August 29, 2024
iStock.com/tupungato
Should Burberry Give Up Its Luxury Aspirations?
Burberry, which in July appointed its third CEO in the last eight years amid continued struggles, should abandon its push to move upmarket to join Gucci, Dior, Prada, and other pure luxury brands and instead settle into the aspirational tier of the pricing pyramid, according to a number of analysts.
A shift toward that direction was signaled by the CEO hiring of Josh Schulman, who most recently led Michael Kors and Coach, two premium brands seen as aspirational but not uber-luxury. Per WWD, “Industry sources have said his arrival could signal a new dawn for Burberry as ‘the Coach of the U.K.’ with a focus on outerwear, accessories and branded apparel — and more accessible prices.”
The appointment came as Britain’s largest and most identifiable luxury brand reported a 22% drop in first-quarter sales, warned of a first-half loss due to the overall slowdown in luxury spending, confirmed layoffs, and suspended its dividend.
The 168-year-old brand reached iconic fashion status in the earlier part of the current century under the direction of CEO Angela Ahrendts and lead designer Christopher Bailey.
“Bailey grabbed British cultural references that spoke to a broad audience — the Beatles, Princess Margaret, David Hockney, Marianne Faithfull — to create a look that was aspirational but accessible, classy without being snobbish,” wrote Jess Cartner-Morley, The Guardian’s fashion editor. “By packing his front rows with politicians and rappers, as well as actors and supermodels, he gave Burberry a context in culture. He popped the collar on the trenchcoat, streamlined it into a more flattering silhouette, and built out the color palette from boring beige into soft neutrals.”
After Ahrendts exited to join Apple in 2014, Burberry’s sales slowed and Bailey was replaced as lead designer by Riccardo Tisci, renowned for his work at Givenchy, and then Daniel Lee, credited with transforming Bottega Veneta.
With the design changes, Burberry shifted away from its bestsellers, like the classic trenchcoat, to edgier looks with higher pricing that alienated its customer base. A strong push into handbags, which typically deliver the highest margins for fashion houses, failed to pay off.
“They tried to be a major fashion player because fashion was back in fashion,” Jelena Sokolova, a senior equity analyst at Morningstar, told Business Insider. “It was the same with boosting leather goods. Neither of these things, I would say, are extremely strongly in the brand DNA.”
On its July earnings call, Chairman Gerry Murphy admitted designs had “moved a bit too far, too fast with the new aesthetic” and said the brand would be taking steps to make offerings “more familiar to Burberry’s core customers by delivering relevant newness.”
He stressed, however, that the hiring should not be seen as a “significant change of overall direction.” Schulman was also formerly president of Bergdorf Goodman and CEO of Jimmy Choo, and he held leadership roles at Gucci and Yves Saint Laurent. Lee is staying on as lead designer.
Murphy elaborated, “The focus is very much on rebalancing our offer to be more familiar to Burberry’s traditional clientele, based on a greater representation in the assortment of classic timeless pieces, but with a top spin of novelty and newness provided by Daniel Lee for the runway customers and for more fashion-forward customers. So, we’re trying to be a universal brand.”
He attributed the weakness in large part to the broader slowdown in luxury spending and promised the moves, including cost savings, should “start to deliver an improvement in our second half.”
The Wall Street Journal noted that to be positioned in the upper echelons of luxury, Burberry would have to significantly reduce its reliance on outlets, which are estimated to account for up to 30% of its sales and up to 60% of profits.
Following the model of Coach and Michael Kors, which rely even more greatly on outlet sales, would allow Burberry to reduce costs, accelerate growth through off-price selling, and boost profits. WSJ added, “The trade-off would be a lower stock market valuation than its European peers and an end to any hope of being a high-end luxury brand.”
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Melissa Minkow
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Georganne Bender
Principal, KIZER & BENDER Speaking
Rachelle King
Retail Industry Thought Leader
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Discussion Questions
Would Burberry be better off positioning itself as an aspirational rather than pure luxury brand?
What does Burberry’s struggles to elevate its positioning say about the challenge of achieving luxury status?
