China has long been seen as a star market for future retail growth. However, Burberry’s recent results reflect that over-reliance on this highly prized market can be a risky business.
Having too many stores – a high cost for a luxury brand – is likely to have contributed to the profit warning in September.
Even at the lower-priced end of the market, Fast Retailing, Uniqlo’s parent company, reported that the slowdown in economic conditions saw Chinese operations falling short of target last quarter.
Carving out niches in new markets seems to be the answer, but not all product offerings are adaptable for growth markets.
In Indonesia, Burberry’s iconic trench coat cannot spearhead a campaign when the equatorial weather does not produce a need.
As such, I believe there are limits on Burberry’s growth in highly populous equatorial countries.
In addition, if we consider the US, which is weathering the economic slump well and is a strong market for Burberry, it is still loss-making for Uniqlo, which seems to have a lot of brand building to do there.
Meanwhile, Massimo Dutti has only just opened its first store in New York – perhaps a reflection that planting flags in every market does not guarantee success.
- Isabel Cavill, Senior retail analyst, Planet Retail