The luxury market is currently in slowdown and big brands such as Prada, Mulberry and Burberry are feeling the pinch. Slow economic growth and political instability in China, Russia and the Middle East has led to a clampdown in spending which in turn has had a catastrophic effect on luxury goods firms. Consultants Bain and Company were recently quoted as saying that this slowdown will put the brakes on the global luxury goods sector for some time, with many brands reigning in any rapid expansion plans.
But what does this mean for British firms Mulberry and Burberry? Mulberry is a company in deep trouble. It has issued numerous profit warnings in the past two years and retail sales in the UK have slumped by 12% in the six months to end of September.
Part of the reason for this was down to the loss of their creative director Emma Hill and the subsequent leadership of Bruno Gallion, who arrived from Hermes aspiring to take Mulberry down a more traditional luxury route, concentrating on top end expensive handbags, thereby putting it in direct competition with global giants such as Chanel and Louis Vuitton.
This was the start of the brand’s demise. Increasing its price point put the brand out of reach and alienated its core consumer. Inflating the product price could only serve to undermine brand value in the eyes of the consumer.
Part of the problem was that savvy consumers did not see the value in paying inflated prices for bags that would have cost them much less a few years ago. Mulberry didn’t have the brand equity to justify the increases and consumers started opting for better established luxury labels as a safer investment.
Burberry’s problems are predominantly down to factors out of their control eg political and economic instability. These are very different from Mulberry’s issues, which rest internally, with decisions on pricing, product and management strategy. In fact their retail sales were up 15% to £748m for the six months to the end of September, while wholesale sales rose 13% to £317m. Burberry has also enjoyed strong sales for its new fragrance My Burberry.
Where Burberry also wins points over Mulberry is through story-telling and opportunity for personalisation, especially across digital channels. Story-telling is crucial and should be woven into a brand’s fabric; through communications, behaviours and above all, products. Brands like Burberry have put simple but meaningful stories at the heart of their products and this benefits the brand, the sales channels and ultimately the shopper, who can enjoy telling the story that lies at the heart of their purchase.
The Burberry Bespoke collection, which allows consumers to personalise their iconic trench coat purchase and share across social media channels, gives power to the consumer.
So whilst Burberry has continued to grow and is just weathering the external factors – albeit with a reduction in growth like many global luxury brands, Mulberry sadly is a victim of its own aspirations due to a culmination of external factors and internal decisions resulting in a very tough situation for the brand.
The tide does seem to be turning for Mulberry though. Godfrey Davis is now at the helm, and the brand are seeking to reposition themselves back in the middle market. But this requires significant investment, all while they are still looking to appoint a new creative director.
The brand are also digitally a long way behind Burberry, who are seemingly on their way to realising their global ambitions. Their concept stores or “retail theatres” are laden with smart labels (RFID tags) full of information and catwalk content that not only allows consumers to personalise and purchase items in a click but inspires at the same time.
Also worth bearing in mind is that many luxury buyers are what are often called “excursionists” – people who don’t usually shop luxury but buy one or two luxury brands that they connect with and feel reflect their beliefs or identity. Luxury brands need to stand for something beyond aesthetics and provide customers with something deeper and more personal.
In order to succeed Mulberry needs to keep its core customer at its heart. It needs to appeal to its core market, the upper-middle class female, but only time will tell if this will be successful, or if it’s place in the market will be filled by another brand. By trying to change their image from a domestic luxury brand to a global one, they have failed to maintain a credible high-end image and this may be irreversible.
But all is not lost for the luxury market. Some luxury brands that are genuinely timeless, such as Hermes and Cartier, have both maintained solid growth during this slump by finding ways to make themselves relevant today. Making stories or weaving brand narratives that consumers want to be part of and believe is worth paying a premium for is key to establishing yourself as a valued brand within the luxury industry.
Robert Wilson is director of strategy and creativity at RPM
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