Table of Contents
Introduction
According the market survey conducted by Deloitte, UK has become the most affordable market for luxury brands in comparison to other markets in the world. For example, a “Speedy 30” handbag from the collection of Louis Vuitton can be purchased from London at $802, which will cost $850 in Paris and the same is available for $970 in New York but it will be most expensive in China where the customers will have to pay $1115 (McClean, 2016). Against such favourable economic conditions, Burberry, one of the renowned luxury fashion brands will be able to gain higher revenue. However, the recent market overview of Burberry depicted issues with the falling profitability, which requires greater commitment from the brand in understanding the preference pattern of the customer while comparing with the macro and microeconomic factors. Therefore, this paper explains the market analysis of Burberry so that it can take the advantage of the changing market conditions.
Company Overview
Burberry has been in the business for bringing innovation in the design and manufacturing of clothes that reflect the heritage in craftsmanship for more than 130 years. The product designs are prepared in Burberry’s headquarter situated in London whereas the production is carried on in the manufacturing facilities located in the UK and the company also procures products from external suppliers located in primarily in Europe. According to the current reports published by the company, Burberry employs 10000 workers worldwide. Although Burberry produces a wide range of clothes, beauty products and accessories for men, women and children but the core business of Burberry relies on outerwear. The following figure explains the worldwide growth achieved by Burberry in terms of global revenue from 2005 to 2017.
Figure 1: Burberry’s worldwide revenue growth between 2005 and 2017 in million GBP
(Source: Statista, 2017a)
The revenue performance of Burberry is shown in the following figure along with the changes in percentage.
Figure 2: Burberry’s revenue performance in 2016-17
(Source: Burberry, 2017)
The above pie chart shows that the company’s revenue has fallen by 4% in the women’s category and 5% in the beauty products. However, the company has been successful in increasing its sales in the men’s section by 1%, children’s segment by 5% and a 2% rise in the sales revenue from the accessories. The total revenue earning in 2017 has declined by 2% compared to its previous year’s performance. The market of Europe, Middle East, India and Africa (EMEIA) is calculated to be 36%.
Industry Overview
Fashion industry is one of the highest revenue contributors in the UK and Burberry has reported that the company has been successful in maintaining a market share in the UK with the advent of more foreign tourists to take the advantage of the reduction in the value of Pound. The challenges in the macro-economic business environment have affected the performance of the luxury sector. In comparison to the 2015 performance, the sales of the luxury market for Burberry has been flat. However, the luxury market in the UK looks promising in 2018 as shown in the following figure.
Figure 3: Change in the growth rate in the luxury retail segment in the UK in 2008 to 2013 and 2013 to 2018
(Source: Statista, 2017b)
Figure 4: Growth in the Categories of Clothing and accessories in the UK
(Source: Statista, 2017c)
The above figure shows that the growth has been highest in the women’s outerwear and in terms of accessories in the luxury market, the growth has been driven by women’s products. Therefore, there is many opportunities for Burberry to penetrate deeper into the market with new products and services to revive its revenue positions.
SWOT Analysis
Strengths
Iconic Fashion Brand
Burberry is renowned as the most fashionable brand of Britain along with the prosperous history of 156 years. Furthermore, Burberry is identified to provide high quality of products, which include a diversified range of fashionable commodities (Burberry, 2017). The long lasting products sold by the company include apparels, fragrances, as well as accessories.
Pioneer to several designs
Burberry has the trademark to the check pattern, which is widely used by several other companies. Moreover, the trench coats, which became popular during the world war was designed by Burberry (Burberry, 2017). The innovative styles for fashionable clothes developed by the company has enabled it to gain competitive advantage over its primary competitors.
Focused branding
The company promotes its brand on the fashion magazines such as Glamour, GQ, Vogue, and Elle. The products of the company are endorsed by celebrities who are popular across the globe. The celebrities who are the brand ambassadors of Burberry are Kate Moss, Robert Pattinson, Agyness Deyn, as well as Rosie Huntington-Whitey (Burberry, 2017).
Royal warrant
The company has been honoured to design clothes for the royal families, which include Queen Elizabeth II and Prince Charles. These accolades received by the company have assisted it to enhance its brand image in the industry.
Engagement with the community
The company has identified the need to be associated with the several social media platforms in order to influence its targeted consumers.
Weakness
Premium Price Range
The price of the apparels as well as accessories manufactured by Burberry make it unreachable for consumers who do not belong to the premium class of the society (Burberry, 2017).
Limited Product Line
The products provided by Burberry are luxurious ones or fashionable commodities. The competitors of Burberry have diversified their range of products to materials for home décor or personal grooming segments (Burberry, 2017).
Asian Market
The Asian nations contribute to most of the revenues generated by Burberry (Burberry, 2017). Therefore, the alteration in the preferences of the consumers of these countries, as well as their changing economic environment can adversely affect the profitability of the company.
Opportunities
Developing emerging market
The fashionable products designed by Burberry can be sold at countries such as Thailand, Egypt, Mongolia, and Turkey (Burberry, 2017). These nations are recognized to be potential markets for the brand as they exhibit high economic growth in the recent years.
