Burberry: Bringing Screens to the Streets
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Burberry, the British luxury fashion house renowned for its signature check pattern, was founded in 1856 by Thomas Burberry. With the invention of gabardine—a light, durable, and weatherproof fabric—Burberry’s trench coats quickly became a favourite among the British elite in the 20th century, and are still one of the brand’s best sellers to this day. With revenues in excess of $3.7 billion, Burberry is one of the most valuable luxury companies in the world today.
Despite its illustrious past, Burberry has found itself in a slump. Aside from the devastating impacts of COVID-19, revenues have declined by an average of two percent per year since 2017, attributable to stagnating growth in the Americas and EMEIA. Furthermore, sales in apparel, which account for over 55 percent of Burberry’s total revenue, have failed to maintain historical growth, declining by one percent between 2019 and 2020. This is particularly concerning since competitors like Gucci and Louis Vuitton have thrived in the economic boom leading up to 2020, with revenues growing at a 30 percent and 20 percent CAGR, respectively.
Burberry’s key issues currently stem from unintentional brand dilution. For nearly a decade since the early 2000s, Burberry apparel was adopted by the Chavs, a subculture of the cigarette-smoking, tracksuit-wearing, football-loving young British working class. As a result, the brand’s signature check pattern came to be known as the “Chav check.” This association drove a significant decline in brand equity, and the fashionable elite were quick to abandon Burberry in favour of other luxury designers. Since then, the decline in Burberry’s status has made it difficult to grow revenues and the company has taken steps to reclaim its image as an innovative and premium luxury brand.
In 2006, Angela Ahrendts became the CEO of Burberry to reverse the unfavourable trajectory of the company. Ahrendts and her successor, Christopher Bailey, repurchased many of Burberry’s licensing agreements to protect the exclusivity of its trademarked designs. In 2018, Burberry initiated a complete rebranding under its current CEO, Marco Gobbetti. The multi-year plan includes a modernized typeface, a new logo, and the incorporation of streetwear into Burberry’s ready-to-wear segment. These initiatives have strengthened Burberry’s brand by reducing its association with the Chav subculture.
Streetwear, in particular, is an industry Burberry has bet big on. It is currently the fastest-growing segment in luxury fashion with an estimated market size of $185 billion, making it about 10 percent of the global footwear and apparel market. Yet despite other brands’ success in this fast-growing and lucrative segment, Burberry’s apparel revenue has been stagnating.
Creating “Hype:” The Supreme Model of Branding
Burberry’s venture into streetwear was lacklustre for two reasons. First, Burberry’s brand image and history do not align with the origins of streetwear, which began in the streets of the Bronx as a subset of hip-hop culture. While Louis Vuitton found success in collaborating with the prominent streetwear brand Supreme, Burberry ventured into uncharted territory without the guidance of a strategic partner. As a result, awareness and brand loyalty with streetwear enthusiasts were never established.
To achieve success in the streetwear market, Burberry should study the playbook of Supreme, an American luxury streetwear brand. Supreme applies a drop model that creates exclusivity by only notifying select regulars of limited edition new items. This exclusivity, coupled with the minimalistic design of its website, sent a clear message to consumers: “You chase us, not the other way around.” The success of this model can be seen in the massive line-ups in front of Supreme stores every Thursday, as well as the secondary resale market, where markups on Supreme merchandise can be as high as 1,500 percent.
In the past, Burberry’s customer buying experience was traditional: customers walk into the store, see something they like, and take it home. The brand created intangible value through the artistry and craftsmanship of its merchandise, which consumers perceived as a status symbol and therefore paid premium prices for. In recent years, Burberry has begun to release products through a drop model in Asia. So far, this strategy has proven successful at a small scale and should be implemented when expanding its streetwear line to create a sense of exclusivity.
The Rise of Japanese Culture
While it is difficult for Burberry to change its brand positioning to match that of “hype” brands, there is an opportunity to succeed by overhauling its brand image. Radical transformations are necessary in the current environment given the maturity of the luxury retail space. Louis Vuitton’s recent success is a result of collaborations with pop culture brands that appeal to consumers around the world. Similarly, Burberry should embrace pop culture as an opportunity to make its brand relevant again to young and diverse audiences. The most promising opportunity to do so lies in Japan.
Japanese media has experienced a global surge of popularity in the past decade, supported by shifting cultural trends and the rising adoption of online streaming platforms. In particular, the $20.5 billion market for Japanese animated content (anime) is expected to grow by 8.8 percent annually. This explosive growth can be attributed to an expanding viewer base outside of Japan through platforms like Netflix, where anime content viewership increased by 100 percent in 2020. This surge in anime popularity presents an excellent opportunity to build brand equity among younger consumers both in and outside of Asia. Almost half of Americans between the ages of 18 to 29 and one-third of those between 30 and 44 have favourable attitudes towards anime. Many luxury brands have started taking advantage of the popularity of anime in Asian countries and the U.S. through collaborations with popular Japanese franchises. Most recently, Gucci partnered with Doraemon to create a limited edition Lunar New Year collection. Burberry should therefore look to expand a partnership with one of anime’s leading names: Studio Ghibli.
