Burberry Burns Brands
24 July 2018
Does destroying old stock make business sense?
Burberry’s decision to deliberately destroy old season stock caused alarm among ecologically conscious groups. It may go against government policy on recycling and reuse through the ‘circular’ or ‘sharing’ economy. But does mass destruction of old stock make business sense?
Burberry’s most valuable asset is its brand. Understanding brand value is about getting inside the minds of customers, to understand what it does for them. It is too simplistic to say that brands have become emotions-based rather than utility-based - we need to unpack how emotional aspects of brands work.
Brand owners have long known that brands can add to an individual’s sense of identity. As many traditional sources of identity - place of work, religion and often family – become weaker, brands have filled the gap in providing a sense of belonging. Social norm can be a powerful motivator in choice of brands.
Traditionally, companies ‘did’ branding which was then pitched at customers. However, the idea of ‘shared value’ has been gaining ground. In 2011, a seminal article by Michael Porter and Mark Kramer argued that shared value is at the heart of successful brands, claiming that brands cannot be successful if their values don’t align with positive social impact for people and the planet.
Shared value sounds fine in principle, but overlooks complexity and sophistication in modern societies, with subtle systems of status and hierarchy. Brands can struggle to reconcile shared values with the need for individual differences and identity. This is where Burberry faces a dilemma.
We can all share some core values - being good to the planet, living in harmony and political freedom. But how do you create a brand which is exclusive and allows an individual to identify as different, possibly transgressing these shared values? One response by brand owners is to make buyers feel good about their purchase, typically with claims that a luxury product is actually good for the planet and society. Companies may find cynical segments of customers with less need to acquire identity linked with social sharing. There is, for example, evidence that older people tend to be more self-confident and less concerned with ecological issues.
Burberry has built a brand which buyers aspire to. But in its quest to put its brand on a pedestal, accessible only to a few, Burberry faces a problem in selling old or surplus stock. If it sells through conventional channels such as outlet centres or eBay, it puts its products into the hands of a second tier of consumers, potentially leaving the top tier to question their exclusivity.
Other strategies, such as selling in developing countries, face a practical danger of stock finding its way back to the main target market. In a globalised marketplace, it is not just big companies that move goods around the world; small-scale entrepreneurs who spot bargains in Bangladesh, can find ways of getting them back to higher value markets.
So destroying old season stock may make sense for Burberry. Yes, it has attracted media attention with newspapers screaming stories of ecological harm, profligacy and waste. Maybe this was a calculated gamble by Burberry, guessing that people who shout most are never likely to buy its products. Better still, loyal customers may be reinforced in their view that Burberry products really are exclusive and they will not see their neighbour wearing a cheaper version tomorrow.