Analysis: Is Burberry’s golden era over with Marco Gobbetti’s exit?

In news that has shocked the luxury sector, Burberry boss Marco Gobbetti has quit to take the top job at Salvatore Ferragamo in his native Italy.

The luxury veteran, who has also held roles at Bottega Venetta, Givenchy and Moschino, joined Burberry in 2016 with a brief to turn around performance.

He inherited the business from Christopher Bailey - who held the dual role of chief executive and chief creative officer, but whose talents lay firmly in the design field.

At the time of his departure, the business had experienced three consecutive years of losses, with profits down 10% on the previous year.

Gobbetti was tasked with rooting the brand firmly in the luxury category, elevating it from an “accessible” label to one more akin to premium European fashion houses - with the pricetag to match.

Under his leadership, Burberry has been given a new lease of life, and is now on a strong growth trajectory, recording £2.3bn in revenues for the full year to March 27 2021 despite the impacts of the coronavirus pandemic on the fashion industry globally, down just 11% year-on-year.

Profits for the same period were down just 8% to £1.6bn, when there was recovery across markets such as China and the Middle East by the second half of the year.

Shares in the luxury brand have tumbled since it was disclosed that Gobbetti is leaving, showing the market’s disappointment after a stellar leadership record - and analysts have expressed concern that chief creative officer and Gobbetti’s right hand man Riccardo Tisci may follow suit. 

”The news about the sudden exit of the CEO for sunnier Italy and an equally demanding challenge at smaller brand Ferragamo, was a surprise for all,” said Jefferies analyst Flavio Cereda.

“The issue for Burberry now is, yet again, one of credibility and maintaining market confidence that its current targets are achievable after mixed results so far. Probably the last thing they needed, raising many questions with few answers at this time.”

While Burberry has seemingly succeeded where its fashion counterparts have struggled during the pandemic of the past year, it emerges into a new world - where the results of its strategy are unproven, and its leader has left before he finished what he started.

At the time of the last financial update, Gobbetti said: “We wanted to re-energise our brand, renew our product, evolve our communications and transform the customer experience. We also set out to maintain sales and profit broadly stable while undergoing this transition. 

“And I’m pleased to say that in the last three years, we achieved what we set out to do and transformed our business.”

Retail Week explores how Gobbetti has achieved each of these elements whilst at the helm.

Re-energise and renew

Entering the business after three consecutive years of losses, Gobbetti’s initial turnaround strategy was to reposition Burberry as definitively in the luxury category.

Its previous positioning was unclear. Burberry had been likened more to “accessible” luxury brands such as Coach and Kurt Geiger, than premium counterparts such as Dior or Gobbetti’s alma mater Givenchy - meaning some products were seen as vastly under or overpriced.

Gobbetti’s first act was to ban wholesaling of the brand’s products to any retailer outside the luxury sector, which at the time accounted for 30% of sales in the US and 20% across the group.

Burberry has since partnered with luxury platform Farfetch, which is more aligned with its positioning.

Gobbetti also made the decision to upscale Burberry’s accessories, with a particular focus on leather goods and hero products such as its iconic trenchcoat.

In 2017, Burberry bought one of its Italian leather suppliers, bringing production in-house.

In the retailer’s most recent financial report, Gobbetti stated that both leather goods and outerwear had returned to double digit growth last year, aided by new, fun handbag shapes, pop-up stores, diversified ranges and new eco-materials.

Evolve communications

With the fashion industry’s regular programme of catwalk events switched to online only, Burberry teamed up with livestreaming platform Twitch to allow consumer interaction with the brand.

Burberry’s spring/summer 2021 collection debuted on Twitch, attracting 40,000 viewers. Using Twitch’s squad stream function, guests could view the show from multiple angles and interact with each other in the comments section.

Burberry also offered behind-the-scenes footage of the models getting ready and discussions with celebrity hosts.

The fashion show was also streamed live on Instagram, to give the world the front-row experience - from a location in the forest playing on Burberry’s return to its heirtage as an outdoorwear brand.

Burberry has also made headway in securing itself a more sustainable reputation.

In 2018, Burberry was embarrassed when it was revealed that the brand had been burning unsold stock for years despite its apparent sustainability targets.

A year into his role, Gobbettoi announced that the brand would no longer do this, and would also stop using real fur on garments.

Under Gobbetti’s leadership the brand has sought to turn around its image on sustainability, particularly throughout the past year during the pandemic.

He was appointed chair of Burberry’s sustainability steering committee, committing to elements such as climate neutrality by the end of the year, and climate positivity by 2040.

A partnership with Marcus Rashford in 2020 also exemplified how Burberry has taken note of the cultural discourse in the UK.

The popular footballer made headlines for promoting free school meals during the pandemic, meaning Burberry’s partnership funding school meals and other youth programmes resonated well with the public. 

Transforming the customer experience

With a focus on digital-led commerce, Burberry has been experimenting with virtual and augmented reality in its physical spaces.

The brand’s pop-up store in Selfridges encouraged customers to interact with the space using a smartphone - scanning a QR code would bring up animated penguins that floated around the shop when viewed through the phone’s camera.

A handful of Burberry’s iconic pieces were also trialled with Google Lens - enabling customers to see a virtual rendering of, for example, an TB handbag to understand the dimensions better.

In a step up, Burberry also launched a virtual interactive replica of its Tokyo flagship, allowing customers to tour the store and shop the entire spring/summer collection.

More than just buying clothes

Gobbetti’s Burberry also realised that a digital and social-led brand would appeal to the younger generation who are likely to grow into lucrative future customers, creating more touchpoints that went beyond just purchasing goods.

In 2019, timed to coincide with the launch of Burberry’s monogrammed puffer collection, the retailer created B Bounce - a game which could be played either on Burberry’s website or one a large screen in its Regent Street flagship.

Players then receive prizes for better game scores - from exclusive gifs, digital versions of the jackets, or even the physical jackets themselves.

Burberry has placed its bets on gamification being the next big thing in luxury, and a way to meet customers wherever they are - two further online games  Ratberry and B Surf followed, while earlier this year, Burberry added branded skins for players to purchase on China’s biggest video game Honor of Kings.

So where is Burberry now?

Gobbetti’s departure therefore leaves Burberry in the lurch - while progress has been made on his strategy, it has not yet come to fruition, and the pandemic has stifled its potential for the past year.

Cereda says that the next challenge will be to keep the improvements on track.

“Assuming no further high-profile names are set to abandon ship, the group has to continue to pursue its new strategy under the stewardship of the exiting CEO for six more months, At the same time they must hone in on a replacement that would be available relatively soon, and able and willing to take on what remains one of the sector’s most challenging jobs,” says Cereda.

That Gobbetti has made transformations is not in question, but he leaves his successor with a big trenchoat to fill.