Inside Burberry’s new strategic plan: Higher prices, more product

While, according to Gobbetti, digital innovation remains a core part of Burberry’s brand identity, the most pressing matter on its path forward is moving prices of products across categories up, edging the brand entirely out of the dreaded middle-tier market of accessible luxury and into the higher-end sphere of fashion and heritage luxury brands.

“Today’s customers are polarizing between luxury and mass market. The mid-market used to dominate fashion. [It] no longer has a place with the consumer, and this polarization will be reflected in our pricing,” said Gobbetti. “Brands in the top segment enjoy price empowerment and drive growth through a premium price, while the mass market has attracted entry-level customers through lower-priced fashion. Mid-market players have stagnated, and we must move ourselves up to ground ourselves firmly in luxury.”

To gain footing as a higher-tier luxury brand, Burberry plans to renew its product assortment to include more higher-priced leather bags and accessories, build out a more distinct collection of basics including the classic Burberry trench and add more trend-driven newness throughout the year through capsule collections, outside of the two main fashion seasons. Burberry has been an early adopter of the see-now-buy-now trend, attempting to reach customers immediately with new collections as they debut on the runway for the past four seasons. Gobbetti didn’t confirm whether or not this exact model would continue going forward, but said that Burberry remained committed to the idea of immediacy being integral to the way customers today shop.

“We’re changing the velocity and the continuous engagement with customers because they don’t expect to see two collections a year. They want to find novelty very often,” said Gobbetti. “Our aim is to increase frequency with delivery: We will look to collections that are more edited, but more frequent, as well as more capsules and product initiatives, almost always with a direct-to-consumer approach, because this is fundamental.”

Along with a more elevated product assortment and a focus on newness, Burberry is changing the creative force behind its collections. In October, Burberry announced that creative director Christopher Bailey, who’s been with the brand for 17 years and served a stint as the company’s CEO before Gobbetti joined in July, would be leaving the company in March. The search for a new creative director is underway; rumors have floated that former Céline designer Phoebe Philo is up for the job.

Bailey, along with former CEO Angela Ahrendts, is credited for turning Burberry into a digital pioneer in the luxury space, establishing it as the first luxury brand to join social platforms like Facebook and Snapchat, the first to live stream a runway show, and one of the first to look to technology companies like Apple and Google as collaborators. For a time, sales saw a significant boost as a result: In 2011, Burberry revenue jumped 27 percent. But over the years following, sales stagnated as the brand struggled to turn its vast social followers into customers. While Burberry saw its most growth in the first half of fiscal 2018 in the Asia-Pacific region (a 7 percent boost), it’s not growing there as fast as competitors, and it’s been hit harder by declining sales in the U.S. (a 2 percent decline).

“When brands like Burberry, that are synonymous with digital innovation, are struggling, other organizations will point to them as an example to say, ‘Should we really be investing here?’” said Maureen Mullen, chief strategy officer of digital think tank L2.

Gobbetti said that digital strategy would remain part of the plan going forward, but the ways in which it would play a role were focused more on improving the customer experience rather than flash. Gobbetti mentioned that a personalized product feed on the Burberry e-commerce store, to be relaunched in the new year, and a universal mobile checkout system for customers were top priorities.

He added that, as the brand looks to solidify itself as a premium luxury brand, digital efforts on social media channels and other outlets are going to serve as the “gateway” for entry-level consumers who may not fit into a higher-level price tier. A lot is riding on this being successful during the transition.

“Burberry’s new strategy is not a departure from digital. It just means that you need more exciting products to be successful in a competitive market,” said Luca Solca, head of luxury goods at Exane BNP Paribas. “The real challenge will be to move up in price and maintain sales flat. Gucci, for example, has re-accelerated sales significantly, but their prices have become more accessible. It’s an ambitious goal.”