Burberry – an Example of Fashion and Luxury

BURBERRY – AN EXAMPLE OF FASHION AND LUXURY

The core business of the Burberry brand is the outerwear which is Burberry’s oldest product and is the fastest growing category of clothing that they produce. The outerwear apparel accounts for approximately half of the brand’s mainline clothing sale. Core business refers to the primary area or product that the business is founded on which leads to their strong position in the market. In Burberry, the trench coat, created by the founder, is considered it’s core business.  Burberry extended their product line to create different brands that were suited to a particular segment. They started out with outerwear as the focal product in 1856 but diversified and produced the menswear, women wear and accessories in 2003. The beauty product line has been initiated in 2012 with the introduction of perfumes and comestic products.

Burberry also introduced a distinguished apparel retail line for their products depending on the use of the apparel. The brand Burberry Prorsum is the most fashion forward collection centred around runway shows, providing the design inspiration for the brand, The brand Burberry London is the tailored collection, typically what a customer wears on weekdays for work and Burberry Brit is the most casual collection, typically worn in the weekend.

Burberry’s business model is dependent on the luxury brand area. Since Burberry has a brand that showcases authentic British heritage that has a rich history and culture in the fashion industry of Britain. They have a globally recognized icon – the trench coat which is their trademark product. They focus on the craftsmanship, innovation and design of the apparel that signifies high quality and exclusiveness.  ·Burberry’s products are created in keeping with the brand attributes to appeal to the luxury consumers.

Burberry has a larger presence in the retail sector than it does in the wholesale sector. The company receives the highest revenue from the retail outlets (70%) than it does from wholesale (27%) or licensing (3%).  The retail sector has 215 main stores, 227 concessions shops within departmental stores and malls, a digital e-commerce website and 55 outlets. While the wholesale sector includes sale of apparel and accessories directly to department stores and franchises that have 70 stores opened and the beauty product lines that have 100 distributors worldwide. This shows that Burberry has a higher number of retail shops that the wholesale ones with great emphasis on the retail sector.

The products sold in the retail sector amount for a higher revenue than the wholesale sector does. The same can be said about their global presence where the retail sector is supplies more to the revenue than the wholesale does.  This shows that Burberry is more of a retail driven company with more emphasis on facing customers than being wholesalers.         

Burberry is not vertically integrated but it still has a low level of integration. Vertical integration can have different percentage of the main activities. Some may have manufacturing under them or may not. In Burberry’s case, they design and sell the product under the brand while fabrics and other materials are sourced and the final goods are manufactured both in Company-owned facilities in the UK and through an external supplier network in Europe. Since the processes are divided between the company owned facilities and an external supplier, the company’s manufacturing processes is done locally in UK as well as in Central/Eastern Europe. Raw materials like cotton  is bought from Peru and used for making the apparels.

Burberry has revenue from licensing. They earn at present 3% of revenue from the licensing. Burberry have licensed their brand in Japan that pays them a decided sum of royalty in return for the trademark and brand. The products that Burberry have licensed are :-

1. Apparel

2. Eyewear

3. Watches

4. Fragrances  

 Burberry has a good balance at the international level in terms of geographical market coverage because they have covered all the major continents or countries that have their customer base. They have set up in :

1. North and South America - including United States of America, Canada, Mexico, Brazil.

2. Europe – Including England, Italy, France, Spain, Germany.

3. Africa and Middle East – Saudi Arabia, Qatar, United Arab Emirates, South Africa

4. Asia and South East Asia - Including India, Japan, China, Korea, Thailand, Australia.

These are the major luxury markets that exist for Burberry to have outlets. All these countries are known to have a populations with high standard of living that would prefer to buy luxury items that are appreciated. For example : Opening more stores in Africa would not be viable as there are few luxury consumers in the continent while on the other hand, they have more stores in Middle East due to the high level income of the residents.

Burberry either has retail driven outlets in these countries or relies on wholesale and licensing to get their products to the specific market. Plus, Burberry also has an e-commerce platform that allows consumers to purchase their preferred products online from any country to which it will be shipped. This makes it easier for Burberry to cover longer distances and present their products to any consumer in the world.