power of suppliers
suppliers will start to make end products are slim because there are high entry
barriers to enter luxury industry. What strengthens suppliers’ power is that
some of products they provide for Burberry are distinct and have no real
substitutes. Burberry being knowledgeable about the products they buy from
their suppliers weakens suppliers’ strength.
Some of the products Burberry purchases from
suppliers are distinct and have no real substitutes and that is something that
strengthens power of suppliers. What weakens suppliers’ strength is that
Burberry is knowledgeable about products they buy from them.
For Burberry it’s easier to switch suppliers of
materials such as leather, cashmere or cotton because they are numerous.
However things change when it comes to more advanced items. Craftsmen posses
certain skills which take a long time to master plus there is also a decreasing
number of craftsmen and they can charge more.
Consequently it’s getting more difficult for Burberry to change them and
craftsmen have more negotiating power. Burberry risks getting lower quality
items by changing any supplier. Bargaining power of suppliers is therefore moderate.
There is a growing
number of low-middle price labels such as Asos, Bohoo and Missguided. There are
customers who are sensible to economic cycle and buy from those brands. Their
expertise is being really good at imitating higher priced luxury items in brief
time period. It takes them one to four weeks to copy luxury products.
items from China which look like genuine products and it’s
challenging to differentiate them from authentic products are an additional. Premium
priced products diverge from mimicked products in the way upscale brands are
perceived. Luxury labels are a synonym of wealth and social status people
continue to buy them although fow-priced fake goods offer similar use. (NUS
Investment Society, Consumer Industry report on U.S. luxury goods) The highest
threat of substitutes is from rivals which offer prodcuts of equal or even
better quality and purchasers have minor costs switching them. Threat of substitutes
Burberry is planning to remove their items from certain shops that
are not luxury and renovate their own shops. Companies like Louis Vuitton has
created their label and distinction on expensive leather handbags and
Burberry’s aim is to compete with brands like that. Burberry thinks that by
selling high-priced handbag they will be able to boost their margins. For
comparable products Louis Vuitton charges higher prices. The company also
making alterations in crucial employees. Their designer Christopher Bailey who
has been with the company for 17 years will be replaced and they are looking
for somoneone with extensive expertise in designing handbags. (CNN)
Their aim is to turn the brand into a luxury brand. They will
expand their handbag offering because handbags create larger margins than
trench coats, which is Buberry’s signature item. Louis Vuitton has bigger array
of leather goods. They will reduce the number of the outlet stores. By training
in-store employees on leather goods and styling they want to improve buyer’s
experience and boost their efficieny. Making the most out of digital media
remains one of the goals. The british designer was one of the first who entered
a »see now, buy now« model which allowes custmoers to purchase immediately
after a fashion shows. That was a bold move and a very different way of
shopping and fewer chances for forgery. All this will result in profitability.
They expect revenue and operating margins will be stable over the next two
years and in 2021 they predict growth. (businessoffashion).
Louis Vuitton knows how to differentiate itself. Louis Vuitton
handbags are compared to Burberry’s higher in price. Another thing that differs
Burberry from Louis Vuitton is that Louis Vuitton never has a sale, they never
mark down prices because they believe all customers should pay the same price