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Burberry tried to move itself upmarket into a more exclusive position but did so in a schizophrenic way. The brand relies heavily on mid-priced sales and discounting to drive volume, and it is not seen by most consumers as being in the top tier. The result has been poor performance.
New CEO, Joshua Schulman, has a background that has been about accessible luxury: that fine middle-ground of avoiding ubiquity and cheapness while still allowing a broad base of consumers to buy into a brand. This is a strategy he is likely to use at Burberry. It marks a welcome step change from the unrealistic push to a more rarified and uber-luxury brand position.
That the answers here seem so obvious suggests I may be missing something, but…: Burberry was never a luxury brand, in the sense of Tiffany or Rolls Royce or a host of brands that most of us wouldn’t even be familiar with. It was – and is – a better brand; in the world of pre-WWII England, when many struggled just to put food on the table, that was perhaps a distinction without difference, but those days are long gone. If Burberry thought otherwise, the perception lived mostly in its corporate mind, rather than reality.
Academic research on luxury perceptions has shown three grades along a continuum: Accessible Luxury (e.g., Chanel and Mont Blanc), Intermediary Luxury (e.g., Rolex), and Inaccessible Luxury (e.g., Ferrari and Van Cleef & Arpels). Each of these luxury grades operates on exclusivity, scarcity, and price. Burberry’s reliance on volume and outlets does not engender viable luxury elements for the brand. The best (and ideal) for Burberry is to achieve consistency in its marketing, inventory management, and pricing to deliver Accessible Luxury branding. Anything more exclusive would require a massive rebranding that will outlast the current CEO and the board and entail a significant retooling of the company’s business model and current operations.
I love the way you articulate the luxury continuum, Mohamed. It’s exactly correct. And that gives the brand something deeper to think about. Sometimes I wonder if Michael Kors, for example, fits in the luxury paradigm at all.
I’m confused. Burberry is a luxury brand. It may not be considered a pure luxury brand, but it’s certainly not on par with Coach.
Marketing Burberry as the “Coach of the U.K.” would be a mistake. You have to take care of your core customer, but you can’t do that by going backwards.
I agree with this. It is a luxury brand but not on par with some more uber luxury brands in the market. You do have to take care of the established core customer base. To go in a different tangent would be detrimental to the brand.
Burberry’s story is the harsh reality of managing (and accepting) brand Archetypes which are established early on. And, regardless of effort or ambition, they are nearly impossible to change.
Burberry has a place in premium, upscale fashion, it’s just not the one they want. However, if they realign to a premium, aspirational strategy, which is where their brand archetype aligns, then they may find the consumers they seem to be missing.
In leadership, vision and aspiration are one thing but it only works in execution if you have an established customer base willing to follow you. This is where Burberry missed the boat. Their customers liked accessible aspiration. The brand has to find its way back there.
I do believe it’s possible for Burberry to get back on track. Brand sales may need a boost but the brand name still has equity. Leadership should ensure new strategies are resonating with the right consumers every step of the way because there won’t be too many more chances to get this right.
Burberry has a hefty amount of heritage and established positioning behind it. I worry that if it attempts to be too midrange for luxury, it won’t resonate with the way shoppers care to buy today- they typically are fragmented either at the very high end, or the much more affordable end. While Burberry has never been top tier expensive, attempting to be too middle-of-the-road comes with risk.
In order for Burberry to be positioned in the upper echelons of luxury, it must significantly reduce its dependence on retail outlets.
Reducing reliance on outlets is important in order to maintain the brand’s exclusivity and high-end image. A brand’s perceived value can be diminished by excessive exposure in discount outlets. A sense of scarcity and prestige can be created by limiting Burberry’s availability.
Burberry can enhance its brand exclusivity by focusing on limited edition collections and exclusive collaborations with renowned designers. Additionally, investing in high-profile fashion shows and private events can create an aura of prestige around the brand.
Implementing a rigorous quality control process and offering personalized services can further elevate the customer experience and reinforce the brand’s luxury status. Db
The premium, aspirational market is a very uncomfortable space, as far as I can see. We have very little evidence that brands in that zone have a clear understanding of what percentage of merchandise should be wholesaled, what percent DTC and what percent in their own stores. As far as I can see, they tend on the over-weighted side – overweighted on the “availability” side.
