Bargaining products in the way upscale brands are perceived.

Bargaining
power of suppliers

Most of Burberry’s supplier are located in
Europe and their end products are produced in the UK and also elsewhere by
outside suppliers. There is a small risk of forward integration because  there big  entry barriers to enter luxury business. What
strengthens suppliers’ power is that some of the products are distinct and have
no real substitutes. And what weakens suppliers’ strength is that Burberry is
knowledgeable about products they buy from suppliers.

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For Burberry it’s easier to switch suppliers materials
such as leather, cashmere or cotton. There is a large number of them so it’s
not difficult for Burberry to change from one supplier to another. However it
is different 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 them and they can charge more. 
Consequently it’s getting more difficult for Burberry to change them and
placing more power in to the hands of craftsmen. Burberry risk of getting lower
quality items by changing any supplier. Bargaining power of suppliers is
moderate.

Threat of
substitute products

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 replicate luxury products.

https://fashionunited.uk/news/fashion/boohoo-asos-missguided-pave-the-way-for-ultrafast-fashion/2017052424625

Counterfeit
items from China which look indistinguishable to 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. Consumers do not buy upscale items purely for
their usefulness, since cheaper fake products offer comparable use, but because
luxury brands are a synonym of wealth and social status. (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.

 

 

 

 

 

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
for products.