Burberry Business Model

1BurberryBusinessModel
The Burberry Business Model
Creating an International Luxury Fashion Brand
https://us.burberry.com/

Introduction
• Such a profitable business, made a significant loss!
• A strategy which sacrificed management control over product
development and distribution in favor of seemingly indiscriminate
licensing agreements.
• Adoption of a business model that :
 Maximised internal controls, with respect to product sourcing, brand
communications and distribution.
 Cost management and resource utilisation efficiency.
 Provision of a portfolio of distinctly positioned fashion brands.
 Maximisation of internal control through the abandoning of licensing
agreements.

Introduction
• The Burberry performance over the same period has been determined largely by the adoption of business
models which … ?
• Ending 31 March 1998, annual profits drop from £62m to £25m !
• Financial analysts describe it as “an outdated business with a fashion cachet of almost zero”!
-148%

Introduction
• The re-alignment of Burberry’s business model :
 Internal control over manufacturing and distribution;
 The expansion of the product portfolio to
include a wider customer base;
 Adoption of a multi-brand positioning;

Introduction
This paper will :
1. Provide a review of the history of Burberry.
2. Evaluate Burberry’s re-positioning strategy.
3. Critically delineate Burberry’s current business model.

 Introduction
 Burberry Chronology
 Burberry Repositioning
• Brand Management
• Product Design & Sourcing
• Brand Distribution
 Burberry Business Model
• Products
• Manufacturing & Sourcing
• Distribution Channels
• Marketing Communications
 Conclusion
Headlines

First Store’s Opening
21-year-old Thomas Burberry
opens a small shop after working
as a drapery apprentice.
GABARDINE
Development
Gabardine, a breathable
and weatherproof fabric, is
developed and introduced.
Adopted By British Officers
As the predecessor of the “Trench
coat”, Tielocken, is adopted by the
British officers.
1856 1880 1900
http://www.tiki-toki.com/timeline
Burberry Chronology
• The Past

"PRORSUM"
The equestrian knight trademark
appears for the first time along
with the slogan "Prorsum"
meaning forward.
The First International
Store Opens
Burberry opens its first
store in Paris located on
Boulevard Malesherbes.
BURBERRY Reaches Japan
Burberry begins to sell their
merchandise in Japan in a wholesale
agreement with Sanyo Shokai and the
giant trading company Mitsui.
1901 1910 1920
Burberry Chronology
• The Past

Conglomeration with GUS
Change in ownership provided
the funding for the expansion of
the Burberry retail network in
the UK and the USA.
Japan Economy Downturn
With an ever increasing reliance
on Asia for sales, the sharp
downturn in the Japanese
economy has a significant effect
upon Burberry’s performance.
Profits Dropping
Annual profits dropped
from £62m to £25m
and GUS was advised to
sell-off Burberry!
1955 1990 1997
Burberry
GUS
Burberry Chronology
• The Past

Burberry Chronology
• Nowadays

 BURBERRY ANNUAL REPORT 2014,15
 BURBERRY 2014,15 ANNUAL REVIEW INTERACTIVE
Burberry Chronology
• Nowadays
Click Below to Show the DOC

BURBERRY…
LOST …
…!?
Burberry Chronology
• Nowadays

• Burberry key strategic challenges that faced their business in 1997 :
1. Heavy reliance upon a small base of core products.
2. Retail network based within non-strategic locations.
3. Inconsistent wholesale and retailing distribution strategies.
4. Parallel trading of legitimate wholesalers to other non approved distributors.
5. Poorly controlled licensing strategy.
6. under-investment in corporate infrastructures.
Burberry Chronology
• Rolling Back

• In 1997 the brand was available in more than 60
different stores in central London but was not
stocked by the capital’s most prestigious retailers
such as Selfridges, Harvey Nichols or Harrods!
Burberry Chronology
• Rolling Back

• GUS appointed Rose Marie Bravo as the new CEO.
• She had previously been president of Saks, New
York’s fashionable department store in Fifth
Avenue.
• New management team was assembled.
Burberry Chronology
• Rolling Back

 Radically repositioning :
• The primary asset, the Burberry brand, was undermined by a moribund image.
• Overly reliant upon a narrow customer base comprising of middle aged, fashion-conservative men.
• Inadequate control over product design and distribution arising as a result of indiscriminate licensing
and distribution agreements.
Burberry Chronology
• Rolling Back

 New strategy, re-position the Burberry’s brand as a :
• Distinctive luxury brand with a clear design, merchandising, marketing and distribution strategy.
• Which would be appealing to new, younger, fashion-forward customers.
• While still retaining the traditional customer base.
Burberry Chronology
• Rolling Back

