When the hero product becomes a villain: the Burberry challenge

Burberry's journey is captured perfectly between the lines of TLC's cautionary lyrics: "Don't go chasing waterfalls" and the adage that "Fortune favors the brave."

For many, Burberry is synonymous with its classic trench coats and check print, elements that catapulted the brand to prominence. As Burberry seeks to elevate its positioning into a fully-fledged luxury brand, focusing on the more lucrative leather goods and accessories segment, it faces the delicate task of balancing its rich heritage with innovative reinvention to avoid being pigeonholed as 'the trench coat brand.'

From Bailey to Tisci to Lee: the quest for growth and identity.

Taking the creative reins of the company in 2001, Christopher Bailey is celebrated for elevating Burberry from a premium brand to a burgeoning player in the luxury market. His 17-year tenure brought transformative change and 14x revenue growth, elevating the brand’s famed outerwear from a wardrobe staple to a fashion statement, leveraging celebrity culture, and pioneering digital innovation.?

Riccardo Tisci's leadership introduced an edgy aesthetic to Burberry, appealing to a younger audience but sometimes diverging from Burberry’s core identity. His logo redesign and new monogram received mixed reviews, with some viewing it as a departure from the brand's heritage. Interestingly, much of Tisci's branding has been phased out post-departure.

Now, with Daniel Lee at the helm, Burberry is steering towards a minimalist yet edgy luxury approach, leaning into the brand's heritage with the return of the Knight logo, a fresh take on the iconic check, and an electric blue theme that echoes Valentino's pink revival. Tasked with expanding the leather goods line, Lee also aims to shift Burberry's focus from ready-to-wear to accessories, leveraging his success from Bottega Veneta.

From trench coats to the next 'it' accessory: the challenge ahead.

Burberry's market positioning, shaped by its pricing strategy, continues to draw diverse customer segments with varying buying behaviors between categories. For example, the profile of a customer spending 2,500 pounds on a trench coat may differ from one investing the same amount in a handbag. This variance in consumer discretion across luxury products, particularly between leather goods and ready-to-wear items, indicates Burberry's potential performance in the leather goods sector.

With the average Burberry handbag retailing around ￡1,500, the brand's leather goods segment mainly appeals to entry-level luxury consumers. This segment forms a broad market base but is marked by fickleness and discretionary spending habits. In contrast, dedicated luxury enthusiasts often exhibit patience and commitment, preferring to invest in coveted items from more esteemed brands than opting for less prestigious alternatives.

The latest Clair Report analyzes the luxury bag resale market and underscores a notable disparity in resale values across brands. Brands like Louis Vuitton and YSL retain 70-85% of their original retail price, while Hermes, an industry outlier, often resells for over 110% of its store price. In contrast, Burberry handbags from 2018 to 2023 averaged 40% of their original RRP on the resale market.

The significant gap in resale value crucially influences entry-level luxury consumers' buying decisions and long-term brand loyalty. Burberry must strategically navigate this landscape by creating standout classic pieces to attract and retain discerning customers.

Another critical aspect for the brand to navigate is its market diversification. With a significant 43% of its revenue stemming from the Asia Pacific region, the brand faces the risk of regional market concentration. It must leverage a brand strategy that ensures appeal across a diverse consumer base, particularly in more challenging territories like Europe and the US.

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Balancing the act: enhancing brand desirability as a path to profitable growth.

Burberry's recent shift towards minimalism and refining legacy elements signifies a progressive direction. Daniel Lee has adeptly reimagined Burberry's iconic check print with vibrant color variations in both ready-to-wear and accessories, opening new avenues for creative interpretations of the brand's heritage. However, the brand still has work to do in achieving cohesiveness, particularly in its accessories collections, where oscillations between the TB logo, the knight, and a subtle 'B' have resulted in a lack of standout pieces and a unified identity.

Luxury is a journey, and Burberry has a considerable path ahead as it balances honoring its heritage with enhancing its appeal. The search for a new hero product remains a clear focus in this journey. While the iconic trench coat continues to be a steadfast pillar of the brand, the future calls for an innovative leap – perhaps a ground (or internet) breaking coat or handbag design that could pivot Burberry's brand identity into new realms. Daniel Lee, with his proven expertise, might be just the right man for the job.