Studio Ghibli: Asia’s Disney
Located in Tokyo, Studio Ghibli is one of the most distinguished animation studios in Asia, boasting a list of critically acclaimed films and award nominations. In 2003, Studio Ghibli’s Spirited Away became the first Asian-animated movie to win the Academy Award for Best Animated Feature. In addition, five of its movies are among the top 10 highest-grossing anime films worldwide. In early 2020, Netflix secured a contract for exclusive rights to stream 21 Studio Ghibli movies on its platform. By using partnerships with Western media platforms, Studio Ghibli has been able to build a broader global audience for its critically acclaimed works.
Despite more than 18 years passing since its initial release, the release of Spirited Away in China in 2019 outgrossed Disney’s Toy Story 4. Not only did this demonstrate the studio’s popularity with Asian audiences, but it also showcased the nostalgic value of Studio Ghibli’s works. Through the Netflix partnership, Studio Ghibli is on track to become one of the most recognizable animation studios in the world alongside powerhouses such as Disney, Pixar, and DreamWorks.
Meet HENRY: The Segment Redefining Luxury
High Earners, Not Rich Yet (HENRYs) are a segment consisting of Gen-Z and Millennial consumers earning between $100,000 and $250,000 annually, with investable assets less than $1 million. This group accounted for virtually 100 percent of the luxury market’s growth in 2018, compared to 85 percent in 2017. Streetwear’s popularity has been fueled by this segment, as HENRYs reported spending five times more on streetwear than non-streetwear. As such, luxury brands are keen to capture this fast-growing and lucrative segment.
Furthermore, there is strong potential for overlap between HENRYs and anime viewers. Many of Studio Ghibli’s classics, such as Howl’s Moving Castle and Princess Mononoke became favourites among children and teens in the late 1990s and early 2000s. Studio Ghibli’s industry-defining works were released when Millennial and Gen-Z consumers were growing up, and these nostalgic connections hold the key to driving purchasing decisions. The success of incorporating nostalgic childhood franchises into fashion can be seen through the success of other luxury partnerships in Asia. For one example, the Gucci x Doraemon partnership earned an estimated $9.8 million in intangible media impact value.
Burberry’s growth has stagnated in recent years because it has not established a long-lasting emotional connection with younger audiences. In particular, these audiences do not see Burberry as a trendsetter, nor an aspirational or inspiring brand. Many young, wealthy consumers describe Burberry as “their parents’ brand” and therefore irrelevant to them. For Burberry to successfully reinvent its brand, it must create a strong emotional appeal to younger audiences with higher customer lifetime values. If Burberry can tap into the connection that Studio Ghibli has built with younger consumers, then it can capture this fast-growing segment of luxury fashion.
Back in the 90s and 2000s, Studio Ghibli had amassed a considerable fan base. Today, the majority of that fan base has grown into the HENRY target demographic for luxury goods. Given the studio’s widespread recognition in Asia and North America, Burberry should capitalize on the strong brand equity Studio Ghibli has developed with Millennial and Gen-Z consumers.
Specifically, Burberry should establish a partnership to create Spirited Away streetwear apparel featuring the movie’s eccentric cast of beloved spirits. As opposed to other franchises like My Neighbor Totoro, Spirited Away features a darker colour scheme and quirky character design that may better resonate with streetwear enthusiasts. This partnership provides an avenue for Burberry to connect with a younger Asian demographic and encourages HENRYs to reevaluate their preconceptions about the brand. It would also benefit Studio Ghibli by strengthening the value of the Spirited Away franchise and bringing the studio’s most popular content to the world of high fashion. Studio Ghibli has also experienced past success with fashion collaborations, including a leather goods and apparel collaboration with the Spanish brand Loewe centred around My Neighbor Totoro. A new mutually beneficial collaboration would increase both Burberry and Studio Ghibli’s visibility and provide support in expanding into new markets.
To achieve exclusivity around this collaboration, Burberry should employ a revenue-sharing model with Studio Ghibli. The brand should create a limited quantity of merchandise and use a drop model. Similar to Supreme’s promotional model, Burberry can generate exclusivity around this collaboration by releasing select quantities in flagship stores around the world. In particular, Burberry should focus on stores in Japan, China, and the U.S.: three established luxury markets that also have some of the highest levels of anime viewership in the world. The exclusivity generated by low retail volume can potentially create high resale values for the limited edition merchandise on the secondary market. While Burberry and Studio Ghibli cannot profit directly from resales, the high prices create intangible value by shifting both companies to a more premium brand category.
To secure a long-term partnership with Studio Ghibli, Burberry should first receive exclusive rights to create a capsule collection centred around the Spirited Away franchise. The luxury house should work with the studio to create unique designs featuring dark tones and imagery reminiscent of the early 2000s that would suit current streetwear trends. Burberry should design streetwear apparel and leather accessories targeting wealthy HENRY consumers between 18 and 35 who have an emotional attachment to the film franchise. The products should be launched in 2021 in honour of the 20th anniversary of the film’s release, with an initial launch in China and Japan, followed by the U.S. Releasing the product line for Spirited Away’s 20th anniversary will generate media coverage and revitalize Burberry’s lacklustre streetwear segment.
Through a partnership with Studio Ghibli, Burberry has the potential to form a strong connection with an increasingly important consumer segment in luxury fashion. By capitalizing on the growing popularity of Japanese art and digital content, Burberry can transform its English heritage brand into one that is truly international and poised for long-term growth at the apex of luxury fashion. Further down the line, the two companies can expand on their partnership through collaborations on new film releases and other beloved franchises.