If Burberry can avoid the thirst to increase store counts to unsustainable levels, create guardrails against over-promotion by the retailers who it wholesales to and create reminisces of its legacy, it can succeed. My problem is, I think these are the new TJX customers. They just wait for the product to show up on a treasure hunt.
I don’t have easy answers, or I’d no doubt be on a beach in Bali, but I do think it’s a delicate line. I haven’t seen Michael Kors toe that line. I don’t love the idea of Burberry trying it.
Agreed, Paula. Michael Kors is a disaster zone. I am fascinated to see what Tapestry does with the brand if the merger goes ahead!
Burberry is, well, Burberry. One wonders why, with such a strong legacy, someone would want to change it. Ego? Hubris? How many companies would desire to have the position this classic company had (past tense) in the shoppers’ minds? In fact, it may be difficult to recapture their traditional and valuable identity.
Even though the magic of the Ahrendts-Bailey era has proven hard to replicate, Coach-a-fying Burberry would be a big mistake. Coach is not and never was a true “luxury” brand and has had its share of struggles fighting it out in the meh middle. Burberry set the standard for creating social media buzz, harnessing multi-media event content, and embracing shop-from-the-runway time shifts. Unfortunately, Burberry went on to myopically push ahead with categories that benefit its bottom line without regard to the brand’s historic references and customer preferences. Burberry needs to stay “up there” and focus on fundamentals, including great design.
Instead of trying to chase the brass ring of ultra-luxury, Burberry needs to face the reality that much of its volume and most of its profit is value-driven. This will require a hard look at everything from its product development and price points to its distribution strategy. What the brand doesn’t need is to compromise its reputation for quality and classic design; otherwise it becomes just another “aspirational” brand among many.
New CEO day one first question, “So who is actually wearing any of this?” https://us.burberry.com/mens-clothing/?brbref=men_lp_mens_clothing
When I see products like this, I am afraid the first thing that comes to mind is the word ‘chav’ – a term with which Burberry has, unfortunately, been associated.
Burberry needs to make a firm decision to either go upmarket or not. It cannot be both. This has already doomed its profits, and will continue to do so in the future. Better defining itself will clarify its position in the consumer’s mind, and clarify who it is competing against in the luxury market. This may be painful in its physical positioning away from outlet sales, but may be the necessary step to defining who Burberry is and where it is going.
Burberry has never really been an uber luxury brand. It is not surprising that recent efforts to transition into that exclusive sector have been challenging.
Luxury consumers have an innate way of knowing what tier a brand should sit in, and clearly the very top tier isn’t the right place for Burberry.
Aspirational luxury is where Burberry belongs and can do quite well alongside the Coachs and Michael Kors of the world. The heritage of the company and clear differentiation among its core competitors should enable it to thrive in this space.
Burberry is already recognized as a high-end brand. To compete with the exclusive higher-end (emphasizing the er higher), it must realize who its competition is and, just as important, what segment of customers it is going to leave behind. Recognizing that exclusive luxury means less unit sales. There’s only one way to make up the difference, and that’s higher prices. For that to work, there must be an obvious reason the price is high.
There is much to consider for a brand to expand into a new market, and even more to consider if you’re completely changing to a new market.
The timing of Burberry’s attempt to become an uber-luxury brand could have been better. Luxury brands have done surprisingly well up untl recently. When established top tier premium brands are themselves seeing softening demand, it was always going to be a hard sell.
In a similar vein to what Mulberry did a decade ago, Burberry tried to be a luxury brand as opposed to upper-aspirational. In the process, they deserted their core customer base and the type of customers who are most likely to shop at Burberry. Given the heritage of Burberry and its deep association with outdoor British culture and identity, it was always going to be a stretch to expect ultra-luxury shoppers to be mucking around in their $3000 trench coats. Instead of being the de facto brand for trenches, every other fashion brand from main street to the mid-tier has commoditized the style.