Increasing demand of premium products
In nations such as India, the demand for the premium range of fashionable products has enhanced by 33 percent. This reflects growing opportunities for Burberry in the developing nations.
Threats
Changing customer lifestyle
The lifestyle of the targeted consumers of Burberry is transforming frequently in the recent years. This imposes threat to the company, as it has to change its designs in order to retain its market position (Burberry, 2017).
Competition
There are several luxurious brands emerging in the modern era, which threatens to capture the market share of Burberry. The major competitors of the company are Gucci, Prada, and Louis Vuitton (Burberry, 2017).
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PESTLE Analysis of Burberry
Political
Burberry is one of the most popular companies, which operates across the globe. Therefore, the domestic law of each of the nations is applicable to the company. A few of these countries impose high tax rate, which enhances the cost incurred by Burberry (Burberry, 2017). Moreover, the political turmoil associated with parliament issues of European countries will impact the profitability of Burberry. Besides, the several trade agreements among the nations in which Burberry operates, influence the activities of the company.
Economic
The clothes, perfumes, as well as fashion accessories manufactured by Burberry are targeted to appease the premium class of consumers (Burberry, 2017). Therefore, it can be inferred that the demand for the expensive range of products of Burberry will decline during global economic downturn. Moreover, the travelers are recognized to purchase the apparels designed by Burberry. The economic recession will also decrease the number of travelers, which in turn would adversely impact the profitability of the company.
Social
The premium consumers of Burberry across the world are recognized to possess differentiated cultural background. The various communities might have different dress codes as well as preferences based on their tradition. The company must cater to the needs of each of the communities while designing as well as distributing their products. Moreover, the CSR policies undertaken by the company include several initiatives that include the individuals of the society in many of its activities (Burberry, 2017). These policies undertaken by the company enhances their brand image.
Technological
The technological innovations are used by Burberry to promote its brand image in several high fashion magazines as well as websites. The company has also developed the platform which enables the consumers to order the products of the company online (Shaoolian, 2017). The company delivers the products to the addresses provided by the consumers. The premium class of consumers enjoy the services of Burberry, which in turn enhances customer loyalty associated with the brand.
Environmental
Burberry complies with its responsibility towards protecting the environment by using organic fiber as well as wools to manufacture many of its products such as socks, and pants (Burberry, 2017). However, there are certain unpredictable environmental catastrophes, which disrupt the operations of the company. Therefore, the strategies undertaken by the company prohibits it to establish its stores in the locations, which are identified to be prone to natural disasters.
Legal
The laws of the countries in which the nations operate are applicable to Burberry. The laws that favor the industry, in which Burberry participates, have positive effects on the company. The labor laws as well as environmental laws of the countries are identified to influence the profitability of Burberry. Moreover, the company also requires to patent the designs developed by it which is also impacted by the laws pertaining to each of the nations in which the company possess stores.
Market Mix
Product
Burberry is well-known worldwide for the exquisite material of the apparels as well as the most fashionable design of them (International, 2013). The company has pioneered in producing clothes, which are unique such as the Tartan, the trench coat, as well as the water resistant ‘Gabardine’. Moreover, the several range of products manufactured by the company include Burberry London, Burberry Golf, Burberry Prorsum, kids wear, fragrances, as well as cosmetics (Burberry, 2017). The perfumes produces by Burberry are categorized into Burberry Touch, Burberry Brit, Burberry London, and Burberry Weekend.
Place
Burberry is a global brand in the fashion industry, which is identified to have stores in more than 50 nations. The operation of the company is divided into 3 major regions such as Asia Pacific, Europe, Middle East, India and Africa (EMEIA), and America (Burberry, 2017). The company has global franchisees, which sell the commodities designed by it. Moreover, Burberry also has developed agreements with third party dealers, which sell the exquisite products of the company.
Price
The products manufactured by Burberry are primarily sold to the premium class of consumers. Therefore, the pricing structure of the merchandise is very expensive. The intricately designed clothes are highly demanded by the customers (Burberry, 2017). The loyal consumers of the company are identified to pay high price for the products instead of compromising on the quality and luxurious designs associated with it.
Promotions
The promotional strategies of the companies include the premium class magazines. The company also depends majorly on celebrity endorsements, which has resulted in the negative publicity, associated with using Romeo Beckham to promote the products (Arthur, 2016). Although the company had to undergo speculation for using a child for promotion, this also resulted in the growth of revenue of Burberry. This ironical situation has prompted the senior executives of the company to endorse the products by Romeo. Besides, the most popular photographers as well as models are used by the company for its advertisement campaigns.
Alignment of Marketing Strategies with Market Mix
It has been recognized that the efficient marketing strategies of the companies are the combination of the market mix. The alignment of the marketing strategies with the 4P model is compulsory to achieve the objectives.
