The Digitalization Road of Burberry
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The Digitalization Road of Burberry Abstract With the development of internet, the world is becoming unprecedented connected. In 2014, there are over three billion global internet users and the number is still increasing in a pace of 10% growth every year. Among the users, 1.3 billion are active Facebook users and 31 million have a twitter account. Business men with visionary mindset are taking advantage of the opportunity to dig gold in the online world. And traditional businesses also try to expand themselves into the e-commerce field to meet the consumer shift in a more efficient way. While in luxury field, most brand were holding doubtful attitude towards digitalization since the industry always has the most prestige image and highly focuses on the exclusivity of both brand and consumer experience. Burberry, the previous royal brand, who used to serve the upper class with 158 years history, became the early player in the trend of digitalization among luxury brands. The movement leaded the brand to boosting growth but also brought up questions to the industry: Should luxury brands go to digital? How to keep the luxurious image while going into the mess media? Will it change the traditional way of luxury brands doing business? What the brand can benefit from digitalization? Key words Luxury brand, Digitalization, E-commerce, Technology, Digital marketing, Social network, Content, Consumer Engagement, Offline, Online, Consumer experience Group6 ZHANG Meng B00470981 December 7, 2014 Introduction During 2011 London Fashion Week, 2 days before the online streaming show of Burberry Prorsum 2011 A/W. All the staff was busy preparing one of the biggest events of the year, especially for Christopher Bailey, the Chief Creative Officer of Burberry. He got up early with a real-time tweet sharing with all the early birds who were just like him, “Morning! Hazey but beautiful morning here in London, everything is coming together CB”. The following day, dozens of super models rushed into Horseferry House, the Burberry’s headquarter in London, for the fitting before the big show. Christopher stepped out of his office, watching girls coming in. He took out his Iphone and tweeted: Girls coming in for fittings....CB, with a photo of the view from up- floor enclosing below the simple line, then turned back into office and continued to focus on his work. “Today is the day”, after the whole night non-stop working, Christopher Bailey, the Chief Creative Officer of Burberry, grabbed his Iphone beside the piles of invitations and tweeted a greeting for the followers of the brand. “It’s showtime CB” he typed with slight excitement. And he didn’t forget to send a short clip on Weibo, known as Chinese Twitter, to remind the Chinese audience to watch the show online. Few hours later, when the models were descending in the rain capes and Baker-boy caps with the magical snow falling down on the catwalk, the front row VIPs and the global audience who was witnessing the entire events through the Internet were amazed by this fashion feast for sensory. After the show curtains down in the applause of audience, models, makeup artists, designers and people who were putting effort to this show were celebrating, taking photos and talking to each other in the back stage, while Christopher started thinking, “what should I explore next?” Brand Background The Early Year In 1856, the brand was founded by the 21-year-old draper’s apprentice Thomas Burberry, with the first store located in Basingstoke, Hampshire, England. He invented a hardwearing, water-resistant yet breathable fabric--Gabardine, which won the popularity in making military uniforms and raincoats in late 19th century. In 1895, Tielocken was introduced, which become the well-known Burberry trench coat later and Tielocken was patented in 1912. In early 20th century, Burberry opened its first store in Paris at 8 Boulevard Malesherbes. In the early year of Burberry, the famous explorers and aviators, such as Major F.G. Jackson who is famed for mapping parts of the Arctic Circle and aviator Claude Grahame-White who is the first person to fly between London and Manchester in less than 24 hours, are the endorsement of the brand. The quality and functionality of the coat from Burberry acted as key roles in those expedition stories. In 1911, Burberry provided Roald Amundsen and his team clothes and tents, who later become the first people to reach the South Pole. [Exhibit1] During World War I, Burberry was commissioned to adapt the officer’s coats to suit the warfare by bringing trench coat, which became a popular iconic item of the brand. The coat closes with a single strap and buckle fastening and only features a button at the collar [Exhibit2]. The brand signature, Burberry Check [Exhibit3], was created and used as the lining in trench coats in the 1920s. Another symbolic image of