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Burberry tried to move itself upmarket into a more exclusive position but did so in a schizophrenic way. The brand relies heavily on mid-priced sales and discounting to drive volume, and it is not seen by most consumers as being in the top tier. The result has been poor performance.
New CEO, Joshua Schulman, has a background that has been about accessible luxury: that fine middle-ground of avoiding ubiquity and cheapness while still allowing a broad base of consumers to buy into a brand. This is a strategy he is likely to use at Burberry. It marks a welcome step change from the unrealistic push to a more rarified and uber-luxury brand position.
That the answers here seem so obvious suggests I may be missing something, but…: Burberry was never a luxury brand, in the sense of Tiffany or Rolls Royce or a host of brands that most of us wouldn’t even be familiar with. It was – and is – a better brand; in the world of pre-WWII England, when many struggled just to put food on the table, that was perhaps a distinction without difference, but those days are long gone. If Burberry thought otherwise, the perception lived mostly in its corporate mind, rather than reality.
Academic research on luxury perceptions has shown three grades along a continuum: Accessible Luxury (e.g., Chanel and Mont Blanc), Intermediary Luxury (e.g., Rolex), and Inaccessible Luxury (e.g., Ferrari and Van Cleef & Arpels). Each of these luxury grades operates on exclusivity, scarcity, and price. Burberry’s reliance on volume and outlets does not engender viable luxury elements for the brand. The best (and ideal) for Burberry is to achieve consistency in its marketing, inventory management, and pricing to deliver Accessible Luxury branding. Anything more exclusive would require a massive rebranding that will outlast the current CEO and the board and entail a significant retooling of the company’s business model and current operations.
I love the way you articulate the luxury continuum, Mohamed. It’s exactly correct. And that gives the brand something deeper to think about. Sometimes I wonder if Michael Kors, for example, fits in the luxury paradigm at all.
I’m confused. Burberry is a luxury brand. It may not be considered a pure luxury brand, but it’s certainly not on par with Coach.
Marketing Burberry as the “Coach of the U.K.” would be a mistake. You have to take care of your core customer, but you can’t do that by going backwards.
I agree with this. It is a luxury brand but not on par with some more uber luxury brands in the market. You do have to take care of the established core customer base. To go in a different tangent would be detrimental to the brand.
Burberry’s story is the harsh reality of managing (and accepting) brand Archetypes which are established early on. And, regardless of effort or ambition, they are nearly impossible to change.
Burberry has a place in premium, upscale fashion, it’s just not the one they want. However, if they realign to a premium, aspirational strategy, which is where their brand archetype aligns, then they may find the consumers they seem to be missing.
In leadership, vision and aspiration are one thing but it only works in execution if you have an established customer base willing to follow you. This is where Burberry missed the boat. Their customers liked accessible aspiration. The brand has to find its way back there.
I do believe it’s possible for Burberry to get back on track. Brand sales may need a boost but the brand name still has equity. Leadership should ensure new strategies are resonating with the right consumers every step of the way because there won’t be too many more chances to get this right.
Burberry has a hefty amount of heritage and established positioning behind it. I worry that if it attempts to be too midrange for luxury, it won’t resonate with the way shoppers care to buy today- they typically are fragmented either at the very high end, or the much more affordable end. While Burberry has never been top tier expensive, attempting to be too middle-of-the-road comes with risk.
In order for Burberry to be positioned in the upper echelons of luxury, it must significantly reduce its dependence on retail outlets.
Reducing reliance on outlets is important in order to maintain the brand’s exclusivity and high-end image. A brand’s perceived value can be diminished by excessive exposure in discount outlets. A sense of scarcity and prestige can be created by limiting Burberry’s availability.
Burberry can enhance its brand exclusivity by focusing on limited edition collections and exclusive collaborations with renowned designers. Additionally, investing in high-profile fashion shows and private events can create an aura of prestige around the brand.
Implementing a rigorous quality control process and offering personalized services can further elevate the customer experience and reinforce the brand’s luxury status. Db
The premium, aspirational market is a very uncomfortable space, as far as I can see. We have very little evidence that brands in that zone have a clear understanding of what percentage of merchandise should be wholesaled, what percent DTC and what percent in their own stores. As far as I can see, they tend on the over-weighted side – overweighted on the “availability” side.
