Restore Burberry The Truth Of Shanghai'S Great Retreat

The American economist, van Valentine, has such a view:

Consumerism is essentially a prisoner's dilemma.

The whole society is richer, and consumer behavior is increasingly characterized by an arms race.

The consumption of luxury goods is, in a sense, arms race.

However, when the environment is generally cold, luxury brands are also having a hard time.

In early April, British luxury brand Burberry was closed at the flagship store in Shanghai's SHANG Jia center.

Media interpretation said it was a landmark event in the great withdrawal of Burberry in China.

Some media even believe that the flagship store of Shanghai's SHANG Jia center has witnessed Burberry's flourishing in China.

Frankly speaking, the media has caused a lot of misreading.

Rather than a big retreat, I would prefer to say that this is the "strategic shift" that the Red Army started in October 1934.

If we go over the three quarter performance report released by Burberry group, we will find that there are too many problems that we can't imagine. Burberry's growth in China has led to the rise of the Asia Pacific market, and Burberry's digital innovation in China has also made some key achievements.

The environment is really cold. Closing stores is really for cost saving, but that does not mean Burberry is declining.

Even Burberry, a shop in China, is stealing a laugh.

In the three quarter ending December 29, 2018, Burberry quarter sales increased by 1% over the same period last year.

This data is lower than analysts' expectations, but in today's environment, it has already been a relatively good result.

The "chicken thief" Burberry cut off two "cancer" in this year.

One of the cost problems brought by a store is to destroy the social problems brought about by inventory problems.

On the magical land of China, Burberry has accumulated rich experience for the digitalized pformation of the European and American markets with the help of new social channels such as WeChat.

One or two "cancer"

If you look at the 2017-2018 year earnings report released by Burberry in early 2018, you will find that the company is facing more serious problems than it did today.

There are also many risks in public opinion.

1, cost risk

In its 2017-2018 year earnings report, Burberry said it had to shut down department stores strategical, and mentioned that the target of 100 million pounds should be achieved in the 2018-2019 fiscal year.

At that time, the data showed that Burberry had 495 stores in the world, and the number of stores in the same fiscal year was 517. The brand closed 36 stores in the 2017 fiscal year and opened 14 new stores.

At the time, Burberry also mentioned in the risk report that the macro environment of the Chinese market may bring risk factors.

Each luxury store is located at the core of the city, facing the high cost of store rent plus the cost of employment.

For Burberry, closing the Shanghai store is part of the company's global strategy aimed at reducing poorly performing retail outlets.

It can be said that it is also a strategy to eliminate risks.

2, social risks

In early 2018, Burberry wrote in a 2017-2018 year earnings report that the actual cost of finished products in 2017 was 28 million 600 thousand pounds.

At that time, it triggered the condemnation of Forbes and other media.

Media and shareholders protested Burberry's approach.

At that time, Burberry only mentioned "stopping the destruction of non marketable products with immediate effect".

In fact, the destruction of goods is the "routine operation" of luxury brands.

Almost all luxury brands around the world have "black history" to destroy stocks.

The reason for the destruction is about two points.

1, from the dimension of luxury goods production, luxury goods will inevitably generate inventory problems.

In order to keep the price of luxury goods, luxury goods will be controlled strictly, and goods can not be completely put into the market.

Coupled with the fashion trend one day, some commodities are out of fashion for a few days, and eventually become stock items.

2, from the dimension of luxury circulation, stock products usually do not sell at a reduced price.

Because letting a luxury product decline is not a small production, but a "rotten Street".

In order to protect the brand, luxury manufacturers often use destruction strategy to restrict circulation.

Two, two "accidents"

In fact, these two problems have been well solved in the past year.

And to see Burberry's performance this year, many phenomena will be quite surprising.

1, revenue decline, China's counter trend growth

In January 2019, Burberry reported that, as of December 29, 2018, the group's retail income fell by 2% to 711 million pounds on fixed exchange rates, and gross data such as gross margins and profits were not released.

But it is worth noting that compared with the shrinking of the American market, the European market is stagnation.

Burberry group is not bad in China.

In the earnings report, the Asia Pacific region was mainly driven by the Chinese market and sales increased moderately.

In fact, this is closely related to Burberry's digital strategy in China, especially the marketing strategy of WeChat and other social media.

Burberry has added more than one million fans to Instagram and WeChat.

Burberry chief financial officer and chief operating officer Julie Brown even described this as a highlight in the earnings call conference.

Julie Brown mentioned:

Our fans grew more than 50% on WeChat. The launch of the "B Series" marketing campaign launched on a monthly basis has passed the brand sentiment on WeChat and has made substantial improvements in the brand image.

It can be said that social media lets Burberry no longer need so many offline stores to get better sales.

In China, Burberry has tried retail innovation.

The new wave of retailing has been baptized in a 100 year luxury brand. This past Royal brand bent slightly and got a good market result.

2, inventory cleared, public opinion relaxed.

