In a recent article discussing the release of Burberry's challenging financial results, Bloomberg reported some striking news. In addition to strategic changes taking place within the world of Burberry to combat stagnant revenue growth, Chief Executive Officer, Christopher Baily, unveiled plans to build a new manufacturing and weaving facility in Leeds, England to produce the label’s signature trench coats. Burberry follows other European luxury retailers, including LVMH and Prada who are investing in dedicated manufacturing capacity in the face of soft trading conditions. Rather than the typical cost cutting, defensive posturing assumed by luxury retailers during periods of stagnant revenue growth, Burberry, Prada and LVMH should be commended for employing offensive strategies including increased investment in company owned production facilities. These announcements demonstrate that in the ever crowded field of global luxury goods retailers, leading brands are finding innovative ways to raise the stakes. The ability to own and operate a proprietary supply chain is becoming a distinction to which only a few luxury goods companies can lay claim. It is becoming the hallmark of authentic luxury.
The issue is not whether owning ones means of production trumps outsourcing. Outsourcing is a very effective and efficient tactic to quickly gain scale within a new product category. It is more related to the significance that production brings to a luxury brand's value offering. Today's consumers want to know where, how and by whom products are made, and they can see through retailers' supply chains with a few clicks. Forward thinking domestic apparel retailers, including J.Crew, Bonobos and Hickey Freeman understand this reality and, therefore, make supplier transparency part of the value offering. Fashion houses do not need to own all elements of their production, but luxury goods brands should realize that design, quality and provenance are all part of their unique DNA.
/ Jacob Harrison Long, CEO American Woolen Company /