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How Burberry is using digital to strengthen customer relationships during Covid-19

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Burberry chief executive Marco Gobbetti says it has deepened its customers relationships through digital as its shops have closed during the Covid-19 pandemic. 

Gobbetti, speaking as the luxury fashion retail brand reported full-year results, said: “We have found new ways to strengthen our connection with consumers, drawing on our digital leadership.”

The retailer has used its digital platform to take its products to clients who were at home in lockdown. It used techniques including remote selling, live-streaming events held in stores, and creating immersive experiences, as seen in its recent Bags World launch.

One event, live-streamed on T-mall, saw influencer Yvonne Ching browse its Shanghai flagship store, watched by almost 1.4m viewers. Engagement on Instagram and WeChat grew by double-digits. 

The business, ranked Top350 in RXUK Top500 research, has focused online as its shops have closed to protect against the spread of Covid-19. Burberry has seen its business “very materially impacted” since January. Most of its stores in mainland China were closed in February, as the pandemic peaked there. Trading in China started to improve towards the end of its financial year in late March, 28, but footfall in other parts of Asia has stayed weaker throughout and its shops in Europe and America were all closed by the end of March and its supply chain was affected that month as it closed its own factories and its Italian distribution centre. It reduced hours in its American and UK logistics hubs, although they continued to operate to support the digital business. Since then, sales have started to rebound in Asia in a way that offers hope for the future.

During the pandemic, Burberry has retooled its Castleford, Yorkshire factory to make non-surgical gowns and it is helping to deliver masks and gowns for medical staff and patients. It is funding research into a University of Oxford vaccine and supporting food poverty charities including FareShare. 

The update came as Burberry reported sales of £2.6bn in the year to March 28 2020, down by 3% from the £2.7bn it reported a year earlier. Pre-tax profits came in at £169m, down by 62% from £441m a year earlier as the retailer wrote down the value of stores and stock as a result of the pandemic. Like-for-like sales fell in the fourth quarter alone by 27%, compared to growth of 4% over the first nine months of the year. Overall retail sales came in at £2.1bn, down by 3% like-for-like, while wholesale revenues of £476m were 2% down on last year, and licensing grew by 1% to £47m from £46m last year. 

Gobbetti said: “Prior to Covid-19, we were delivering strong momentum across our brand and product, with sales ahead of our expectations. Since then, the global health emergency has had a profound impact on the world, our industry and Burberry but I am very proud of the way we have responded. We have taken swift action to mitigate the financial impact on our business, while prioritising the safety and wellbeing of our teams and customers.”

Broader strategy

In recent years Burberry has shifted its strategic focus to flagship shops around the world, while closing smaller and non-strategic shops and, in wholesale, ensuring it worked with luxury partners. It has also rethought its operations in a way that saved £20m during the financial year – taking it to a total of £125m so far, with plans to save a total of £140m by 2021. 

It has also focused on regeneration and “carbon insetting” projects such as promoting biodiversity on farms, restoring ecosystems, supporting the livelihood of local producers and storing carbon at source to remove it from the atmosphere in order to tackle the environmental impact of its own operations. 

Looking ahead, the retailer says it is unable to provide specific guidance for this full year. It is encouraged by the recovery in mainland China and Korea, where sales so far this year are ahead of the previous year, but half of its shops remain closed and that’s likely to have a severe effect on first quarter sales. Overall, it says, it could take some time for the luxury industry to recover to pre-crisis levels. 

In the meantime, it is working on a range of recovery scenarios with specific capital expenditure and cost mitigation plans for each. It says it will tailor its approaches to individual markets, to reflect their stages of recovery, and will use its digital programme to forge stronger connections with customers.

Industry reaction

Commenting, Russell Pointon, director and head of consumer at Edison Investment Research, said the full-year results reflected the struggle the company has been going through over the past year on the back of lower demand in Asia due to the ongoing US-China trade tensions, the Hong Kong protests and the Coronavirus epidemic. 

He added: “Prior to the pandemic, Burberry, began to focus on leather goods and accessories in a bid to diversify their brand towards more resilient and growing sectors in the market and that has helped them navigate the current landscape. Although, they´ve had to put a hold on their plan to revive sales with star designer Ricardo Tisci, the opening of stores mainly in Asia should provide some comfort and hope for the company.

“With much of the world still in lockdown, and hence no open shops, turbulent times still lie ahead for Burberry. Nevertheless, given its strong online offering as well as diversification of products, it will be interesting to see if consumers will continue buying online or potentially holding off from luxury during the coming months.”

Sofie Willmott, lead retail analyst at GlobalData, said: “Other luxury retailers pale in comparison to Burberry when it comes to their digital presence and the brand’s commitment to the online channel will help to weather the coronavirus storm.”

She said improvements to the Burberry product range had helped it attract younger shoppers over the last year, while its efforts to donate PPE and fund vaccine research “will also make it a more attractive choice as consumers become more cautious with their purchases”.

Image courtesy of Burberry

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