Digital Strategy And Targeted Expansion Lead To Profit Turnaround#
Burberry's 2011 Beijing runway show. (Burberry)
After initially issuing its September profit warning and then reporting a dramatic turnaround last month, Burberry is back in a big way with its recently reported 20 percent sales growth for the year ending March 31, as well as record-breaking profit numbers.
The company has several things going for it that have helped it in the China market, including targeted expansion, a solid digital strategy, and an apparel-heavy merchandise collection.
Burberry's digital strategy, which has been highly cognizant of e-commerce and social media, has paid off greatly, as a company spokesperson reported that the Chinese website’s traffic is up 70 percent. The label holds active accounts on four different Chinese social media sites and has over 400,000 fans on Weibo. Burberry stores in China also feature large interactive touch screens and sales staff armed with iPads in order to look up inventory online if it’s not available in the store.
The British trench coat giant is also pursuing a store expansion plan in China that counters many companies’ decisions to push into second-tier cities, instead focusing on the first tier in order to maintain exclusivity. The label plans to open three stores in Shanghai in the coming year.
There are several additional factors helping the brand in the midst of slowing growth for many other luxury companies. For starters, apparel, which makes up 60 percent of the brand’s inventory, is resisting slowdown effects in China much better than accessories, which are used more often for gifting purposes. In addition, since Burberry only entered China in 2010, it has so far avoided any effects of “brand fatigue.”
The brand has also not ignored Chinese tourists outside the mainland, installing Mandarin-speaking staff in its European stores.
The luxury slowdown for China isn't over yet, however, and Burberry remains cautious about the upcoming year. However, as winners and losers begin to surface in the Chinese luxury market, the label appears poised to come out ahead for now.