Evaluation Paper on Burberry

Introduction

According to Gobbetti and Brown (2018) Dow Jones Sustainability Index 2018, ranked Burberry as the leading luxury brand while "Linked" in 2017, ranked Burberry among the topmost sought-after employees. This is a clear indication of the excellent performance by the retailer in the fashion and luxury industry. Among its strategic goals for 2022, Burberry in its product goal is focused on driving positive change using entirely their products and in their company goal they are interested in driving their carbon emission to zero. Again in their community goal, Burberry aims to positively impact at least 1 million people in communities thus sustain their industry (Gobbetti & Brown, 2018). Other indicators of Burberry responsibility is the people focusing on employee engagement, training, and development, freedom of association and health and safety. Secondly is the supply chain focusing on the ethical trading program, remedy access by workers a vendor ownership program. For the community, Burberry is interested in community investment, employee volunteering, and in-kind donations.

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Burberry has generated more than 2 billion GBP annual revenue in 2018 and has a market cap of 7.52bn GBP (Yahoo Finance,2018).

Fundamental Relevant Changes in UK Fashion Retail

Consumers are the heart of every business. In today's world consumer tastes and preferences are continuously changing and businesses must be ready to adapt to the consumer changes which are almost uncertain and trying to anticipate. The consumer is more connected and empowered today through technology and they are continually driving changes in the purchasing behavior both for the brick and mortars and also the online retail landscape (Deloitte, 2018). The fashion industry is no exception and faces challenges like other industries.

In the UK, the most evident challenge for the fashion retail at the moment is the Brexit uncertainty. With the most likely exit from the European Union by the UK in 2019, details are still uncertain about the future. A major concern is a clarity on trade tariffs likely to be introduced and changes in employment and immigration law. Trade deal remains the priority for most retailers (Geoghegan, 2018). An immediate effect of Brexit is that there will be depreciation of the pound. Burberry as a fashion retail will be affected since the weakening pound would imply that the manufacturing costs will soar high (Brown, 2017). With the currency fluctuations, the luxury market in the UK has become least expensive as luxury goods are cheaper. According to Brown (2017) in 2016, Burberry recorder 40% increase in the UK sales in the last quarter of 2016. This implies that the Brexit is beneficial to the luxury brand as sales are likely to increase. However, some costs such as manufacturing costs that are made in foreign currency increases due to the weak currency and this are likely to offset the higher sales.

Fundamental policy changes could also affect the UK fashion retail industry. For example, in April 2018, the domestic living income for citizens above 25 years increased by 4.4% reaching PS7.83 each hour (Geoghegan, 2018). Again policies such as requiring companies to publish their pay if they have more than 250 employees were affected the same month in a move to tackle the gender pay gap (Geoghegan, 2018). Such policies like raising the minimum wage have a direct impact on the fashion industry as there is an increase in operational costs which would be passed to the consumers making their products more expensive. This will affect the consumer purchasing power and a loss of the market share.

Discounting is a new trend that is quickly taking shape in the business environment. Retailers are becoming more reliant on the discounting strategy in a move to raise their sales (Geoghegan, 2018). Although some retailers are resistant to the strategy and have reined in their sales, into the future it will be more difficult to resist the new trend amidst the intense competition taking place in the business environment.

The UK fashion retail has also experienced inflation. The sterling has weakened in the call for European Union exit and is further expected to weaken after the Brexit fallout this year (Geoghegan, 2018). Retailers will struggle to take in higher costs of operation and the retail prices could increase which would affect the consumer confidence. The retailer will be forced to adjust their marketing strategies and convince the customers more on why they should purchase their products. With the increase in price, retail process retailer must convince consumers why their products represent the value for the money and as well the retailers will have to adjust their supply chain management to accelerate their market speed (Geoghegan, 2018). It is interesting to note that although inflation affects businesses in a negative way, for Burberry any increase in cost would probably be passed on to consumers and would have no significant effect as they sell luxury clothes. Inflation is therefore unlikely to affect Burberry considering their target consumer is the wealthy consumers (Brown, 2017)

In the last five years, the fashion retail sector in the UK has witnessed an increase in online fashion sales which has been on the rise since 2012(Mintel, 2017). The online sale in the fashion sector has increased and accounted for 24% in 2017 for the total spending of shopping which was a 17% rise from 2013(Mintel,2017). Approximately 38% of the fashion market is online and this is expected to increase to around 79% in 2022 (Mintel, 2017).

Other changes in the fashion retail in the UK include political factors such as geopolitical events that cause political instability. Political instability has effects such as keeping investors away and even discouraging tourism or migration which contribute to consumer attraction and increased sales. In general, the European Union exit carries several changes within such as the resultant weakening of the currency and the uncertainty of factors such as new trade laws and tariffs that could be introduced.

Microenvironment Changes

Burberry recently changed its business logo and a new monogram was also revealed. The monogram interlocks the letter T's and B's which stands Thomas Burberry, the founder. The brand said that the new logo was in a move to protect itself from counterfeits (Kollewe & Wood, 2018). This move is expected to change the brand perception in the market. "Burberry London England" is the name in the logo.

Again, there are plans to reinvent the brand to a super luxury brand (Kollewe & Wood, 2018). The reinvention will see premiums raised so that the fashion brand will be at par with brands like Gucci. This move has led to the exit and loss of investors and resulted in the company's share falling by 10% (Kollewe & Wood, 2018). To achieve this, the company will be required to spend millions of pounds as they turn the stores to larger ones (Kollewe & Wood, 2018). On the other side, the reinvention is said to be a move to sharpen the brand position as the luxury market is quickly changing and shoppers are more interested in fashion and newness (Kollewe & Wood, 2018). Again, it is argued that demanding immense pricing power will generate fabulous and cash flows as wealthy consumers will resist downturns. This move beside reducing the number of investors and reducing the number of shares is also anticipated to affect the current outlets and jobs (Ahrendts, 2013). Pulling out some retail channels that do not match the luxury aspirations will also hit revenues for the firm especially in areas that depend on them (Vandevelde, 2017).

Recently, Burberry has introduced augmented reality app (Shannon, 2017). This aims at strengthening the digital backbone. The firm is also committed to a continued direct-to-consumer approach which promotes immediacy in brand access.

Another anticipated change for Burberry is the increased focus on consumer engagement. According to Shannon (2017), customer experience offline is of paramount importance. Stores will receive high impact refresh and trained staffs to increase productivity (Daniels, 2018). In July this year, Burberry was highly criticized for burning some of its unsold products which were reported to be approximately 28 million pounds (Danigelis, 2018). Burning the unsold stock was a move to protect its intellectual property. It was criticized for not identifying some alternatives to dispose of the excess inventories and for getting the sustainability wrong. However, the firm has announced that it will stop destroying the finished goods and that there is a new strategy to tackle the waste. According to Danigelis (2018), the alternative strategy has already been put to use which is reusing, repairing, donating as well as recycling the unusable products.

Strategies and Tactics

Burberry can utilize several strategies and tactics. With the expected exit from the European Union, there is uncertainty about the future. Retailers are unaware of expected steps and laws that the government would introduce and other worries such...