I read an interesting story from Campaign Magazine, "Even Burberry is not immune to the pressures on the luxury sector". This is a quite typical story of a luxury brand, which has to fight against tough economic conditions and to protect its rarity. Yes, China's slowdown is a quite understandable issue, and there is very little to do about that situation. However, other challenges can be solved.
The luxury industry is doing well. According to Statista the value of the global luxury goods market was 77 billion euros in 1995 and 253 billion euros in 2015. In 2016 the market size decreased by a couple of billion, which is not alarming. However, there is a global desire for luxury goods but this can also create "a trap" for luxury brands. One of the major challenges of luxury brands is to grow but to remain rare. According to some comments on Campaign, Burberry has a challenge with rarity, and it has become too mainstream. One of the solutions is to raise prices because this can increase scarcity.
We must also remember that fast fashion and premium brands tend to imitate luxury strategies and tactics. This can also hurt luxury brands because consumers will have a problem to identify what is luxury and what is not. Some luxury brands make a fatal error by becoming too popular, which typically means that they will be classified as premium brands but moving from luxury to premium can be a very painful process, and only a handful of brands have succeeded.
Burberry should avoid the premium line by any means. Therefore, it should increase prices, probably close some shops, increase positive envy amongst consumers, and to move upwards. At the same time, it should become even more mysterious by using creative storytelling. Luxury consumers are also heavily divided between liberals and conservatives. Does Burberry satisfy both consumer groups with their creations? Burberry has a bright future ahead, and lowering turnover and profits do not do any harm for luxury brands, on the contrary.
There is still one question, which Burberry should answer. Is the brand distinguishable enough? Photographer Mario Testino gave a new look for Burberry in 2015, and the campaign raised positive feedback. Is this the strategic path for Burberry?
Published in Luxury Sales Academy.