It didn't take but a single trip through one of her company stores to cause Burberry CEO Angela Ahrendts to question why the retailer carried so much merchandise.
According to The Wall Street Journal, Ms. Ahrendts asked for a report following a store tour so she could get a handle on the contribution all those items were making to the company's top and bottom lines. What she discovered was that 20 percent of the items in stores generated 80 percent of its sales.
Following the report, Ms. Ahrendts led an effort to reduce the number of items carried by the chain. Today, the merchants stocks some 4,200 items compared to the 6,000 before Ms. Ahrendts' research project.
"What was needed at this time was focus," Ms. Ahrendts told the Journal. "We needed to simplify on the inside to compete in the complex environment on the outside."
Ms. Ahrendts has also sought to make Burberry's more nimble. Instead of stocking two big collections a year, she has opted for five smaller ones to refresh store stock with new items more frequently.
One area of concern for Burberry, according to the Journal, is an underdeveloped accessories business. The retailer currently generates about 25 percent of sales from accessories putting it at a lower level than many of its luxury retail competitors. With higher margins than clothing, accessories represent a major opportunity for Burberry to improve its fiscal standing.
With increased efficiency, Ms. Ahrendts is turning her attention to reinvesting dollars into new store openings. In the past, Burberry has sought to open flagship stores in major cities but now is looking for opportunities in secondary markets such as Tampa, Florida.
Discussion Questions: Do you see any danger that Angela Ahrendts' focus on improved efficiency will endanger the perception the retailer has developed in recent years as a fashion leader? Is the 80/20 rule any more or less important to a luxury retailer than to those merchants selling goods at more moderate price points?