Burberry Burns 28 Million 60 Thousand Pounds Behind What Is "Burning Economics"?

Unlike some brands who are willing to discount consumers at a discount, Burberry (Burberry) would rather burn up its stock than pay its own price.

In the past year, Burberry, a high-end fashion brand in the UK, has burned more than 28 million 60 thousand pounds (250 million yuan) to sell luxury goods, so as to block the sale of goods to the "wrong people" at a low price in the "gray market".

Burberry's exposure brought out luxury goods.

The iceberg of the usual means.

How did it feel to burn 28 million 60 thousand pounds in a fire? Burberry tried one.

According to Broadcasting British Corporation (BBC) 19 reported that in order to maintain a high brand image, the British luxury brand Burberry last year, the unsold 28 million 60 thousand worth of clothing, accessories, perfume and so on, and caused the indignation of environmentalists.

According to the times, Forbes, the luxury goods giant valued at about 9 billion 600 million pounds, admitted that they burned the unsold stock, but said they used Burberry incinerator to incinerate. Its energy can be recycled and will not affect the environment.

It is said that in order to protect its intellectual property and brand value, designer brand does not want its products to be sold at a discount price elsewhere, nor does it want to sell to the "wrong people" in the emerging "gray market", thereby devaluing the brand.

"Grey market" refers to places where goods are not traded, such as the discount market without authorized manufacturers.

Maria Malone, chief lecturer of the fashion industry in Manchester City University, said that during the past few years, Burberry has gone through a difficult competition stage and has been trying to get back to the "top brand" line.

For a time, counterfeiters liked to "stick the Burberry brand on anything."

In order to prevent hoarding products from being stolen into the black market or selling at a reduced price, Burberry destroyed more than 90 million worth of hoarding goods.

"This is to prevent the flooding of Burberry discounts on the market, leading to a reduction in brand value."

Maria Malone said.

"The London based luxury brand prefers to burn the remaining windbreaker and handbags to a discount," he said.

The Huffington Post said, "if the potential customers of luxury brands can afford 2000 pounds of raincoat if they can't afford their own business, then the clothes will not sell."

According to the analysis, "1400 coats are actually very low in production costs, but customers must pay for their exclusiveness. The value of luxury goods lies in the brand itself, not the clothes."

Consumers wear it because they know that it shows the level of consumer spending.

If the hobo gets his clothes for free, who else will spend 1400 pounds on Burberry's coat?

Uncontrollable distribution

Brand burning clothes and beauty products is a new way of dealing with the industry.

The Swiss luxury goods company, Cartire (Cartier) and MontBlanc (Montblanc) brand, Richemont, has bought nearly 9 tons of watches worth more than 480 million pounds around the world.

Buy back, dismantle the diamonds and accessories on the table and destroy them directly.

Louis Weedon (LV) has also been exposed repeatedly in the media over the years because of "reluctant to drop the leather products inventory to the discount store".

Tim Jackson, Dean of the British Fashion Academy, said these luxuries.

The company is facing a contradictory situation.

In order to satisfy shareholders, they must continue to expand, but this will weaken their brand value and cause overproduction.

"They will never solve this problem."

Jackson said.

But from the point of view of luxury goods, the problem faced by luxury goods such as Burberry is that the owner of the brand is generally unable to fully control the distribution of its own. In other countries, factories in other countries may steal and tamper with the design and sell products through other channels.

In order to prevent such products from flowing to the market, the brand side usually repurchases or destroys the stock.

The times also gave more examples.

The report asked a number of fashion companies, such as Vivienne Westwood, Paul Smith and Victoria Beckham. The answers given by these brands are very consistent on how to deal with unwanted stocks: now, immediately, immediately and quickly, as for discount and donation, they will not consider such an option at all.

Burberry, which recently handed in its earnings report, has remained stable in its performance but failed to satisfy investors in China's recently booming luxury market.

A report from Bain consulting shows that luxury sales in mainland China are expected to increase by 20%-22% this year.

The authors predict that the expansion of mainland China will increase the global luxury market by 8%.

In the past 13 weeks as of June 30th, Burberry sales increased by 3%, slightly lower than the 4% increase in the same period last year. The total retail sales amounted to 479 million pounds, which was basically flat compared with the same period last year.

On the day of the earnings announcement, Burberry's share price fell by 5%, mainly because the Asian market did not meet the expectations of investors.

MainFirst analyst John Guy even made a "pretty bleak" judgment, describing the company's performance in China.

In China, this luxury brand has high hopes.

LVMH and other large companies announced notable revenue reports and pushed them forward.

The growth factor is overall sales, not price increases.

A survey by the Royal Canadian investment bank showed that Chanel and Gucci became the most popular brand names for luxury consumers in 2018. The attraction of brands such as Armani, Burberry and Bottega Veneta to Chinese consumers decreased compared with last year.

This may be related to the overpricing of Burberry in the Asian market.

Data show that in Asia, Burberry's cheapest offer is almost 1000 pounds.

Take the cheapest rucksack of the brand as an example, the price of the product on the British official website is 890 pounds, or about 7800 yuan, but the price of the product on its Chinese official website is 9600 yuan, which is 1800 yuan more than that of the British official website, and its price increase is more than 24%.

According to the financial report, China's sustained demand for Burberry windbreaker and handbags has only brought about a median increase.

Sales in the North American market recorded a high single digit growth.

Sales in Europe, the Middle East, India and Africa have declined, mainly due to the weakness of tourism in Britain and Europe.

Prior to that, Burberry suffered a performance crisis. The new CEO, who worked in CELINE (Celine), was trying to reduce costs, increase revenue and profits for Burberry after taking office last summer.

Today, Burberry's brand pformation continues.