B U R B E R R Y H I S T O R Y – TH E B E G I N N I N G . . .

• In 1856, Burberry was opened in a small outfitter’s shop in Basingstoke Hampshire, England by Thomas Burberry, a 21-year-old draper’s apprentice. Burberry’s customer base grew throughout the 1800s.

• Burberry offered an extensive line of outerwear for both men and women. The company designed hats, jackets, pants and gaiters especially for hunting, fishing, golf, tennis, skiing, archery and mountaineering.

• In 1901, Burberry was commissioned by the War Office — a department of the British Government — to design a new uniform for the British Officers.

• The invention of Gabardine in 1880 — a breathable, waterproof and tear-proof fabric, proved to be a key development for Burberry, putting the company on the world map within the apparel industry.

• Over the years, the brand grew and maintained their quality design and gained public fame and celebrity status.

The Luxury Industry• A new part of the luxury industry – “Experience-Based Luxury”, was a growing segment of

the luxury market..People were enjoying much more material comfort in comparison with previous generations, resulting in a trend of a cultural shift for personal fulfillment and aspiration through experience

• There was sudden cultural shift also came a growing demand for a luxury experience as an aspect of shopping in-store for personal luxury goods. 

• In line with the increase in household purchasing power over the last few decades, prices of top-of-the-line luxury goods experienced an upward trend.

Customer SegmentationABSOLUTES ASPIRATIONAL ACCESSIBLE

Industrial Conglomerates Celebs, Professionals & Business Men and Women

Upper Middle Class Segment

Money isn’t an issue, Demand is stable

Demand fluctuates with market conditions

Owning luxury makes them feel like members of an exclusive

club, hence like loud labelling on products.

Appreciate brand history, heritage, understated

opulence, high esthetic content, extreme quality,

Privacy.

Appreciate emotional & creative value that have

references that justify the price. They also value quality.

They want to be associated with affluence, nut may not have the finances to back it

up, so they often turn to counterfeit.

The Chinese Emerging Market

• After 2006, The established markets (Europe & US ) were overpowered in size by the Asia-Pacific region, which accounted for 35.3 per cent of the global market’s value during this same period.

• By 2005, the China region, was the largest and the fastest growing market for the personal luxury industry. Chinese consumers alone were expected to account for 29 per cent of all global luxury goods purchases.

The Chinese Emerging Market

• The stereotypical Chinese luxury shopper was a middle-aged official who could afford to buy many luxury goods.

• The growing Chinese economy gave rise to the Young Chinese Professional. These educated white-collar workers saved to splurge. They understood trends focused on key luxury purchases and mixed and matched their luxury pieces with local goods as well as with fake, counterfeit pieces.

• The Chinese market experienced steep growth.• However, the luxury sales to this market were not necessarily taking place within

China, because:• A) Taxes: Due to taxes of 20 to 30 per cent on luxury goods, many wealthy Chinese

customers used domestic stores as showrooms to view the items and try them on before they made their ultimate purchases during trips abroad.

• B) Perception - Luxury goods purchased in China were perceived differently, compared to the goods purchased abroad, particularly in Europe.

Burberry Status

• Though the company was enjoying financial growth, the luxury status and quality image associated with Burberry was changing as Burberry — particularly Burberry’s iconic check — gained popularity among a new customer market in Britain. Burberry’s “distinctive beige check, once associated with A-listers, became the uniform of a rather different social group: the so-called Chav.”

• In Britain a few years ago, a working-class subculture emerged called Chavs, a term derived from the Romany travellers’ word chavi, meaning “child.” Young and usually with only a high school education, Chavs hang out at small-town shopping centres, smoke cigarettes, and intimidate passersby. Their uniform is a baggy tracksuit, clunky gold jewelry, and anything and everything with the Burberry check, much to the chagrin of Burberry executives.

• In addition to the strong negative impact of the Chavs on Burberry’s image in Britain, the brand’s global strategy was also not aligned with Burberry’s desired image.

Burberry’s Business

• A customer’s experience in a Burberry store in Tokyo might be very different from that in a store in Chicago.

• Furthermore, with 23 licensees around the world, it was hard for Burberry to control the image portrayed by the licensees. Licensing was a big part of Burberry’s business; 11 per cent and 10 per cent of total revenues came from licensing in 2005 and 2006, respectively.

• In addition, though the head office was based in London, the design team members were based all over the world.

• Burberry operated with positive revenue growth over the last four years. Apart from the Atlas project costs in 2006 (a program for the full redesign of Burberry's sourcing, supply chain and business processes and systems), the company enjoyed steady growth in revenue and profitability over this time period.

Burberry – Product Line

• Prorsum line was the Burberry’s fashion forward runway line. The line carried both haute couture and ready-to-wear pieces.

• The women's wear and menswear lines were the core collections for Burberry. They

offered a range of products in modern but classic style.• Burberry accessories included scarves, handbags, shoes, silks and umbrellas. Burberry teamed up with licensing partners on its glasses, fragrances and children’s clothing lines.

Perfume Segment Prorsum Clothing Line

Footwear Segment Children Clothing Segment

• The retail channel not only gave Burberry full control of the brand presentation and direct access to the customers, it was also a source of marketing for the brand. Large flagship stores in key shopping destinations around the world.

