Burberry is one of the legendary brands in the field of fashion. The great British name has a huge history behind it, having become known for its stylish trench coats.
But during this summer it was revealed how fragile the foundations were behind such an important name. In July, after reports that it was cutting hundreds of jobs, Burberry announced that its sales fell 21% from a year ago in the first quarter and that it would suspend its dividend. Immediately after the results, the company also announced that it was removing its chief executive, Jonathan Aykeroyd. The company’s stock is down more than 50% this year.
But what went wrong? The answer is a combination of too high prices and too high fashion, as Business Insider notes.
Burberry has moved away from its best sellers, such as the classic trench coat, to more cutting-edge looks that don’t appeal to a broad market. It has also tried to compete with larger, more established luxury players, with limited success.
“They tried to become a major player in fashion because fashion was back in fashion,” Yelena Sokolova, senior equity analyst at Morningstar, told Business Insider. “The same thing happened with the focus on leather. None of those things, I would say, are very strongly in the DNA of the brand.”
Burberry also tried to get into handbags, which are one of the highest-margin items a luxury house can sell, but couldn’t keep up with the likes of Louis Vuitton and Gucci. What is left is a confused brand, with no core direction and too many discount and outlet stores.
Reaching the top
Like many other old brands (Hermès, Louis Vuitton), Burberry was created for practicality rather than fashion. Founder Thomas Burberry created his own fabric in 1879 with the aim of protecting customers from the British weather.
Source: Business Insider
The fabric was intended for performance, and the company boasts early 20th century explorers who wore its clothing during voyages.
It took 100 years to become a real force in fashion.
From 2001 to 2018, designer Christopher Bailey ran Burberry and turned it into a global name. While he focused designs on Burberry’s classic heritage, he also modernized the business, making runway collections immediately available after the show and building a strong online presence.
It may not have been a high fashion company like others, but what it did worked, notes Business Insider. “When things were good, the brand outperformed the industry,” said Sokolova.
The end of the golden age for Burberry
But every golden age comes to an end, and after Bailey was also appointed chief executive of Burberry in 2014, the brand began to decline.
The company had begun to lag behind its competitors, and the move to change its leadership in 2018 was praised by industry observers who had just seen Gucci transform under Alessandro Michele.
Part of this renaissance was Burberry’s attempt to move upmarket, both in terms of looks and price. The Burberry looks designed by Riccardo Tisci, who followed Bailey as creative director, were very different from the traditional.
But Burberry’s trademark was never avant-garde, but classic trench coats, a lesson Tisci’s successor and current Burberry designer Daniel Lee learned all too well when he tried to focus too much on leather goods.
For the past two years, Burberry has tried to break into the luxury handbag market, a high-margin market, without success. The company began releasing bags that matched the prices of those from leather goods houses such as Louis Vuitton, charging up to 58% more than its traditional leather products. But customers weren’t particularly moved by Burberry’s new additions.
The result is a series of contradictions: a historic British brand known for its trench coats trying to become a high fashion name, and a brand with increasingly expensive products, forced to turn to outlets and deep discounts when the these products were not moving.
Of course, Burberry is not responsible for all its problems. The luxury sector is facing challenges as a whole.
And industry watchers seem to agree that Burberry is at a crossroads and can go one of two ways, either return to what it does well or continue down the path of becoming a high fashion brand, a path that has brought to where it is now.
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