 Management undertook a range of initiatives intended to :
• update the firm's brand image.
• Re-configure the distribution network.
• Assert fuller and more comprehensive control over product
development, sourcing and distribution both domestically and
internationally
Burberry Chronology
• Rolling Back

• Make a platform for the development of a revised business model,
described as “the positioning of the Burberry brand”.
• These are concerned with new approaches to:
1. Brand management.
2. Product design and Sourcing.
3. Brand Distribution.
Burberry Chronology
• Rolling Back

 Launched a radically different advertising strategy. (change perceptions of Burberry)
• use of leading models,
• reputable fashion photographers,
• retaining distinctly British themes as the content of these advertisements.
Burberry Repositioning

 Launched a radically different advertising strategy. (change perceptions of Burberry)
• flagship store on New Bond Street in London.
• attracting the attention of the international fashion press and other media.

• Bogart sues Burberry …!

• Burberry distanced itself from Moss in September
2005, days after The “Daily Mirror” scandal.
• Burberry stressed in November that it had not severed
ties with the model.
• A year later she got back with Burberry.

He joined Burberry in May 2001 as design director and became Creative
Director in 2004, and Chief Creative Officer in November 2009.
• Try to upgrade the range to ensure that more clearly
reflected the updated lifestyle positioning of the company.
• Restructured its sourcing and pricing.
• Eliminated unnecessary product variation.
• Products Design & Sourcing

PRORSUM Launching …
• Products Design & Sourcing

All unprofitable and non-core retailer stores in
Europe were closed.
Repositioning needed more control where and how the brand
was distributed within the UK and internationally.
Distribution policy should support the repositioning So….
working with wholesalers with inappropriate
stockiest were Discontinued.
The company bought back the distribution rights
within Hong Kong , Singapore , Australian in 2001.

 Introduction
 Burberry Chronology
 Burberry Repositioning
• Product Design & Sourcing
 Burberry Business Model
• Products
• Manufacturing & Sourcing
• Distribution Channels
• Marketing Communications
 Conclusion
Headlines

Burberry Business Model

Table III Turnover analysis by distribution channel
• Distribution channels
Sales (m£) Share Sales (m£) Share
Retail 156.9 31% 228.4 38% 46%
Wholesale 288.8 58% 306.9 52% 6%
License 53.5 11% 58.3 10% 9%
Total 499.2 100% 593.6 100% 19%
2002 2003
Year Growth

Table III Turnover analysis by distribution channel
594
499
72
18
546%
6%
9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
400
420
440
460
480
500
520
540
560
580
600
Total 2002 Retail Wholesale License Total 2003
Growth(Percentage)
Sales(m£)

Group Financial Review 2015
 TC Revenue : £ 2.523 M
 Retail Revenue : £ 1.807 M
 Year end net cash : £ 552 M
 Adjusted EBIT: £ 456 M
 EPS : 76.9 p
 Dividend Per Share : 35.2 p

Burberry Chronology
• Nowadays

 Products
 Manufacturing and sourcing
 Distribution channels
 Marketing communications

• Products Regional Mix

• Products
Product Mix

• Products

 Policy:
• Full Control Over The Development, Sourcing & Manufacturing
• Brand Control/Regular contact
• Creative Direction (Prorsum)
• Manufacturing and Sourcing

• Own Fabric Weaving Operation(Burberry London collections)
• Limited Number Of European Supplier (Prorsum)
• Raw Materials: Directly Purchases or Approved
• Achievement: Control Core product Category ,Rainwear )

• Castleford(England), Wales ,New Jersey (rainwear, outerwear)
• Finished Goods For Prorsum, European suppliers
 QC Managing Internally
• Moroccan Manufacturers(Thomas Burberry)
• Other European Suppliers
• QC Outsourced Third-Party Specialist

 Limited Licenses “brand-enhancing products”
 Principal Product Categories:
• Fragrance, InterParfums “Burberry London”
• Eyewear,Safilo Italian manufacturer
• Childrenswear CWF, specialist manufacturer
Achievement : Response To Changing Customer Tastes and demands

• Mitsui, Textiles Manufacture
• Sanyo, Designer, Producer & Wholesaler
• Royalty Payments
• 18 Japanese Firms Hold Licenses
• Advertising & Marketing
Achievement: Local Expertise ,Knowledge & commitment

