (1985) found, consumers may choose to purchase luxury items from a brand like Burberry because it reflects their personality or because it serves as a status symbol. It is important to note that Burberry heavily relies on its trademarks and other intellectual property rights, which are vital to its competitive position and

brand value. Consequently, the group takes a combination of criminal and civil legal actions or settlements to address any issues that may arise in order to protect its brand.

Nevertheless, despite the fact that such measures are not entirely sufficient, Burberry must discover alternative methods to maintain its prestige without relying heavily on logos. One approach could be to highlight the environmental benefits of genuine products, their representation of deeper values, or their support for local communities involved in production (WWF 2011). In conclusion, we can reaffirm that Burberry is a well-established brand with significant financial backing. Moreover, it possesses an authentic British historical heritage that surpasses that of almost any other fashion brand.

Based on an analysis of its financial fundamentals and segmentation, it can be concluded that Burberry's poor growth results in 2010, compared to previous years (WSJ 2009) and not compared with competitors, are the outcome of marketing tradeoffs. The main issue that Burberry faced was the overexposure of its logos and brand name, which happened for the second time after 2005. However, it is highly likely that the current actions and strategy are better aligned than in the past. Burberry has extensively and successfully utilized digital marketing. While there are no major fashion-forward changes in its products, Burberry refreshes their frame of reference, exclusively and authentically.

Appendices Appendix 1 Significant Milestones for Burberry | 19th Century ''Innovations and business expansion''| 1880| Burberry invented the famous ’’Gabardine’’ made of a breathable, waterproof material quite innovative for that period of time. 1891| The business grows with the opening of a new shop in the West End of London at 30 Haymarket trading under the name Thomas

Burberry ; Sons.

Since the beginning of the 20th century aviators, cartographers and mountain climbers have worn Burberry clothes.

20th Century | 1901| The Equestrian knight trademark was introduced accompanied by the Latin Word ’’Prorsum’’ a horse logo meaning forward.

| 1911| Burberry was chosen to defend Captain Amundsen, the Norwegian explorer who became the first person to reach the South Pole, and his team. 1920| The iconic Burberry check pattern was introduced and became closely associated with the brand. | 1967| Burberry extended the check pattern to include other items such as handbags, umbrellas, and scarves. | 2000| The exclusive 'Art of the Trench' service was launched, offering made-to-order trench coats.

| Today| Internationally recognized luxury brand with a worldwide distribution network, embodying the distinctive British heritage while catering to the creative spirit and ambition of young individuals. | Appendix 2 Credit Suisse Equity fund Global Prestige (Investment Distribution) Source: Credit Suisse (2011) Appendix 3 Burberry’s SWOT Analysis Strengths| Exclusive Heritage: The Company holds a unique position as a classic and elegant British clothing brand, renowned worldwide. | Attractive Market Fundamentals: Despite the current macro-environment, the accessible luxury goods industry shows positive prospects in terms of geography and product diversity, particularly due to the emerging economies' demand growth. Pricing: Premium prices enable middle-class consumers to occasionally purchase Burberry products, contributing to expanding its customer base. | Social Media Use & E-commerce: Burberry extensively utilizes digital marketing techniques such as social media, mobile internet, live broadcasting, and interactive tools in its flagship stores.

| Weaknesses| Burberry's weaknesses include its exposure to changes in demand for luxury goods, which is dependent on the external economic environment, the stock

market, and local consumer confidence. This makes the company susceptible to a potential decrease in spending on apparel by wealthier consumers. Additionally, Burberry is structurally exposed to the apparel market (61% of sales) and has a higher fashion risk compared to other luxury groups. Although the company has increased the number of collections annually from two to five, its fashion risk remains higher than its competitors.

Joint Ventures pose a potential risk as there is a lack of control over the Japanese market, which contributes 40% to brand retail sales. Additionally, unexpected weather changes can negatively impact seasonal sales, especially for outerwear items like gabardines (20%).

On the other hand, there are opportunities for growth. Despite being a large and mature brand, Burberry can still expand its retail space and develop new products. In April and June 2010, Burberry successfully opened stores in Baku, Budapest, Cannes, and Korea. Luxury brands have an advantage in crossing borders compared to retail brands, and the increasing affluence of consumers in various markets indicates significant potential for ongoing expansion in this business.

Supply Chain ; Cost Efficiency Burberry has enhanced its supply chain capabilities by implementing an ERP project called ATLAS. Celebrities Endorsement Apart from Emma Watson (since 2009), the company covertly utilizes various British symbols. A recent example is Kate Middleton, who was photographed wearing multiple apparel and non-apparel products of the brand shortly before her marriage to Prince William. Threats Currency Burberry is susceptible to currency risk, and a significant portion of the brand's sales are dependent on tourism, especially from Japanese tourists. Therefore, the brand is exposed to fluctuations in international tourist flows. Counterfeit Products & Overexposure of

the Brand Burberry has dealt with issues related to counterfeit products and excessive brand distribution, which has resulted in brand dilution, although it appears that they have managed to address these problems to some extent. Increasing Market Competition As a well-established player in a mature market, Burberry faces competition across various product categories.

The competition in the market may have more financial resources, making it even more challenging for Burberry. In mature markets, consumers tend to look for something beyond pseudo luxury. Additionally, a significant portion of Burberry's sales comes from customers who purchase products while traveling, specifically from countries such as Russia, Japan, China, and the Middle East. Therefore, any conflicts or changes in political regimes that affect travel routes will impact Burberry's trading results.

Mentions:

  1. EBSCOhost, 2009. Why Do Consumers Buy Counterfeit Luxury Brands? Available from: http://web. ebscohost. com(Accessed 12 April 2011)
  2. EBSCOhost, 2009. Vertical Step-Down Luxury Brand Extensions: Do They Help or Hurt the Core Luxury Brand. Available from: http://web.

ebscohost. com(Accessed 12 April 2011)
Enterprise innovation, 2011. Verizon business helps Burberry stream Spring/Summer 2011 collection worldwide. Available from: http://www. enterpriseinnovation. net/content/verizon-business-helps-burberry-stream-springsummer-2011-collection-worldwide (Accessed 14 April 2011)
Euromonitor, (2005) LVMH Mo?t Hennessy Louis Vuitton, London, Euromonitor Plc.
Fashion Industry Network, 2009.

Luxury brands & building social networks can be found on www.fashionindustrynetwork.com/profiles/blogs/luxury-brands-and-building, accessed on 14 April 2011. Another source, Fashionably Marketing, discusses whether luxury brands should create their own social networks, available at http://fashionablymarketing.

The following sources were accessed on specific dates:

- "me/2009/10/should-luxury-brands-build-their-own-social-networks/" (Accessed 14 April 2011)
- Financial Times, 2010. Burberry looks to win over friends online. Available from: http://www.ft.com/home/europe (Accessed 12 April

2011)
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Available from: http://l2thinktank. com (Accessed 12 April 2011)

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    The article titled "Coach, Gucci, Juicy, Burberry have lion share of luxury web visits" accessed on 12 April 2011 at the website http://www./2010/10/27/coach-gucci-juicy-burberry-have-lion-share-of-luxury-web-visits/.
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  • The Business of Fashion, 2010.
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