Burberry is the Equestrian Knight logo of the brand, from the original version of the black and orange 1 logo which is created in 1933, now the brand logo has evolved into the well-recognized version, carrying the 158 years brand history and heritage. [Exhibit4]. The Late 20th Century 1970s, Burberry started to expand the brand to US market. First store was showed up in 57th East Avenue in New York. In the following year, retails stores presented widely in US map, including big cities such as San Francisco, Chicago, Boston, and Washington. In the late 20th century, following the lead of former CEO Rose Marie Bravo, Burberry started to leverage its powerful brand recognition to extend the reach to new and expanded customer segments. The brand succeeded in moving to mass market through licensing. With the joining of Roberto Menichetti as chief creative officer, photographer Mario Testino and supermodels Stella Tennant and Kate Moss, the conservative classic British brand was injected with modern blood. [Exhibit5] The 21st Century Entering into 21st century, the pace of Burberry expanding globally was accelerated. The global flagship store was opened in Bond Street, London in September 2000 while the flagship in Los Angeles was finally situated in the famous Beverly Hills. In 2001, Christopher Bailey joined Burberry as the leader designer, then, became the chief creative officer six years later. Burberry came to public in 2005, after the former major shareholder, GUS plc, distributed its Burberry holding directly to GUS shareholders through a demerger progress. Recommended by Christopher Bailey, Angela Ahrendts started to re-brand Burberry as the brand new CEO in 2006 by using high-tech methods. Sharing the common vision, Angela and Christopher transformed the 158 years-old brand into a pioneer in digital field by targeting on millennial consumers. The digitalization of Burberry brought a triple growth to the brand in the past 8 years. In the financial year of 2013-2014, Burberry hit the turnover of over 2 billion for the very first time with 20% profit before tax [Exhibit 6]. In April 2014, Angela Ahrendts stepped down as CEO and joined Apple in the same year. Christopher Bailey took over her position, acting as Chief Executive Officer and Chief Creative Director at the same time. Business Model and Performance Currently, Burberry’s main businesses include women’s and men’s apparel, children’s wear, accessories and beauty product [Exhibit 7]. Within the apparel categories, three diversified brands build up a pyramid targeting the different levels of consumer. Burberry Prorsum presents the most fashion collection from runway shows, providing the design inspiration for the brand and contributing 5% of the total revenue. Burberry London, a tailored collection that brings 45% of total income, offers the daily wears for weekdays of working people. Burberry Brit is a collection for casual wears with generating 50% turnover in total. The distribution network includes both online and offline. The brand owns 497 directly operated stores in 32 countries which contributed 70% of total sales [Exhibit 8], 70 franchises store in an additional 28 countries and 1400 wholesales department and specialty stores in over 80 countries. The digital platform, burberry.com, is actively serving for communicating with its customers in 11 languages and providing various products ranges for selling online. 2 The Luxury Industry towards Digitalization Around 2008, most luxury brands were holding doubts to all the digital things. It made sense. Digital means discretization which is contrary to what luxury brands are holding through their history, that is, exclusivity. Luxury brands always shut its door to those who couldn’t afford and serve to those who were able to pay for the exceptional product and experience of the brands. Most important, the digitalization is an emerging field, no one knows what consequences it will bring or whether the brand will benefit or lose. When facing the digitalization trend, some of the brands stayed in the comfort zone and refused to change due to the lack of visionary while some chose to take the opportunity and see where it can take the brand to. Few years later, the trends of digitalization remarkably shifted the world. When everyone was connected by web2.0, people started to shell out big money on online shopping and life was influenced by the internet, more and more luxury brands felt the urgency of implementing digitalization in their business. It was not simply re-allocating the advertisement budget into social media marketing. “There is a sense of urgency associated with digital platforms,” Vera Wang president Mario Grauso said. “We haven’t so much shifted [advertising] resources, but rather we have allocated additional resources to build, support, and promote our social media platforms.”1 Brands begin to consider digitalization as way to innovate the luxury brand in a strategic level.