Burberry's new strategy takes shape
Burberry chief Marco Gobbetti's turnaround plan for the British megabrand is starting to take shape with a focus on re-building a strategic leather goods pillar, delivering faster and more regular product drops and supporting creative director Riccardo Tisci's early emphasis on the contemporary framing of heritage products.
“We’re still in early stages of transformation with the majority of changes still ahead of us, but so far I’m pleased with the progress,” Gobbetti said after the brand announced preliminary results for the year ending March 31, 2018. Operating profit climbed 5 percent to £467 million ($629 million), while annual revenues fell 1 percent.
Gobbetti is six months into his 5-year plan to reposition Burberry as a true luxury player and re-energise a brand whose sales growth has vastly lagged rivals LVMH and Kering. Core to the strategy is a new focus on leather goods, which currently accounts for less than 40 percent of revenue, significantly trailing competitors such as Gucci.
Burberry’s new £1390 ($2000) belt bag, launched in March and has been selling well. A new smaller version of the bag is starting to hit stores now. “The early days are quite encouraging. It’s a classic, it can become a pillar for us,” Gobbetti said.
Still, one well-performing bag doesn’t equal success.
Gobbetti sees a major opportunity in the $1,000 to $2,000 price point for handbags, rather than competing with top-tier luxury players such as Dior, Chanel and Hermès, which sell styles priced upwards of $2,000. Sabrina Bonesi, the former Dior executive who now heads up accessories design, is already working with Tisci on new Burberry ranges with different silhouettes and broader price points, he added.
Burberry has also recognised the need for speed — delivering more frequent and fresher products to “to keep the attention of the customer” — was also key to the strategy. The strategy has attracted new, younger customers and resulted in higher-than-average purchases. Customers bought full looks, rather than one-off items, Gobbetti said. A second capsule collection with Russian designer Gosha Rubchinskiy is planned for July.
The billion-dollar question is — can the new product and pricing strategy translate into revenues? For now, it’s too early to tell.