Burberry chief Angela Ahrendts will be getting the retailer in order
‘If my feet look swollen today, it’s because they are,’ jokes Burberry chief executive officer Angela Ahrendts.
She has spent much of her week on the hoof, speaking to many City analysts and every single employee in the luxury-goods company. Her feet, in fact, look immaculate in a smart pair of heels, which finish off a crisp slimline suit - top to toe Burberry, of course.
Ahrendts has just begun the first official week in her new post, although the handover from outgoing boss and fellow American Rose Marie Bravo began in January.
She is flanked by Burberry creative director Christopher Bailey and chief financial officer Stacey Cartwright, as she outlines her business strategy for the famous British company, which celebrates its 150th birthday this year. ‘We’re going to write chapter 151,’ she says.
The Burberry story has been a happy one in recent years, but that brings its own challenges. When Bravo joined Burberry in 1997, it was worth£200 million; today’s share price values it at£2 billion. Although working in the shadow of a 1,000 per cent growth will not be easy, Ahrendts believes there is plenty more mileage in the business, in the form of retail expansion and an increased product offer.
Bravo was feted for revitalising the Burberry brand, but it is no secret that systems and communications need to be improved. In order to achieve growth, Ahrendts must overcome these issues. She says: ‘As brilliant as the human structure is, our back office is not impressive.’
Her employee meet-and-greet was part of the push to draw together all outposts of the fashion empire. This has several tiers, from high-end catwalk collection Prorsum, through the mainline London collection to the young fashion label Thomas Burberry, which is targeted at 16- to 25-year-olds.
Prior to Ahrendts’ arrival, there was scant communication between the different divisions, to the extent that the first time the London collection designers would see the Prorsum range would be alongside everybody else at its Milan catwalk outing. Ahrendts now holds lunches every Friday to ensure her heads of design get together.
Ahrendts seems to be leading the communication drive by example, but she emphasises that she will not meddle in the design process.
She says: ‘There’s a natural trust and respect. I’m not a dictator; I’m a modern-classic customer. I can look at (the product) and tell its going to be a home-run around the world.’
In the 2005/2006 financial year, retail accounted for 43 per cent of Burberry’s sales. Ahrendts hopes to bump this up to 50 per cent in the coming year. In order to achieve that goal, the business needs to operate with a new mindset. Ahrendts asks: ‘What do you have to do differently to class yourself as a speciality retailer rather than a wholesaler?’
To work towards this, she will be increasing the number of product drops to stores from two a year - spring/summer and autumn/winter - to eight, to give shops a more up-to-date look.
The biggest thrust of retail expansion will be in the US, a market Ahrendts knows well through her former role as executive vice-president of US clothing giant Liz Claiborne.
Ahrendts describes Burberry as ‘hugely under-penetrated’ in the US, where it has 36 stores. Cartwright acknowledges that the company’s previous target of increasing that number to 50 was conservative, to say the least. She says: ‘You can expect it to be quite a lot higher than that.’
Burberry will also target emerging luxury goods markets such as India and Russia. It has 35 stores in China through a franchise partner.
The chain will also experiment with store formats to cater for the many micro-markets within the US. For example, it is planning menswear-only stores on New York’s Wall Street and casualwear-led outlets in the state of Kansas.
The burgeoning retail business will rely heavily on the success of Project Atlas, a£60 million IT and operations initiative launched last year. The project is being overseen by Cartwright, who describes it as ‘a year in the planning and two years in the delivery’.
Incredibly, at present head office can only receive performance updates from its stores in terms of total sales figures, with no breakdown of how individual lines are performing. A Project Atlas roll-out later this year will rectify that, allowing micro-analysis of individual stores.
Other areas of growth for Burberry are accessories and shoes, which it has identified as fast-growing luxury categories. The fashion brand intends to increase the number of bags, wallets and scarves it sells and has already made inroads with a shoe offer four times the size of last year’s.
Despite suffering from an association with chav culture, the Burberry check is still prominent on the accessories floor at the retailer’s head office and showrooms at London’s Piccadilly. The chav connection is something Burberry is keen to dismiss and Cartwright insists that sales of the check are as strong as ever.
Despite this, Bailey has been busy scouring Burberry’s archives for alternative icons to represent the brand, such as the signature of founder Thomas Burberry, which features on some of the new season’s products. The Burberry-mounted knight logo will also get more of an outing.
Leaving a ‘wonderful work life’ in the US to join Burberry was not an easy decision for Ahrendts to make. One of the deciding factors was a visit to a New York store with her mother. ‘I was amazed at the cross-generation appeal of the brand,’ she says. She does not rue her decision, describing herself as ‘very happy’, as will be the company’s shareholders if she manages to keep structural problems in classic Burberry check.
HOW LUXURY FASHION RETAILERS ARE FENDING OFF VALUE RIVALS
As Burberry boss Angela Ahrendts outlines her vision for the business, other luxury retailers are also considering their next steps.
With the increasing power of fast-fashion and value retailers, which can mirror catwalk looks within weeks, upscale groups have had to defend their status. Luxury brands are making use of an armoury ranging from design and product innovation, pricing, shorter product runs and sub-brands to reclaim the all-important prestige and exclusivity their customers crave.
High-end goods are now more expensive than ever, despite deflation on the high street, according to Harvey Nichols and Mulberry. Harvey Nichols commercial director Patrick Hanly believes the trend for his customers to mix their couture pieces with high street fashion bargains is tailing off.
He says: ‘We are seeing customers with a very strong desire for designer goods. The most successful part of our business is the top end, which is experiencing extraordinary growth. Our customers spend tens of thousands of pounds on clothing and can easily spend about£5,000 on shoes in one visit.
‘Our customers like exclusivity, so we stock directional brands, such as Balenciaga, Chloe and Lanvin, and new, young, edgy designers.’
The trend is also evident at couture e-tailer Net-a-Porter, whose customers do not balk at buying a£1,850 Chloe black strapless empire line dress or a£1,500 Matthew Williamson Rosetti beaded dress.
Upmarket retailers have found many ways to maintain the air of distinction that justifies premium prices, such as providing outstanding customer service. Royal stationer Smythson of Bond Street, for instance, offers a personalising service to keep celebrity customers - including TV comic David Walliams and supermodel Kate Moss - coming back. Smythson creative director Samantha Cameron, wife of Conservative Party leader David, designs pill purses and pens that can be emblazoned with special messages.
Such high-profile figures can also help luxury retailers create a celebrated brand, whether it is a hands-on leader such as Selfridges creative director Alannah Weston, who is well-known in art circles, or a publicity-generating personality like Mohamed Al Fayed’s daughter Camilla.
Geographic heritage can also help luxury retailers exploit a reputation for authenticity and expertise. Just as Burberry plays on Britishness for its London collection, Mulberry shouts about the fact that its leather goods are all handmade in its original English factory in Somerset.
Last May, global health and beauty giant AS Watson revealed that The Perfume Shop in the UK, along with European business Marionnaud and Benelux retailer ICI Paris XL, would form a European luxury division.
The Perfume Shop managing director Jeremy Seigal believes creating a luxury retail portfolio has been advantageous for trading. He says: ‘The division is based in Paris, which, in the long term, is where you need to be in luxury perfumery and cosmetics. From there, we can support innovation, product research and manufacturers to provide interesting goods for our customers.’
While many shoppers might be focused on low prices and Primark products may these days be mixed with Prada, luxury retailers are still finding plenty of ways to encourage the most affluent to carry on splashing out.