Friday, October 16, 2015

Burberry Shares Dive on Weaker Asian Demand

Burberry Shares Dive on Weaker Asian Demand

by Saabira Chaudhuri

           The WSJ article for October 16, 2015 has an article depicting the foreign external environmental influences on the Burberry company with an emphasis on the Asian consumer market. Burberry is a very strong luxury brand in all of their markets however shares fell 8.3% in London Trading on Thursday. The article, in keeping with global marketing and the importance of always looking at the external cultural influences, pinpoints estimates as to why this decrease occurred. The article states that "the company blamed inherent Chinese consumers and its geographic mix for the weak results." The target market location of the Burberry  company, with its main target of mainland China, has been the most hit in these few days. 

                         This is further explained, "Burberry has, in the past, benefited from Chinese shoppers spending in the high-margin markets of mainland China and Hong Kong, but that has changed in recent quarters as stock-market turmoil and macroeconomic weakness there has been compounded by currency volatility that has changed spending behavior. Separately, wealthier Chinese consumers increasingly are traveling to buy luxury goods in Japan, a country that currently makes up just 2% of Burberry’s wholesale and retail revenue. Ms. Fairweather said Burberry is “significantly underpenetrated” in Japan but is moving to increase its presence.A weaker euro has made shopping in Europe cheaper for Chinese tourists, but the relatively strong British pound has discouraged tourist spending in Burberry’s home market of the U.K., where it has a major presence." 

         Burberry therefore must use these observations and react quickly to the changes in location preferences and demand of the consumers. I believe it is very important for them to become creative and react quickly especially in order to keep their investors happy and on board for the future. It is very hard to predict consumer behavior especially on a global scale. The image of stores by region also shows the emphasis on mainland China rather than on Japan which is receiving luxury consumer demand as well as Europe. I think that this article is important as it shows that marketing research is very important and that consumer behavior can change even with the best predictions and marketing research. This is also especially when dealing with a multicultural range of consumers. It will be interesting to see how Burberry will react and deal with this problem and I believe that their actions can become a model for other companies that may have to deal with the same problems in the future.

Katherine Wojtyna

1 comment:

  1. Katherine – your article is very interesting and extremely similar to the WSJ article that I chose analyzing Hermes in the Asian and European market. However, Hermes is benefiting from the exchange rates and the weak Euro unlike many other luxury brands – similar to Burberry. It is amazing how one brand can use the same factors as an advantage while others suffer. Wonder if it has anything to do with the origin of the brand? As Hermes is French and Burberry is British.