Burberry puts digital at centre of plans to revive performance

Profile picture for user ddpreez By Derek du Preez November 13, 2016
Summary:
Luxury fashion brand Burberry has a number of digital and technology investments planned in an attempt to boost its performance.

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In recent years, Burberry has placed a strong emphasis on its digital investments. Despite being a luxury brand that is over 160 years old, it has said that it sees its digital future as important as its high-end stores.

However, it is looking to take this further, following a period of suppressed growth. Digital is outperforming the rest of the business, but in its latest half-year results, the company saw pre-tax profits down by £44 million to £102 million.

Chief Creative and Chief Executive Officer Christopher Bailey told investors that a “new strategy covering our culture and the changes to our ways of working [will] be a critical enabler for all of our plans in the future”. Two key features of this new strategy involve improving operational performance and becoming a leader in e-commerce.

Bailey said:

Since May, we've been focused on developing the detailed plans underpinning each of these strategies, which we are now beginning to execute. As a reminder, these strategies are being informed by a number of external factors; a more subdued luxury growth environment, a shaping force of digital technology, rapid changes in consumer behavior, and significant demographic shifts, including the increasing importance of cities and the maturing of millennials.

Bailey added that he expects half of all growth through to 2019 to come from improving mainline retail productivity. For example, Bailey described the introduction of a new customer feedback tool, which will be based on net promoter scores for the first time.

He said that following six months of planning and a pilot, this tool should provide insights for retail teams that will allow Burberry to become “much more responsive in how we manage our customers’ experiences”. Early results suggest, according to Bailey, that it will help in driving loyalty and building stronger relationships with local customers.

In operations, Burberry is prioritizing how it supports its wider omni-channel plans. For example, it has rolled out a single pool of inventory, which has built a 7% increase in online stock availability. It is also laying the foundations for shipping e-commerce orders directly from its stores. Bailey said:

These are just a couple of examples of progress from a program that is genuinely galvanizing our whole organization to think and work differently in order to put our customers first.

E-Commerce leadership

E-commerce, or ‘e-commerce leadership’, is central to the new Burberry strategy. Bailey wants to translate Burberry’s “strong digital capabilities” into greater sales growth across its own and partner platforms (which are playing an increasingly important role). He also wants Burberry to develop a deeper relationship with existing digital audiences, whilst simultaneously attracting new customers to the brand. Bailey said:

As we said in May, we believe Burberry is uniquely positioned to lead the sector in this, its fastest growing channel.

From digital customer acquisition and retention to developing omnichannel journeys, we are using skills we believed in and developed early on and which, today, are core to our DNA. We have a detailed set of initiatives planned to achieve our e-commerce ambitions and we are investing behind all of these, from people to capabilities to technology, to ensure that we stay ahead.

And we made good progress in the half just gone as digital, once again, outperformed and grew in all of our regions. Traffic to our website increased year on year and conversion improved across platforms. Mobile accelerated to more than 50% of our mix, reflecting sustained investment. And we began to realize the benefits of our investments in the significant commercial opportunity we see in Asia with our newly configured site driving a strong sales uplift in China.

In the first half of this year, Burberry saw strong growth in sales on third-party e-commerce platforms, which now represent a significant proportion of its e-commerce retail revenues.

Some recent developments in e-commerce include the launch of Burberry’s new website on desktop, which Bailey said is a “much better representation” of the brand and carries with it an improved customer experience. He said that it is “very much a living platform” and that Burberry will “continue to improve and evolve the site”.

Burberry is planning the launch of a new mobile site in the coming months, as well as a new customer app, which it claims will create a more personalised shopping experience.

Bailey added:

Third, and, finally, we are continuing to build relationships and drive innovation with partners in the digital space; such is our collaboration with Barneys and WeChat for the September show. This partnership approach will be critical to building reach, brand consistency, and keeping pace with customer expectations for the future.

Operations and CRM

Christopher Bailey
Christopher Bailey

Bailey was also keen to highlight Burberry’s use of CRM data to analyse shifts in customer behaviour. He said that the company now has about 12 million people on its CRM database, following a program of capturing new data for new customers. Burberry has an 85% success rate of capturing a customer’s data once they enter a store. He said:

Once we've got that data, we then use it in all sorts of ways. We can use it in a macro way to look at traveling patterns, behavior shifts, trends, and so on, what's happening to the Chinese customer, and things like that.

And we can do it on a micro basis, either by in-store, allowing sales associates to have the data on their iPads to be able to have a meaningful conversation with a customer, based on actual purchases that customer has made in the past. And once the sales associate has identified a customer, and typed the name in on to the iPad, all previous purchases, with a picture of what they bought, and when they bought them, come up.

So you can have a meaningful conversation around that rather beautiful jacket you're wearing, Luca; would you like to have the latest trousers just come in off the runway?

And we can also use it in a micro way to target customers on the CRM database to stratify it and send out emails and other forms of communication, specifically tailored to the likely shopping habits of that individual customer, because we've got the data.

Finally, it’s worth highlighting that Burberry is also making a number of investments in its operational strategy, in an attempt to gain greater efficiencies - where Bailey said that the company is focusing on systems, processes and balancing cost reductions with investment.

He said that Burberry is on track to deliver approximately £20 million of savings this year, and at least £100 million annualized savings by 2019. He said:

[This is] supported by actions in the half, including supplier renegotiations where we saw double-digit reductions in the cost of numerous large contracts; improved marketing efficiency with investments in digital marketing capability, allowing us to reduce the cost of each view of our content by 20%; and the cost benefits flowing from changes to our ways of working.

In addition to these cost efficiency measures, we're taking action to simplify the most critical processes across our organization, and to introduce new technology solutions to support improvement in how we operate. For example, in procurement we're implementing a technology called Ariba, which will halve the effort involved in processing our supplier payments.

In product development, we will roll out a new system to simplify how we manage the product lifecycle between design, merchandising, planning and supply chain. And we're taking steps to optimize our management of stock with the single pool of inventory improvements that I mentioned earlier.