Saturday, August 28, 2010

Burberry and Immediacy

Thomas Burberry was twenty one when he opened the doors to his shop in England in 1856 and in 1870 he created the gabardine which henceforth and forever would be the Burberry raincoat material. "A Burberry" would suffice whilst previously it would have been the generic "a raincoat."

Last season Burberry streamed its fashion show in 3D to the world as its website invited readers to post photos of their Burberry, changing from just another designer website showcase to a social experience.

Burberry has decided that it will sell a "substantial" amount from its Summer 2011 runway show at its website directly to its customers - and deliver in about six weeks. The promise of six weeks is actually more shocking than its new business model; the typical scenario involves writing orders in October for pieces that will be shipped from the end of January to the end of April. The adage of first in first out at shops is somewhat subverted here but still appropriate. And Christopher Bailey is a designer that has taken a rather established staid house to the heat of fashion. Even in these odd recession/not recession days, Burberry has grown and grown and in the verbage of finance - it's stock is riding up in the winners circle: the upward trend is steady and the profit potential of serving the customer directly (scoot over dear Burberry retailers) is immense. The markup is 2.2 to 2.5 of landed cost (3 to 3.2 for imported goods), Burberry having only net wholesale and yet full retail potential - the profits will at least double and without the pesky real world expense of rent (the internet is essentially free apart from server costs and a few minor expenses related to maintenance), one could expect the trend of its stock to continue upwards in the same way that Apple's profits are immense and its stock commensurately shows that.

Dolce & Gabbana sold a "limited" edition of several bags from its website directly last season (those prices, sigh) as did Proenza Schouler. It's a business model that is all money and there is no doubt that this has been noted by every single designer on the planet.

There is no turning back. Retail shops continue to deal with trying to hold costs in check and minimize inventory and even the best are warning for next season's earnings. On the other hand, and increased their sales 50% last year and each have exponentially explosive seasons coming as more customers migrate to online.

At the recent Financial Times Luxury Conference at the Beverly Hills Hotel, it was noted that there is an entire younger class of customers that prefer shopping online as they find the experience in store rather daunting and sometimes intimidating. Whereas online one can order in their jammies with spills of coffee not stared at and many of the best companies make returns completely easy; small real world boutiques still shudder at returns.

Shades of what Apple did to the record store and Amazon to bookstores. Things change.

It's a big thing that Burberry is doing.

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