Burberry’s great success, due to their massive export rates towards America and Japan, during the 1980’s eventually came to its end in the late 1990’s, despite the product and geographical diversification the company had undertaken. Placing the Burberry brand on handbags, belts, childrenswear, toys, cookies and crackers, fragrances and liquor, and exporting abroad was simply not enough. Burberry wanted to position itself among the leaders in the fashion industry. However, those actions had a negative impact. The company began experiencing financial losses from its business in Asia, due to the gray market they were operating in. Several factories in the UK had to close. Management decided to focus on product and brand development, and attempts to expand through the United States and Europe were made. The new strategy turned out to be successful. The aggressive marketing approach and the successful expansion resulted in positive numbers. The company shut down non-profitable stores and invested in new geographical locations. Japan became Burberry’s largest market, followed by Spain. Gradually, the company expanded through the entire USA, and France and Italy, in Europe. Burberry had become one of the leading luxury brands in the world. The future, however, was not that bright. The following economic crisis resulted in a recession, which had a harsh and negative impact on the brand. The company had to close some business units. Focusing on Asia – Korea, India, and especially the uprising Chinese “empire” appeared to be the solution to all problems. Investing in under-penetrated markets proved to be one the most successful elements in Burberry’s strategy. By that time China and India were such markets, therefore all distribution channels in terms of retail, wholesale, and licensing where used, in order to optimize final outcomes. The results were incredible. Financial data indicated that since 2004, the global luxury goods market had grown by around 8% per annum prior to the economic downturn in late 2008. In 2009, it is estimated that the global luxury market declined by around 9%, as consumer confidence and spending fell. Burberry’s wholesale business experienced a 28% drop in sales, which led to shutting down some units and restructuring the entire wholesale division. However, despite the economic slowdown, Burberry presented adequate financial results for 2008/2009. The firm stated that Europe and Asia both delivered double-digit percentage growth. At June 2009, the company possessed 18 retail stores, 253 concessions and 84 franchise outlets in over 25 countries. They agreed on expanding the number of franchised stores in Asia to 100. Specialists predicted recoveries in 2009/2010 and fortunately forecasts were correct. The year of 2009/2010 was actually extremely successful, compared to the prior 2008/2009. Burberry stated that there was a real blast in their financial performance. The company continued to see strong growth potential overseas, in both Americas. In result, Burberry opened a new regional headquarters with state-of-the-art showrooms in support of its wholesale operations in Americas, and six new stores were opened in retail. Additionally, in order to strengthen their positions in Latin America, Burberry opened its first store in Brazil. According to BBC News, “Sales grew by 21% in the six months to the end of September”, and “Much of the growth came from within Asia where sales were up by 50% - driven largely by China”. In result, the company agreed to buy out all of its franchises on the territory of China. Burberry saw an opportunity to gain greater control over the merchandise and its marketing. Apparently, management did not believe that the Chinese possessed the knowledge and skills required to manage the company’s constantly growing businesses. Buying out company franchises would strengthen Burberry’s position into the Chinese market, thus enabling them to move the production itself to Asia. Local production provides many financial advantages, including cheap labor, China’s greatest advantage of all. In addition, fighting counterfeiters is a massive problem in China. Burberry’s presence will definitely have a positive impact on that matter.
Investment in Asia has undoubtedly been instrumental in the company's success. Burberry recently acquired direct control of its Chinese operations, which will help to further improve its understanding of local consumers, enhance sales and consolidate its position in the country's growing luxury market. Burberry expects to increase its average retail space in China by 15% in the second half of the year as it acquires the remaining franchised stores and opens new outlets. The fiscal 2009/2010 has been quite a success for English Burberry. Twenty-one (21) mainland stores were opened, including Burberry’s first flagship store in Asia at Singapore’s Ion Orchard. Additional locations in Paris and New York were added as well in attempts to strengthen the company’s position. Twenty-eight (28) stores were renovated. The company achieved 60% growth in e-commerce and is planning to continue investing in the channel, as it has proved to be a valuable addition to the distribution process. Burberry has always been aiming at providing leading standards of customer service throughout its stores. The company’s current strategies turned out to be successful in the highly unfavorable economic conditions it is operating in, therefore the Burberry Group are planning further to continue the search for under-penetrated markets and invest in them, and rely on heavy and aggressive marketing, in order to create strong brand awareness. The group now has 122 mainline stores, 255 concessions and 90 franchised stores across the world, is planning to increase retail selling space by 10 percent a year.
The unexpected world economic crisis had a devastating effect on the business. It is times like those that require true strategic thinking. Burberry took the correct strategic choices and witnessed great financial results, while others were struggling to survive. It is extremely hard to predict the economic future. One thing is certain, Burberry continue to strive for excellence.
REFERENCES
Burberrys of London: An Elementary History of a Great Tradition, London: Burberry Ltd., 1987.
Fallon, James, "Bravo on Burberry's Luxe New Digs: `A Big Strategic Move'" Daily News Record, August 23, 2000, p. 1.
"Burberry Profits More than Double in Year", Daily News Record, June 9, 2000, p. 1B.
Burberry continues China push as sales rise. Retrieved/Accessed: 05.02.2011; URL: http://www.retailinasia.com/article/retail/store-development/2010/10/burberry-continues-china-push-sales-rise
Burberry annual report, Retrieved/Accessed: 06.02.2011; URL: http://annualreview2009-10.burberry.com/strategy/accelerating.html
Benefits from Asia push. Retrieved/Acessed: 06.02.2011;
URL:http://www.datamonitor.com/store/News/burberry_benefits_from_asia_push?productid=E844E9BA-33B1-462F-84F0-9FA4075ECDFE