In May 2018, the US media Newsweek mentioned in a Burberry product entitled where to buy discounts:

Burberry plans to "reuse, repair, donate and recycle" unsold products. If you are looking for cheaper Burberry products, you can search for discount websites, such as tradesy.com or nordstrom.com.

In fact, Tradesy is a fashion website selling second-hand designer clothing.

Tradesy's main business is still concentrated in clothing, shoes and bags, and other products, through the sale of second-hand luxury way to find a profit growth point.

Nordstrom, a luxury department store chain, is located in Seattle, USA, and is famous for selling brand-name clothes at discounted prices.

Nordstrom's low discount store NordstromRack's net sales increased by 15%. Now the discount store's sales exceed the company's full price store sales in the US.

This is also the usual practice for more and more luxury brands to face the public opinion crisis of destroying stocks.

For luxury brands, the dominant department stores usually ask them to buy back products that are not sold at the end of the season.

While reducing the stock pressure of department stores and winning another sales opportunity for brands, brands usually choose to sell some products to discount stores.

High end department stores, such as Bergdorf Goodman, Neiman Marcus, Bloomingdales and so on, will directly dump their inventory to discount stores such as TJMaxx and Marchalls after the season change.

These places attract a large number of housewives or middle and low income consumers.

This discount franchise is also one of the ways to inventory.

This kind of exclusive store wants to sell a certain brand of inventory goods, it can only go to the stock business to buy goods, usually 1.8-2 discount buy, then 5-7 discount sale.

There is a saying that luxury goods manufacturers have specialized inventory agents, only receive a certain scale of professional senior buyers, warehouse selected goods have a certain privacy, in addition to the need to trust people to introduce, also set a order quantity of not less than 300 thousand euros.

The inventories set different amounts of goods for different brands of different styles.

In order to maintain brand value, there is an unspeakable tacit agreement between luxury goods and downstream dealers and discount stores.

Three, "to hide a secret"

Luxury goods, downstream dealers and discount stores are protecting the brand and making profits through the way of "hiding the old positions", so that people with less economic conditions can get relatively affordable products. "Three"

How to inventory, luxury brands and China discount e-commerce platform can actually have more and better attempts.

China does not have online retail outlets such as TJ Maxx or Nordstrom, but also has no such luxury platform as tradesy.com.

However, in China, there are online TJMaxx such as love stock. The online platform based on WeChat ecosystem can help Burberry clean up inventory.

The low price logic of this inventory is to help big factories clean up large stocks and abnormal returns.

Considering the warehouse, capital turnover and maintenance price system, many brands are willing to deal with the designated retailers at a low price, sometimes even below the cost price. The price of the goods is mostly between 1-3 fold.

For luxury goods, it is a good choice to throw off the season and outdated goods to the inventory platform.

With love CEO, cool words, to focus on selling the logic of love inventory, use social networking channels, put different goods into the store and sell them in the form of nearly million + distributors, not only will not generate additional traffic costs, but also will form a certain leverage effect, leveraging new traffic.

We can imagine a scenario where Burberry's Chinese marketers are able to deliver goods to AI inventory such as inventory problems, which is very obvious.

On the one hand, it does not require Burberry to drop its own price. It will protect Burberry's own brand to a large extent.

On the other hand, Burberry does not need to destroy goods, it can avoid social ethical doubt, and can get extra revenue through this kind of inventory platform.

What Burberry really needs to do is control the scale of production.

Canadian journalist Naomi Klein published a bestseller called No Logo in 2002.

Klein mentioned in this book:

Nowadays, many famous manufacturers no longer manufacture or sell products, but buy products and then branded them. Therefore, these companies are always looking for creative new ways to create and enhance their product image.

In order to facilitate marketing, we need to constantly flaunt the brand name and constantly update the image. More importantly, we need to use the brand new space to disseminate the concept of brand itself.

Luxury goods will inevitably face the problem of "refusing famous brand" when the whole consumption is cold.

In fact, from the earnings report, Burberry has encountered the global economic environment.

A number of key indicators have slipped in the three quarter earnings report.

From the 2018 revenue forecast, Burberry also lowered expectations.

Julie Brown, chief financial officer and chief operating officer of Burberry, mentioned in the earnings call conference:

In Europe, the Middle East and Africa, the consumption of European customers is still affected by the macroeconomic situation (especially France).

The Middle East is still challenging and also influenced by the macro situation.

Finally, the United States has been influenced by the more challenging steps of the US market.

Through the cold winter, there is wisdom to pass the cold winter.

Luxury goods are all concerned about the price. If the consumer environment is cold, if Burberry adopts such a strategy in the Chinese market, it will be able to "hide the old position" to the maximum extent and get the balance between brand and sales.

Luxury is no exception, which is also the normal state of people's consumption mentality.

This is also mentioned in the theory of leisure class.

What people pay attention to is the wasteful mark that they have. What is demanded of all goods is that they can provide indirect or discriminative utility. This habit is enough to make the standard of measurement utility change.

Maintaining that unspeakable balance is exactly the greatest attraction of luxury goods.