Burberry enters a new era

Madelyn Postman
July 11, 2018

I met Christopher Bailey in 1999 in Milan, when we were both working at Gucci, shooting the Core Collection the day after the runway show. Since he moved to Burberry in 2001, where we also collaborated on some projects together, I’ve been keeping a close eye on the career of “the nicest guy in fashion” (I wholly agree!) and on the iconic British brand.

Repositioning to super luxury

Last autumn, Bailey announced that he was leaving his post of chief creative officer. A few days later the new CEO Marco Gobbetti set out an ambitious strategy to reposition Burberry into super luxury — suddenly with no creative director at the helm. The markets reacted badly and share prices dropped 12% in one day.

The move to super luxury, with Gobbetti promising no significant results for four long years, could alienate a large part of Burberry’s customers as well as the shareholders. Mulberry tried a similar move in 2014 and failed, with the chief executive leaving with his tail between his legs.

However, Burberry’s scale and knack for innovation may be just what’s needed to make Gobbetti’s plan succeed. The CEO is targeting flagging department stores and middle-market retailers in the US in particular, already closing 34 stores including seven outlets, and opening 14 locations in promising spots like Dubai. This way, Burberry stays high-end where markets are soft and becomes more readily available in the emerging markets, where luxury growth is strongest. The scale of the brand can absorb ups and downs which could cause lasting damage to a smaller name like Mulberry, and the long-term view means that planning and operations can be truly strategic, without running after quick wins.

The rainbow-coloured vacuum that Bailey left was filled in March of this year, with the announcement of Riccardo Tisci as the new chief creative officer. In luxury fashion, the chief executive-creative director duo is vital — think Gucci’s Domenico de Sole and Tom Ford, or Prada’s Patrizio Bertelli and Miuccia Prada. Gobbetti and Tisci already have a track record as a successful chief executive-creative director pair at Givenchy, and that shows in Burberry’s share price, which has been climbing steadily since Tisci’s appointment.

In May, Burberry acquired its Italian leather goods supplier CF&P, providing more control over product development, quality, timing and costs. Raising the production game with this type of vertical integration is in line with the repositioning strategy.

Burberry’s new chief creative officer: Riccardo Tisci

Like Gobbetti, Tisci is Italian. He studied at Central Saint Martin’s and has proven at Givenchy that he can create a signature style. It’s part dark romantic, part minimalist, and is sensual and emotional, underpinned by the technical excellence which couture demands. He’s a favourite of the red carpet with fans including Madonna, Rihanna, and Beyoncé, and friends with celebrities like Kim Kardashian West. His muse is a transgender model called Lea T (her professional surname, T, stands for Tisci). His collaborations with Nike shoes starting in 2014 helped spark the athleisure trend.

Collaborations are the way to go in fashion. Russian streetwear designer Gosha Rubchinskiy is already on his second capsule collection with Burberry and just five days ago, Tisci revealed his first collaboration: with Vivienne Westwood. It would be impossible to go wrong with this punk fashion darling, who is a British icon herself. That collection will be available in December.

Redefining retail

The old paradigm saw the press and VIPs at runway shows which preceded the actual season by half a year: a September show for spring/summer of the following year. Buyers, both in-house ones from brands’ various world regions, and from retailers like department stores, would flock to showrooms during the days after the show to place orders for production. Print advertising was closely coordinated with key pieces; a product that wouldn’t be available or produced in high enough numbers wouldn’t be worth pushing worldwide in a beautiful shoot with Mario Testino. Over the years, some of the traditional front-row VIPs had to make room for fashion bloggers like Susanna Lau of Style Bubble, but not much else changed until Burberry live-streamed a catwalk show in 2010. For the first time, everyone had a front-row seat.

Then in 2016, direct-to-consumer (or “see now, buy now”) completely shook up production timing for fashion houses, taking cues from the speed and influence of social media as well as from fast fashion outlets like Zara and H&M which push for lightning-quick production times, inspired by (read, copying) designs from the runway and whatever else is in demand that week or month. Only the largest brands can expect suppliers to jump when asked to do so.

Understandably, “see now, buy now” doesn’t work for all brands. There’s a middle ground, which is to increase the number of “drops” or deliveries. Streetwear brand Supreme regularly sees its fans flying in and camping out overnight in London’s Soho for their drops.

Yesterday, Vogue UK reported that Riccardo Tisci Is Switching Up Burberry’s Release Strategy, a move covered in today’s first quarter trading update. Tisci, who is dialled in to all the latest trends, wants to make “exclusive drops”, which are bound to create hype and drive demand. They will allow him to release his new designs this September straight off the runway, rather than next spring as conventional timing would dictate.

Thus Burberry’s purchase of CF&P, and the resulting increase of leather goods production control, supports the repositioning into super luxury as well as this more dynamic retail model.

How’s it going?

Burberry’s financial year end is March 31st. In May, the year’s preliminary results were positive: on-track and “showing promising early signs,” as Gobbetti said. Today’s trading update confirms the incremental upward trend. With the aim to initially keep operating margins stable for the next two years even while investing in the brand, an approach of “retail excellence” which includes “enhanced customer service” is already helping to increase sales to top customers.

The brand’s recent collections and collaborations have received positive reviews and consumer enthusiasm. Online, there is a new partnership with fashion retail platform Farfetch — which Burberry says is “performing ahead of our expectations” in the trading update — so you can now buy the classic trench coat with a check lining in 150 countries. In fact, mobile is now the brand’s largest digital channel. Always an innovation leader, Burberry now has a store on WeChat, the social and ecommerce app which dominates China.

The £1600 Leather Belt Bag is performing well and could replace the brand’s previous £800-£1200 key price point for handbags, which now includes a popular D-Ring Bag. Will the move to super luxury alienate middle-market consumers? Though the average price point is inching upward, the lower-priced products will probably still be available, albeit in more exclusive retail locations. Burberry’s repositioning strategy which initially seemed overly ambitious is now slowly but surely falling into place.