Burberry: A great British success

Over the past decade, only a handful of retailers have taken the sector by storm and helped define what 21st-century retailing means. Apple is one, Amazon another and, at the luxury end of the scale, iconic British brand Burberry has earned its place as one of the world’s most exciting retail powerhouses.

In a market where many retailers feel as though they’re swimming through treacle, Burberry has shown consummate adaptability and enjoyed standout success as a result. The 156-year-old brand has adapted to a changing Western consumer mindset, recognised and capitalised early on the rising power of the Chinese consumer and made smart use of new technologies that other retailers are still only starting to comprehend.

Burberry’s headquarters in London paint a succinct picture of its story over the past few years. It’s not just the sleek interiors and outstanding product in its showroom that catch the eye, but the extensive use of cleverly designed technology. Huge screens showing its most recent catwalk shows decorate the reception area and an entire room is dedicated to displaying the ad for its Burberry Body fragrance, while touchscreens adorn the walls of its showroom. Every sales assistant in its stores has an iPad which can be used to order products online, and of course Burberry’s use of digital technology is trailblazing – but more of this later.

Burberry’s achievements over the past five years in one of the most difficult trading periods on record are astounding. Since Angela Ahrendts took the helm as chief executive in 2006, the creative side of the business including product, marketing and branding – driven by British designer and chief creative officer Christopher Bailey – have all excelled. At the same time, the retailer has transformed the way it does business. Gone is the proliferation of licence agreements, which allowed third parties to produce Burberry goods on the retailer’s behalf. Now, everything bar some accessory lines are produced in-house, the look and feel of the stores is under Burberry’s control, the focus is on quality and there is strict control over how the brand is perceived.

The result says Guy Salter, deputy chairman of luxury industry body Walpole, is “quite exceptional”.

He says: “What’s happened over the past five to eight years has been outstanding. It’s been a progression, which is what’s interesting about it.” And its resultant international reputation today should not, says Salter, come as a surprise: “Each year has brought its own incremental successes.”

The facts and figures speak for themselves. Full-year results to March 31 last year showed revenue was up 27% and operating profit ahead 59%. It achieved double-digit revenue growth in both retail and wholesale in all regions and across all product categories. Over the past two years, Burberry has doubled the capacity of its factory in Castleford, Yorkshire.

Third-quarter results, reported on January 17, were no less impressive, showed total revenue up 21% to £574m.

Tailor-made success

Ahrendts and Bailey have been credited with turning Burberry into the force it is today. When Ahrendts started in 2006, she introduced five key strategies that have driven Burberry’s subsequent success, including a focus on developing the company’s non-apparel offer and starting the now well-known adoption of digital technology. She also led a change in direction, away from wholesale and towards the retail business, and the number of licensing partnerships was reduced to those it currently has for perfume and beauty, sunglasses and watches.

Burberry’s more difficult years – when its UK image nosedived and the iconic Burberry check print was scorned after one infamous photo showed EastEnders star Daniella Westbrook wearing it head to toe – have been firmly left behind with the advent of the luxury brand’s strategy.

The retailer started to use the check print – which is still a core but very subtle part of its designs – more judiciously and gained better control of counterfeit products. At the same time it brought production and management of most of its stores back in-house, and the image of the brand has been tightly managed ever since. “The most important thing it has done is really taking control of the brand and the product,” says Sarah Peters, lead retail analyst at Verdict Research. Luca Solca, luxury analyst and director of research at broker Cheuvreux, agrees: “Burberry has reduced the amount of the business that is outside its control, which means it can directly manage the brand.”

Style and substance

The brand today, with its Prorsum, Brit and London lines, is a textbook case of clever marketing. “It’s rare to find such great cohesiveness and such perfect brand execution,” says Solca. Burberry is now more fashion focused than formerly, and its Prorsum line, which makes up 5% to 10% of sales, being the most fashion-forward component of the brand. What makes it stand out, though, is its Britishness – and in particular its use of that heritage in overseas markets.

“It has developed a sophisticated understanding of how Britishness works overseas, especially in China and with the younger generation,” says Salter. “It has a critical understanding of how to keep the brand attractive.”

With up to 50% of luxury sales in Europe reliant upon wealthy tourists, the use of such a heritage is crucial, even in markets close to home. While Burberry has carefully injected a sense of newness to its business, it has combined that with an emphasis on its history and its future success will rely as heavily as ever on this carefully constructed sense of Britishness.

It champions British talent, using actors such as Emma Watson in its campaigns, and even British music with artists recording exclusive videos for its YouTube channel. Its Facebook page makes extensive use of its archive material as well as promoting the latest product ranges or campaigns.

Its innovative edge hasn’t just come from its use of digital technology, however. Burberry used to receive deliveries of products only when the new fashion seasons started – now, it updates stores once a month, and has improved its replenishment systems so styles selling well can be restocked. On top of that, a new advertising campaign is launched every month, so regular customers are greeted with fresh imagery.

Such thinking is born of a well-crafted internal culture. A strategy innovation council – whose members are all under 30 – is tasked with generating exciting new ideas. The co-operative and trusting relationship between the corporate and creative halves of the business is renowned.

And the focus has long been on employing the very best people Burberry can find. “For years it has put a premium on having outstanding people in every area,” says Salter.

Fashion forward

The next few years will see more of the same for Burberry, and probably ever greater world domination. It still has some work to do in terms of reducing cost per square foot by cutting the size of some of the stores, says Solca, and on making the retail business as profitable as the wholesale. Burberry says it is focusing particularly hard on flagship markets – 25 markets across the world where 60% of retail sales are generated, including Hong Kong, Paris and London.

Burberry’s amalgamation of its unique heritage with up-to-the-minute innovation has created a business whose forward march seems unstoppable. As the only luxury British retailer to keep pace with its French and Italian luxury counterparts, the power of the brand is impressive.

Its transformation over the past decade into the modern-day retailing phenomenon that it is today makes its story even more compelling. Here’s to the next 10 years.