The marketing strategies undertaken by Burberry include focusing on the products instead of the wide range of it. In the context, the company has simplified the products that are offered in the stores of Burberry. The company has also strategized to groom as well as to train its employees in order to provide exquisite service to the premium class of consumers (Davis, 2014). Moreover, the marketing strategies of the company include its objective of being a leader in the e-commerce sector as well (Shaoolian, 2017). The company has improved the design of its website using several graphics in order to attract its targeted audience. This will enable the company to widen the place demonstrated in the aforementioned market mix. Furthermore, Burberry has strategized to retain the customers by investing in redesigning the stores, which in turn improves the satisfaction provided to the visitors of the stores. Moreover, the promotional mix of the company is aligned with this objective of Burberry.
Burberry has also strategized to improve its efficiency in the process of production. The senior executives of the company aim at simplifying its manufacturing procedures by procuring the raw materials effectively, optimizing the management associated with its inventory, as well as utilizing the information technology. Besides, the marketing strategies of Burberry include several measures undertaken by it to inspire individuals across the world. These strategies involve the commitment towards preserving the cultural values of the consumers while designing clothes for the customers worldwide (Burberry, 2017). The human resource management team of the company has undertaken policies to empower as well as engage the employees in order to extract higher productivity from them. The employees recruited by Burberry are rewarded to ensure that the talented personnel are retained in the company. The People aspect of the marketing mix is in line with the goal of training the employees.
Target Market
The target market will be UK as the macro economic factors have facilitated growth in the number of foreigners in the concerned region. In 2013, the British luxury market was contributing 2.2% towards the UK’s GDP accounting for £32.2 billion and by 2019, the expected value of revenue from the luxury market is supposed to be around £54 billion showing sufficient potential in the concerned market. Almost 78% of the UK’s luxury products constitute of designed bags, shoes, clothes and cars (Armstrong, 2015). The rising demand from the export sector of UK and the growth in the tourism in the UK offer wider avenues of expanding Burberry’s business in the UK. Burberry can be considered somewhere between Polo and Armani that focuses on developing its image as a functional and wearable brand. The company has upgraded its stores with the help of modern multi-media to make it represent a digital store. The target customers of Burberry, are the premium ranged individuals who prefer to buy products that hold a century old heritage and innovation to suit the needs of modern day customers. For the women, Burberry has launched the new line of tropical gabardine and for the men Burberry will be concentrating on the lightweight cashmere trench coats. In their beauty range, the company has launched new perfumes for men and entered into the strategic partnership with Coty. On the other hand, Burberry is also required to focus on children clothes and accessories specifically on small leather products and women handbags. Therefore, the company is producing products for men, women and children who value branding with mid-range pricing.
Market Strategies and Market Communication
The promotional strategies followed by Burberry have been tried and tested but in order to reach to greater section of the high-end customers, the company needs to focus designing their product while keeping their traditional values and incorporating new approaches. The company should look for fresh designers who will be able to blend Burberry’s heritage with modern definition of fashion. The concepts of AIDA model will be used in communicating Burberry’s market strategies towards its target consumers.
Figure 5: AIDA Model
Figure 5 AIDA Model
(Source: Bovee, Thill and Raina, 2016)
The same needs to be communicated to the target customers as well and the company can take the help of the following market communication strategies to make the brand more vibrant and attractive to its target premium customers.
- Changing the outlook of their website (Attention and Action): The retailing website needs to combine, style, functionality and consumer experience. This requires ease in navigating across the webpages and clear availability of the information of the products along with the number of reviews. The information of the number of customers already buying the product helps other customers in viewing the popularity of them among their peers. The use of captivating visuals and sleek design of the content will be able to attract greater customers.
- Use of social media (Desire): Fashion is one of the most widely viewed contents on the social media. Facebook, Twitter, Instagram and Pinterest are some of the very popular social networking websites which can be used to identify the preference of the customers with their ‘likes’ ‘comments’ and ‘shares’.
- Search engine optimisation (Interest and Desire): Search engines like, Google, Bing and Yahoo can increase the visibility of the products and Burberry needs to ensure that they have high ranking in the search engines along with neat presentation of their websites through direct links. For example, a person typing for ‘handbags’ on Google should receive Burberry handbags as their first option and not Prada or Gucci. It will increase their chances of transforming browsing into potential sale.
- Educational content (Desire and Action): The advertisement content should look into changing the style of the target customers by showing the way the clothes can be matched to increase their style quotient. Moreover, the advertisement should reflect them being good corporate citizens which directly affects the purchasing intention of elite customers.
Conclusion
The political set up of the UK has affected its business significantly with a greater focus on the luxury brands as they have become relatively cheaper after the fall in the value of Pound sterling in the international market as a result of Brexit. On the other hand, the UK customers have been facing issues with the rise in the cost of import goods and the increase in the fuel prices. Therefore, Britain has become the destination for foreign customers with the intention of purchasing expensive branded products. The researcher has used SWOT and PESTLE analysis in evaluating the current market strategies of Burberry. The paper also recommends the marketing communication strategies to prevent its fall in profitability.
Future Position
In the next five years, Burberry would be looking towards achieving the leading position in the luxury fashion brand with high profitability and greater market share in the UK market. According to the 2016-17 annual report of the company, the greatest share of revenue accounted from the US market of Burberry but in the next five years UK will become its largest contributor along with China as the market has shown positive growth signs for the company.
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