Bargainingpower of suppliersThere is nota high potential that suppliers will start to design their own distributionchannels or in some other way circumvent the customer because there are highentry barriers to enter luxury industry. Some of the products Burberry buys fromsuppliers are distinct and have no real substitutes and that is something thatstrengthens power of suppliers. What weakens suppliers’ strength is thatBurberry is knowledgeable about products they buy from them.
For Burberry it’s easier to switch suppliers materialssuch as leather, cashmere or cotton. There is a large number of them so it’snot difficult for Burberry to change from one supplier to another. However itis different when it comes to more advanced items.
Craftsmen posses certainskills which take a long time to master plus there is also a decreasing numberof them and they can charge more. Consequently it’s getting more difficult for Burberry to change them andplacing more power in to the hands of craftsmen. Burberry risk of getting lowerquality items by changing any supplier. Bargaining power of suppliers ismoderate.Threat ofsubstitute productsThere is a growingnumber of low-middle price labels such as Asos, Bohoo and Missguided. There arecustomers who are sensible to economic cycle and buy from those brands. Theirexpertise is being really good at imitating higher priced luxury items in brieftime period.
It takes them one to four weeks to copy luxury products.https://fashionunited.uk/news/fashion/boohoo-asos-missguided-pave-the-way-for-ultrafast-fashion/2017052424625Counterfeititems from China which look like genuine products and it’schallenging to differentiate them from authentic products are an additional. Premiumpriced products diverge from mimicked products in the way upscale brands areperceived. Luxury labels are a synonym of wealth and social status peoplecontinue to buy them although fow-priced fake goods offer similar use.
(NUSInvestment Society, Consumer Industry report on U.S. luxury goods) The highestthreat of substitutes is from rivals which offer prodcuts of equal or evenbetter quality and purchasers have minor costs switching them. Burberry is planning to remove their items from certain shops thatare not luxury and renovate their own shops. Companies like Louis Vuitton hascreated their label and distinction on expensive leather handbags andBurberry’s aim is to compete with brands like that.
Burberry thinks that byselling high-priced handbag they will be able to boost their margins. Forcomparable products Louis Vuitton charges higher prices. The company alsomaking alterations in crucial employees. Their designer Christopher Bailey whohas been with the company for 17 years will be replaced and they are lookingfor somoneone with extensive expertise in designing handbags. (CNN)Their aim is to turn the brand into a luxury brand. They willexpand their handbag offering because handbags create larger margins thantrench coats, which is Buberry’s signature item.
Louis Vuitton has bigger arrayof leather goods. They will reduce the number of the outlet stores. By trainingin-store employees on leather goods and styling they want to improve buyer’sexperience and boost their efficieny. Making the most out of digital mediaremains one of the goals. The british designer was one of the first who entereda »see now, buy now« model which allowes custmoers to purchase immediatelyafter a fashion shows.
That was a bold move and a very different way ofshopping and fewer chances for forgery. All this will result in profitability.They expect revenue and operating margins will be stable over the next twoyears and in 2021 they predict growth.
(businessoffashion).Louis Vuitton knows how to differentiate itself. Louis Vuittonhandbags are compared to Burberry’s higher in price.
Another thing that differsBurberry from Louis Vuitton is that Louis Vuitton never has a sale, they nevermark down prices because they believe all customers should pay the same pricefor products.