Burberry, the iconic British luxury brand, has made an interesting move in the Chinese luxury market. According to a recent press release from Burberry, which holds more stores in China than any other luxury brand, they have purchased back the remaining 15 percent of their economic interest in Chinese retail business. This purchase from their Hong Kong-based partner, Sparkle Roll Holdings Limited, has given Burberry the benefit of receiving 15 percent more in sales and profits. This now gives the company an opportunity to move forward with their strategy of expanding in Mainland China.
A Risk in Luxury Retail
This was a foreseeable move for Burberry because China produces one-third of the brands’ profit. It is an interesting risk however, as luxury sales in the region have remained stagnant within the first quarter of the 2017 financial year. The similar economic climate in luxury buying has caused a number of other luxury brands in the region to put a hold on plans for expansion in this market until discernible growth takes place.
This fluctuation of numbers has caused shares at Burberry to move at a decreasing rate in the past 12 months alone. Burberry however, remains optimistic coupling an evolving approach to their agility of business, and their list of ambitious new strategies of growth over the next fiscal year.
There Might Be New Hope
With Burberry’s modest uprising in gains in post-Brexit UK, taking on the risk of growth in China may prove to be an opportunity of positive expansion for the company. This could save its current luxury sector which has continued to struggle. With the recent announcement of a change in leadership at Burberry, attention will begin to shift away from the now product-oriented CEO and Chief Creative Officer Christopher Bailey, to his partner and replacement Marco Gobbetti, the current CEO of French luxury brand Céline.
Gobbetti, who has a breadth of experience in luxury retail as the CEO of luxury brands such as Céline since 2008 and Givenchy since 2004, has been the key player in Céline’s growth in the Chinese market in recent years. His unique understanding of China’s luxury retail consumers may prove to be an asset to Burberry, noting that Chinese consumers take a well-informed and knowledgeable approach to buying. With Burberry’s large and growing brick-and-mortar presence in China, Gobbetti may just have the resources he needs to revitalize Burberry’s brand with a lead in China’s market.
The Missing Link to Rebuilding the Legacy
Although the shift of Burberry’s executive leadership to Gobbetti proves to meet the qualities of upward growth for the brand in the sense of business, it still remains under heavy watch. Gobbetti hasn’t quite demonstrated the ability to navigate through one of the most pertinent areas for the brands’ sustainable success in China: digital strategy.
Consumption of luxury goods by mainland China has significantly changed. A higher shift in domestic shopping to shopping overseas via websites and mobile sites raises the demand for the organization to begin implementing digital strategies that leverage digital platforms and strategic digital content.
If Gobbetti’s administration is not able to meet their audience where they are in this sense, the growth of the Burberry in physical locations might cause more damage than profit for the retailer.