Mark Ritson: Burberry’s luxury repositioning won’t work, it’s not in the brand DNA

After dispensing with chief creative officer Christopher Bailey, new Burberry CEO Marco Gobbetti wants to take the brand upscale, but it goes against its history and traditions.

Burberry repositioning
Photo: Robert Sheie

Well isn’t this interesting. Less than a fortnight after renowned chief creative officer Christopher Bailey announced his departure from Burberry, the plot has thickened considerably.

In an update last week, newly arrived CEO Marco Gobbetti finally revealed his long-term strategy for the brand. “We must sharpen our brand position, we must move up to plant ourselves firmly in luxury,” Gobbetti explained on Thursday. Prices will go up, accessible retail doors will be closed and significant sums of money will be invested in raising both the look and prestige of the remaining Burberry retail boutiques.

And when I say prices will go up, I mean up. Gobbetti pointed to Burberry’s polo shirts, which already retail for between £145 to £275 each. These will need to sell for at least 50% more before the brand will reach its proposed new luxury level and Gobbetti will relent.

READ MORE: Burberry has a big brand challenge to replace Christopher Bailey

“By re-energising our product and customer experience to establish our position firmly in luxury, we will play in the most rewarding, enduring segment of the market,” Gobbetti explained. “This will enable us to drive sustainable growth and higher margins over time, while continuing to deliver attractive returns to shareholders.”

But the problem, which has become all too apparent since Burberry’s repositioning announcement last week, is that shareholders see the move as anything but attractive. Almost a billion pounds has been wiped from Burberrys market capitalisation as a result of the new strategy. And despite reassurances from analysts that this is a “classic luxury repositioning”, the stock market appears unconvinced.

So why is everyone so jittery about Burberry’s new strategy? Isn’t a move upscale with the promise of greater profit margins and higher-end products exactly what investors want to hear?

Repositioning is a fool’s errand

Before I take a long run-up and start taking check-patterned pot shots at the new direction, let me first pause and acknowledge Gobbetti and his ability. Only a fool, and your humble columnist, would bet against him pulling this off. He has an amazing track record at Givenchy and then Céline. He is quite capable of making this strategy work. But indulge me while I explain why he will probably fail.

First, repositioning is usually a fool’s errand in most businesses – especially luxury. The idea that you can mess around with the 161-year-old genetic code of Burberry and somehow change its position, its offer and its fundamental appeal is naïve at best, and crazy at worst.

Burberry might end up being a strategic car crash, but it will be one that takes place in slow motion and from a very long distance.

Luxury brands certainly do need to be revitalised. Their extended age ensures that a good CEO will always need to keep updating and evolving the brand. But revitalisation is a very different affair from repositioning.

When you revitalise a brand you study its founder, history and approach, and distil the ‘brand DNA’. Then, rather than repeat the ancient tactics of the past, you ask the key question: what does this DNA direct us to do in 2018? While that almost certainly means new tactics, those tactics are derived from a respect for, and connection with, the history of the brand.

A good example of brand revitalisation is exactly what Gobbetti’s predecessors at Burberry achieved when they brought the brand back to life at end of the 20th century. This was all about a fresh new approach for Burberry, but one that was anchored by CEO Rose Marie-Bravo – and her newly hired creative director Bailey – in understanding and then applying the formula from the past in a new and contemporary way.

What Gobbetti proposed last week is a radical change in the way Burberry does its business. And that usually spells disaster. Put more simply, Burberry is not meant to be a top flight uber-luxe brand like Dior or Hermès. It’s a brand that has a peculiar combination of accessibility interwoven with its luxury. After all, it was the brand that was worn by King George V, but also by his infantry. It was founded by a young, working class man from Basingstoke, not Bond Street. He was a draper, not an aristocrat.

And Burberry is not a pure fashion brand like Prada or Gucci. Burberry has a solid stripe of functionality to off-set its fashion appeal. Its business began with outdoor clothing not indoor élan. Even in the most fashionable moments of Burberry’s recent appeal, supermodels wore coats. In the rain. On the street. This is a brand in which it can be fashionable to be functional.

READ MORE: If BMW is too radical with its brand revitalisation it will be on the road to failure

None of which is to say that Burberry is unable to play with the big brands of fashion and luxury. One of Gobbetti’s biggest problems is that he has not walked into a brand with a problem to fix. Burberry is on fire – in a good way. It’s half-year operating profits are up 24% on last year.

That’s partly the currency advantages from a rapidly receding British pound, but also down to the fact that Burberry has continued to grow sales will keeping a very tight rein on costs. In the last six months, sales are up 4% and the company has shaved another £20m from its operating costs. China is in love with the brand at the moment too.

This might all sound like good news, but in the strange inverted world of CEO succession it is very troubling. A CEO hopes to inherit a ‘low bar’ – a company with strong fundamentals but suffering from poor leadership and bad strategy. The turnaround is heroic and enduring and the rewards that come with it are immense.

Gobbetti has walked into the exact opposite kind of company with Burberry. It’s been well led, incrementally profitable and efficiently operated for almost 20 years. Because of that he has also inherited a team of talented designers and managers who are justifiably proud of their achievements and who will become increasingly perturbed at the different direction they will be asked to take the brand towards in 2018.

And the stock market knows all of this and wants to know why a new CEO wants to spend hundreds of millions of pounds to fix something that isn’t broken, to achieve a result that poncey marketing columnists are telling them will probably fail.

Burberry already has history

So why does he want to do it? To understand that, you have understand the spectacular success of his last assignment at Céline. When Gobbetti arrived, Céline was a luxury basket case. No real heritage, no signature products and no idea what to do next.

In a few short years, ably assisted by the amazing creative director Phoebe Philo, he turned Céline into a brilliant, very high-end success. The ladies of South Kensington, Upper West Side Manhattan and central Shanghai would not be seen dead these days without their Céline bag and associated accoutrements.

A CEO hopes to inherit a ‘low bar’ – a company with strong fundamentals but suffering from poor leadership and bad strategy.

But therein lies the clue to this whole repositioning fallacy. Gobbetti earned his reputation from taking a luxury brand and repositioning it upscale and giving it proper fashion credentials. Now he is about to make the oldest mistake in branding by trying to do it again. No doubt he has the ability, but the only real rule of branding is that there aren’t any general rules of branding. There is no such thing as ‘brands in general’, just ‘the brand’ – distinctive and different and unlike any other.

Céline was an empty brand and one that, with great skill and strategy, Gobbetti took upmarket and into the annals of luxury brand history. But everything that made his Céline strategy successful will ensure the same formula will fail with his new assignment.

Burberry has history, has accessibility and has functionality. These are not weaknesses to be erased and reversed, they are the biggest assets that the brand has. It is not the blank page that Céline was. It’s a complex, nuanced and very significant brand and one that will resist any and all attempts to reverse its genetic origins to move completely upscale or more fashion-forward.

I hope I am wrong. Burberry is too important an asset to the British identity and economy to wish it ill. And Gobbetti is a bold and attractive leader who deserves the best. But I fear I am right.

It will take time for the re-positioning of Burberry to be completed but let’s check back in around 2022 and find out. One of the other frustrations and delights of the world of luxury is that everything, even gigantic strategic blunders, take time to take effect. Burberry might end up being a strategic car crash, but it will be one that takes place in slow motion and from a very long distance.