FACTORS CONTRIBUTING TO BURBERRY’S FAILURE 1
FACTORS CONTRIBUTING TO BURBERRY’S FAILURE
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FACTORS CONTRIBUTING TO BURBERRY’S FAILURE 2
FACTORS CONTRIBUTING TO BURBERRY’S FAILURE
Introduction
Many retailers rely on physical contact with consumers to market and sell their
products. In 2020, many retailers registered a drop in sales mainly due to the COVID-19
pandemic (Morais, 2020, p 2). The study focused on understanding how sustainable
fashion and limitations on customer-centricity affects Burberry during and after the
COVID-19 crisis. All retail companies were affected by the COVID-19 pandemic, but
Burberry was hit hard, indicating serious internal problems.
Background
Barberry has been experiencing a significant drop in its revenue and profits since
November 2016 (Olteanu, 2020, p 779). The decline became worse since COVID-19
regulations were implemented in different countries. The retailer attributed its decline in
numbers to the pandemic. However, attributing failure to external factors is usually a
cover for internal execution issues and brand equity. The Covid-19 crisis has had
significant impacts on retail companies that rely on customers’ physical contact (Silvano,
2020, p 3). However, those that have become customer-centric are not hit hard by the
crisis. Similarly, some sustainable fashion brands face declining brand equity due to
changes in the needs of younger audiences.
The impact of COVID-19 on the retail sector depends on the combined effect of
three factors. First, the effect of social distancing measures on retail businesses
depends on whether they are essential or not. Non-essential retail activities have either
been shut down or are reporting a significant decline in sales. Most essential retail
activities are still in operation but under challenging conditions, including disruption of
supply chains and working conditions, shortage of labour supply, and a spike in demand
during some seasons (Hermann, 2020, p 31). The clothing industry (especially luxury) is
non-essential. As a result, clothing retailers are facing a significant decline in the
demand for their products. For instance, the sales of clothing retailers dropped by 89.3
percent in April 2020 year on year in the US (Morais, 2020, p 35). Essential retail
activities include grocery, which is experiencing an increase in demand. For instance,
the sales of grocery stores increased by 13.2 percent in April 2020 year on year in the
US. According to Morais (2020, p 24), EU, Eurostat data shows that sales of non-food
FACTORS CONTRIBUTING TO BURBERRY’S FAILURE 3
products dropped by 23.8% while the sale for beverages, food, and tobacco increased
by 1.2% in April 2020 year on year.
Second, lockdowns and other COVID-19 regulations affect physical stores more
than online retailers, accelerating E-commerce. According to Nielsen, in France, the e-
commerce market share increased to 10% of total consumer goods sales during the
pandemic compared to 5% in 2019 (Morais, 2020, p 14). Similarly, the Office of National
Statistics reported that the proportion of retail expenses spent online in the UK
increased to 30.7% in April 2020 from 19.1% a year before (Morais, 2020, p 14). Lastly,
the retail sector consists of businesses that coexist with strikingly different abilities to
mitigate the crisis. It is linked to access to outside finance and difference in liquidity
positions. Some recommendations made by previous studies on the impact of COVID-
19 on the retail sector include government enhancing liquidity, helping essential retailers
deal with the labour shortage, helping retailers adhere to crisis measures, and ensuring
competition remains sufficient.
Customer centricity is essential in any business. It involves having the consumer
focus on every decision in a business (Borsboom, Case and Lawson, 2018, p 13). It
transcends across consumer journey from consumer acquisition to transaction and
aftercare. Customer-centric businesses have the potential for self-disruption, invest in
technology, put the customer first, and answer customers’ needs for immediacy with a
speed-to-market approach (Netek and Carbone, 2020, p 50). Examples of customer-
centric businesses include Nordstorm Cares, Glossier, and Burberry. Nordstrom has
been keeping its customers happy by ensuring that they leave better than they found. It
has friendly return policies, an app that enables customers to access products based on
images, and personalized thank you cards (Huggard and Cope, 2020, p 31). It invests in
data and analytics for smarter marketing. Glossier, with only two physical stores
globally, has managed to be customer-centric through digitalization. It engages
exclusively with customers, especially millennials allowing them to build at scale.
Burberry is also customer-centric and was the first retailer to allow customers to buy
online and pick up in-store (Netek and Carbone, 2020, p 51). Burberry’s trench coat has
been traditionally marketed to the upper class, even though the target base is
FACTORS CONTRIBUTING TO BURBERRY’S FAILURE 4
millennials. The transformational shift that began in 2016 is still in the trenches.
Recovery is slower than expected and is attributed to COVID-19.
Sustainable fashion involves contributing to the well-being of the planet. The
clothing industry involves producing environmentally friendly fashions using organic
materials, minimizing pollution, and using renewable energy. Examples of sustainable
brands include Burberry and Cano Water, among others. Burberry’s sustainability rating
is good for the planet and people categories but is poor in the animals’ category
(Borsboom, Case and Lawson, 2018, p 2). It is rated four out of five on the planet, and
people since the leather working group audits its tanneries. It is a better cotton initiative.
It monitors healthy and safety issues and traces most of its supply chain. However, the
animal rating is two out of five since it uses exotic animal skin, leather, and exotic
animal hair. Cano Water Start-up was started in response to the environmental impacts
of plastics. It offers plastic alternatives that are environmentally friendly and have fewer
hazards involved in drinking water from an aluminium can than from a plastic bottle.
Aims and Scope
