Why Burberry's Bet on a Beijing Blitz Will Bolster the Bottom Line
The British are coming, the British are coming. And they're armed with a battery of digital retail solutions that is sure to change the face of both brick and click commerce. Specifically, British luxury group Burberry (BRBY) just made a big techno-splash in Beijing, opening a flagship loaded with touchscreens and iPads to capture the eye and wallet of the Chinese consumer.
In keeping with the brand's digital DNA (most impressive for a 155-year old company), the launch was a spectacle of style and tech presented to nearly 1,000 attendees and streamed on the Web. Floor-to-ceiling video walls showcased the latest collection, while virtual image technology mingled holograms of models among live counterparts on the catwalk.
Clearly Burberry's come a long way from its 3-D ad experiment and globally-streamed fashion shows in a very short time.
Despite the fanfare and Burberry's current presence (57 stores and counting) the average upper-middle class Chinese consumer isn't as likely to recognize the brand's signature plaid or the rest of its luxury goods. That's why Burberry is wielding digital initiatives like a high-tech banner to groom devotees.
As such, the Wall Street Journal reports that the store itself will use touchscreens the size of full-length mirrors to display special collections, fashion shows streamed from other countries, and Burberry-produced entertainment. Additionally, the retail staff will use iPads to order sizes not stocked in the store, as well as some of the 5,000 products in Burberry's collection. Translation: shoppers will be rendered defenseless with the onslaught of Burberry's techno-dazzling approach to sales.
That's actually the most fascinating element of Burberry's Operation Beijing. Even though many consumers aren't familiar with the brand's iconic plaids and trench coats, CEO Angela Ahrendts was eager to leverage Burberry's strong sales in China. Overall, retail sales in the third quarter ended December 31 increased by 36 percent while China, which transferred from wholesale to retail on 1 September 2010, contributed a further 14 percent.
This comes on the heels of Burberry completing a buy-back of its Chinese franchises. The £70 million deal gave Burberry direct control of its 50 stores on the mainland and is projected to add up to £20m to operating profits in 2011.
Just as of-the-moment as its studded-shoulder trenches, team Burberry's Beijing initiative is on-trend in appealing to China's nouveau riche. Nearly a million Chinese had a personal wealth of $1.5 million, up 9.7 percent from the year before, according to the annual Hurun Wealth Report 2011. More encouraging is that just last month McKinsey & Company found that the 13 million households with incomes between $15,000 to $30,000 are expected to grow to a whopping 76 million by 2015. The report also noted that luxury sales in China didn't get hit during the recession. In fact, they grew 16 percent in 2009 and are expected to reach $27 billion in the next four years.
The difference is digital. Ralph Lauren (RL), Levi's, Coach (COH), and Tiffany (TIFF) are busy building up their Chinese presence. But none of these brands has used technology the way Burberry has - yet.
For being first out of the gate, Burberry should get a gold star. However, more practically, the group will likely take its reward in the form of snatching fat profits away from the competition.
Image via Burberry
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