• Warehousing & Logistics in-house, Northumberland
• Reducing Costs & Improving Delivery Times(USA-Asia Pacific)
• Plans To Extend Service To Major Wholesale Customers
Achievement: Managing Global Supply Chain

 Distribution channels
• Retail distribution
• Wholesale
• license

Distinct formats of Burberry retail chain :
• operation of company-owned stores
• company-controlled wholesale arrangements
• license agreements with partner firms in Japan

 Four distinct formats of Burberry retail chain :
1. Burberry London ranges : Serving as a showcase to the fashion
media and potential wholesale stockists.
2. New York and Chicago stock : wider range of rainwear ,has a greater
emphasis upon lighter weight products.
3. Korea, Japan and Spain : department stores are the dominant
distribution method for premium priced fashion in important
markets.
4. Outlet & factory stores in the UK, USA and Spain : 1. Discount prices
2. these sell products with minor imperfections & products
manufactured from surplus fabrics.

Wholesale stockists include :
• Prestigious department stores
• Specialty fashion retailers
• Duty-free retailers
Burberry’s wholesale stockists in 2002 was in excess of 3,100.
United State of America 17%
Spain & Portugal 40%
Europe & remainder in Asia 37%

The Burberry distribution channels model
Full
Product:
Range
Retail distributions Wholesale Distribution License Distributions
(Japan Only)
Flagship store Flagship store
Regular Price
Retail Store Department Store Burberry Blue/Black
Stores
Department Stores
Concessions
Specialty Fashion
Store
Department Stores
Concessions
Limited
Product
range
Designer Outlets
Factory Store Specialty Fashion
Store

• identify the importance of active marketing
communications in the development of an image and
lifestyle that is capable of “generating interest among
retail customers, wholesale buyers and the media” .
• Marketing communications

 Three ways of the Burberry communications model
1. Advertising
2. Fashion shows
3. Editorial placement

1.Advertising
• Launched on a twice-yearly basis to coincide with the delivery of the seasonal collections to
their retail stores and stockiest
• The production and media costs associated with the advertisements represent a signiﬁcant
proportion of the ﬁrm’s advertising expenditure.
• All advertising campaigns in Japan require central marketing department approval

2.Fashion shows
• Burberry views fashion shows as an important element in their marketing plan since these serve to underline the
luxury status of the brand.
• Furthermore, the shows establish and reinforce the fashion credibility of the brand and generate international press
coverage.
• The shows for the men’s and woman’s Burberry Prorsum are held twice-yearly in Milan.
• This decision to show in Milan recognizes the importance of the city as the global center of luxury fashion and serves
to maximize fashion media coverage internationally.
• The Burberry London line is shown at London Fashion Week each season in the London showrooms.

• Burberry has adopted a proactive public relations strategy aimed at the fashion and trade press.
• This strategy aims to maximize world-wide editorial coverage
• comment in support of the Burberry brand
• to ensure frequent product placement in the leading fashion, business, trade and newspaper publications.
• In addition, the company provides a brochure each season containing the current collection for wholesale account
customers and operates an information-only Web site which includes information on the history of the company,
images of current advertising campaigns and shareholder information
3.Editorial placement

Important considerations of Burberry’s marketing communications
• it recognizes the importance of advertising in the creation of a luxury brand image and lifestyle association
• it is clear that fashion shows and associated events are crucial to the achievement of international media coverage
• a proactive media management strategy is crucial for the achievement of adequate editorial coverage and the
development of a credible international brand proﬁle and standing

The Burberry marketing communications model In Bird’s Eye view

• The re-positioning and subsequent renaissance of the Burberry brand provides
invaluable insights into the machinery of the luxury fashion brand business
model.
• The value of this analysis lies in the access that it gives to the location of those
factors that contribute to the success of an international luxury fashion brand.
Conclusion

The Burberry model identifies five key success factors:
1. The importance of a clearly defined brand positioning which communicates a definite set of attractive brand values and lifestyle associations.
2. The requirement to maintain a coordinated distribution strategy whereby retail chains
compliment and are complimented by wholesale chains which assure maximum market coverage.
3. The opportunities afforded by a strong brand identity to extend into adjacent product areas either through internal capability or via licensing
agreements.
4. The opportunities afforded by a flexible approach to the management of important foreign markets – such as in the form of delegating
marketing activity through licensing agreements.
5. The importance of media relations management to the creation and maintenance of a credible luxury fashion brand reputation.
Conclusion

Finally, through an in-depth analysis of the Burberry business model, this paper
has sought to encourage further interest and debate with respect to the
mechanics of generating an internationally successful luxury fashion brand.
Conclusion

Burberry Business Model

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