Burberry ended its lucrative 35-year licensing deal with Sanyo Shokai and took direct control of its Japanese business. Burberry transformed its license model from an indirect business model to a direct type, and the transformation came five years before the license with Burberry was meant to expire in 2020. The direct control and operation of its own stores in Japan allowed Burberry to control the quality of items that it sold in Japan.
The transition was mainly brought about by the fact that Burberry’s Japanese positioning under Sanyo Shokai and the global positioning of Burberry were greatly out of sync. In Japan Burberry was mainly seen as an upper-middle class brand and yet globally Burberry had transitioned into a luxury goods brand.
Burberry opened new flagship stores in key cities and focused on advertising Burberry’s heritage with images of top of the line Heritage trench coats in main Japanese newspapers. The transition also meant that Burberry outlets would be fewer in Japanese cities and target high-end clientele and also that the items sold in the outlets would be sold at higher prices because of the increased quality to match Burberry’s global brand as a luxury goods manufacturer.
Burberry has a higher level of control of its trench coats and other products.
There is no risk of poor quality of service delivery which may harm the reputation of Burberry.
Cons include :
Sanyo Shokai is now a competitor of Burberry after the termination of the license. This is a concern because Sanyo Shokai had more experience in the Japanese market, and already understood the customers which Burberry is seeking to target.
Burberry will have to invest in opening and running the Japanese stores which will eat into its bottom-line before business in Japan picks up.
Burberry is now directly exposed to the Japanese market and hence any economic downturns in Japan will impact Burberry directly.
Investors response and stock market performance since the strategy
The immediate response by investors was seen as the stock price of Burberry saw an improvement, and the price rose from 1160 pence sterling to 1475 pence sterling. This was on the expectations that the direct control of Burberry stores in Japan would lead to higher profit margins and the transition of the Japanese business into luxury goods would also increase the profits made by Burberry. The stock price saw an increase regardless of the expected losses due to the fact that Burberry had to stop operating in the close to 400 stores that were owned by Sanyo Shokai.
Tiffany’s brand strategy
Tiffany’s brand has built is brand and people are willing to pay a premium for the products than they would for similar products from other companies. The success of Tiffany is based on:
Tiffany’s ability to change as per the customer needs, Tiffany initially began as stationery and jewelry company before dropping the stationery and focusing solely on the jewelry.
The latest strategy adopted by Tiffany involved the use of online marketing to grow its brand and increase sales. Tiffany was a pioneer in online marketing in the luxury industry and has launched numerous digital marketing campaigns mostly using celebrities to increase its sales. Tiffany has also adopted social media and Tiffany ranked highest in terms of responsiveness and engagement with potential customers as compared to its competitors. Tiffany has also designed its online purchasing process to make it easier for users to purchase items they want and in this regards, Tiffany embraced the fact that product experience need not be confined to a physical store. Burberry should adopt the use of online marketing to increase its sales since the strategy has proved useful for Tiffany’s by increasing its exclusivity and demand as a luxury brand.
- Amed, I. (2015, July 27). How Burberry is Rebuilding Its Japan Business. Retrieved from https://www.businessoffashion.com/articles/bof-exclusive/bof-exclusive-how-burberry-is-rebuilding-its-japan-business
- Chu , K., & Fujikawa, M. (2015). Burberry Revamps Its Image in Japan. Retrieved from https://www.wsj.com/articles/burberry-revamps-its-image-in-japan-1439547804
- Irwin, T. (2012). Licensing arrangements – the pros and cons. Retrieved from https://www.tcii.co.uk/2012/10/26/licensing-arrangements-the-pros-and-cons/
- Koh, M. (2016). Diamonds for the Digital Age: How Tiffany & Co. Embraced Online Marketing. Retrieved from https://www.referralcandy.com/blog/tiffany-marketing-strategy/
- Nikkei Asian Review. (2015, January 22). Burberry-s-new-strategy-in-Japan. Retrieved from https://asia.nikkei.com/Business/Burberry-s-new-strategy-in-Japan