43%

11%

46%

Retail

Licence

wholesale

BURBERRY Distribution Channel - 2005/06

• The wholesale channel, Burberry products were distributed through a network of leading department stores, duty-free retailers and specialty stores, Franchise store run by wholesale partners.

• The licensing channel made 70 per cent of its revenue in Japan. This licensing channel included a broad range of licensing on apparel, accessories and home products through licensing partners. By using licensing, Burberry minimized its input in the production process while, simultaneously, it took a cut of the profits from the sale of the licensed goods.

Burberry - Distribution

• French Based, owned by Pinault Printemps Redoute (PPR), now named Kering.• Kering also owns other labels such as Alexander McQueen, Stella McCartney, Yves

Saint Laurent, Balenciaga, Sergio Rossi, Bottega Veneta.

• They competed with Burberry in the area of personal luxury goods – RTW, handbags, luggage, small leather goods, shoes, timepieces, jewellery, ties and scarves, eyewear, fragrances, cosmetics and skincare products.

• Having so many brands under one group enabled the company to penetrate all three customer segments of the luxury market by catering to everyone’s tastes.

• 2006 year end, the Gucci Group made EUR 3.568 billion out of the total 17.931 billion sales that PPR made.

• Rumours spread that Gucci was considering moving production to China, despite the ‘Made in Italy’ and production being linked to Tuscany was the Crown Jewel aspect of their products.

• Out of all these, Burberry’s closest competitor was the Gucci label itself.

• Also a French Fashion House, it is part of the Louis Vuitton Moet Hennessey Group.

• They operate in five sections: Wines and Spirits

Moët & Chandon, Hennessey, Dom Perignon, Ruinart, Mercier, Wenjun, Krug, Veuve Clicquot, Hennessy, Belvedere and Château d’Yquem

Fashion and Leather Goods – manufactured in France, Italy, Spain and The U.S.(Louis Vuitton, Celine, Loewe, Kenzo, Givenchy, Thomas Pink, Fendi, Emilio Pucci, Donna Karan, Marc Jacobs, Berluti ,Stefano Bi and eLUXURY, the online luxury shopping portal).

Perfumes and CosmeticsGuerlain, Parfums (Christian Dior, Givenchy, Loewe, Kenzo), Benefit, Fresh Acqua Di Parma and Nude.

Watches (excl Switzerland) / Jewellery manufactured in Switzerland, Fenace, Italy.Tag Heuer, Hublot, Zenith, DeBeers and Bvlgari

Selective Retailing (Sephora, Cruise & Airport Shops, Department Stores, etc).

• 2006 year end, LV made nearly EUR 4 billion which was more than half the revenue that the LVMH fashion and leather goods division made that year.

• Out of all these, Burberry’s closest competitor was the LV label itself, because of the logo and the product categories it offered.

• Milan, Italy Based, Armani was privately owned by Giorgio Armani.• Following brands comprise the Armani Group: Armani Prive Giorgio Armani Emporio Armani Armani Collezioni Armani Exchange Armani Jeans• They are engaged in designing, manufacturing, distributing and retailing fashion and

lifestyle products – apparel, accessories, timepieces, jewellery, home interiors, eyewear, fragrances, cosmetics and children’s clothing.

• This diversification enabled the group to cater to the various levels of the fashion pyramid, thereby penetrating all three customer segments.

• 2005 year end, the Armani Group generated sales wroth EUR 1.428 billion, an increase of 9.9% as compared to the previous year.

• Giorgio Armani openly said that if the quality was controlled, there wasn’t any reason to not move production to China. BUT, ‘Made in Italy’ was important to the top line, as it shows specialization.

• Milan, Italy Based, Prada Group is privately owned by CEO Patrizio Bertelli, his wife, designer, Miuccia Prada, and their family members.

• Prada is known for their luxury leather goods and bags.

• 2006 year end, the Prada generated sales wroth EUR 811.5 million, an increase of 23% as compared to the previous year.

• Even with these changes, they are evaluating moving production of the less exclusive products to China.

• The global fashion brands – Prada and Miu Miu comprise the group.

• They had floated an IPO in the past, but were unsuccessful. Recently (2008), they have considered getting listed on the Milan Stock Exchange.

• They had adopted a multi brand strategy, too. But recently, they’ve decided to refocus on the Prada and Miu Miu labels only. They sold off some of their labels like Jil Sander and Helmut Lang.

• France Based, Chanel SA is now privately owned by Alain and Gerald Wertheimer (100% ownership), grandsons of Pierre Wertheimer who ran the brand in partnership with Gabrielle Bonheur Chanel.

• They also ran Paraffection – their artisans’ division. Paraffection managed seven ateliers.

• There isn’t much financial data available since the group is privately owned.

• Chanel began as a milliner. She later revolutionised the sportswear industry through the use of Jersey fabric on simple designs.

• The brand introduced the concept of the LBD. They are also known for their tailored suits and their perfumes – especially Chanel No. 5.

• Chanel operates in the fashion, cosmetics, watches and jewellery business. Only the license for sunglasses was with Luxottica – they produce eyewear for 80% brands.

• Karl Lagerfeld took over as Head of Design at Chanel in 1983. He revived the label by tapping a younger market.

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