If Burberry can avoid the thirst to increase store counts to unsustainable levels, create guardrails against over-promotion by the retailers who it wholesales to and create reminisces of its legacy, it can succeed. My problem is, I think these are the new TJX customers. They just wait for the product to show up on a treasure hunt.
I don’t have easy answers, or I’d no doubt be on a beach in Bali, but I do think it’s a delicate line. I haven’t seen Michael Kors toe that line. I don’t love the idea of Burberry trying it.
Agreed, Paula. Michael Kors is a disaster zone. I am fascinated to see what Tapestry does with the brand if the merger goes ahead!
Burberry is, well, Burberry. One wonders why, with such a strong legacy, someone would want to change it. Ego? Hubris? How many companies would desire to have the position this classic company had (past tense) in the shoppers’ minds? In fact, it may be difficult to recapture their traditional and valuable identity.
Even though the magic of the Ahrendts-Bailey era has proven hard to replicate, Coach-a-fying Burberry would be a big mistake. Coach is not and never was a true “luxury” brand and has had its share of struggles fighting it out in the meh middle. Burberry set the standard for creating social media buzz, harnessing multi-media event content, and embracing shop-from-the-runway time shifts. Unfortunately, Burberry went on to myopically push ahead with categories that benefit its bottom line without regard to the brand’s historic references and customer preferences. Burberry needs to stay “up there” and focus on fundamentals, including great design.
Instead of trying to chase the brass ring of ultra-luxury, Burberry needs to face the reality that much of its volume and most of its profit is value-driven. This will require a hard look at everything from its product development and price points to its distribution strategy. What the brand doesn’t need is to compromise its reputation for quality and classic design; otherwise it becomes just another “aspirational” brand among many.
New CEO day one first question, “So who is actually wearing any of this?” https://us.burberry.com/mens-clothing/?brbref=men_lp_mens_clothing
When I see products like this, I am afraid the first thing that comes to mind is the word ‘chav’ – a term with which Burberry has, unfortunately, been associated.
Burberry needs to make a firm decision to either go upmarket or not. It cannot be both. This has already doomed its profits, and will continue to do so in the future. Better defining itself will clarify its position in the consumer’s mind, and clarify who it is competing against in the luxury market. This may be painful in its physical positioning away from outlet sales, but may be the necessary step to defining who Burberry is and where it is going.
Burberry has never really been an uber luxury brand. It is not surprising that recent efforts to transition into that exclusive sector have been challenging.
Luxury consumers have an innate way of knowing what tier a brand should sit in, and clearly the very top tier isn’t the right place for Burberry.
Aspirational luxury is where Burberry belongs and can do quite well alongside the Coachs and Michael Kors of the world. The heritage of the company and clear differentiation among its core competitors should enable it to thrive in this space.
Burberry is already recognized as a high-end brand. To compete with the exclusive higher-end (emphasizing the er higher), it must realize who its competition is and, just as important, what segment of customers it is going to leave behind. Recognizing that exclusive luxury means less unit sales. There’s only one way to make up the difference, and that’s higher prices. For that to work, there must be an obvious reason the price is high.
There is much to consider for a brand to expand into a new market, and even more to consider if you’re completely changing to a new market.
The timing of Burberry’s attempt to become an uber-luxury brand could have been better. Luxury brands have done surprisingly well up untl recently. When established top tier premium brands are themselves seeing softening demand, it was always going to be a hard sell.
In a similar vein to what Mulberry did a decade ago, Burberry tried to be a luxury brand as opposed to upper-aspirational. In the process, they deserted their core customer base and the type of customers who are most likely to shop at Burberry. Given the heritage of Burberry and its deep association with outdoor British culture and identity, it was always going to be a stretch to expect ultra-luxury shoppers to be mucking around in their $3000 trench coats. Instead of being the de facto brand for trenches, every other fashion brand from main street to the mid-tier has commoditized the style.