The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — Burberry is stopping its longstanding practice of destroying unsold product after a firestorm of negative press and social media posts in July. That month, it emerged that the British brand had destroyed £28.6 million ($36.8 million) worth of product — including clothing, accessories and perfume — in fiscal 2017/2018. The company has destroyed £105 million ($135 million) of unsold product in the last five years, a practice it has previously disclosed in its annual reports.
Alongside the shift, Burberry is also banning the use of animal fur — including rabbit, fox, mink and Asiatic raccoon, as well as angora — in its runway collections, beginning with new chief creative officer Riccardo Tisci's highly anticipated debut collection set to be unveiled on September 17 at London Fashion Week. Existing fur products will be phased out over time, however the brand will continue to sell products made with shearling.
“Modern luxury means being socially and environmentally responsible. This belief is core to us at Burberry and key to our long-term success,” said chief executive Marco Gobbetti in a statement.
But clearly, the negative publicity was a wake-up call for the British luxury behemoth. “We are in the midst of an environmental crisis exacerbated by the fashion industry,” read an open letter to Burberry from second-hand retailer ThredUp, which captured the sentiment of the backlash. “Fashion is now responsible for 10 percent of global carbon emissions and is projected to drain a quarter of the world’s carbon budget by 2050. We respect the desire to protect your brand image but discounting your product shouldn’t be scarier than setting it on fire.”
Burberry is not the only fashion or luxury brand to have destroyed product. Last November, H&M was reported to have burned unsold products. According to the New York Times, Nike slashes its unsold sneakers. And, Richemont has reportedly destroyed more than £400 million worth of watches from high-end brands including Cartier and Jaeger-LeCoultre.
Indeed, it is one of the industry’s dirty secrets that brands regularly destroy product to protect their intellectual property from counterfeiters and to limit the diminished brand perception that comes with disposing of excess stock through heavy discounting.
Burberry says its new policy on the disposal of unsold product dovetails with the wider business and merchandising strategy that Gobbetti has been putting in place since he officially took the reins as CEO from Christopher Bailey in July 2017. The company has previously revealed that it is moving toward a new delivery model of tighter, more frequent collections — or "drops" in the parlance of streetwear — that will take a more targeted approach to product development and distribution and create less waste in the process. This new merchandising strategy is expected to be the cornerstone of Tisci's new creative vision for Burberry.
Until now, Burberry has not spoken publicly about what it calls its "responsibility agenda." Gobbetti sat down with BoF’s Imran Amed to explain his thinking.
Imran Amed: This is an important announcement. Burberry has employed this practice of product destruction for many years — and we know that it is a widely used practice throughout the industry. What is the rationale for making this change now?
Marco Gobbetti: Last year we launched a new responsibility agenda, which is quite a broad agenda. Already part of our agenda was how we are dealing with waste and end-of-life products. So, within what is labelled as ‘destruction,' there is already a significant part that is recycled or used or donated. That was the first step.
The second element is that we are also changing the way we operate and our targets in terms of operational efficiency. The main point is how we look at our model, from design [all the way] to stores. We started with our design and a merchandising approach that is completely changing from the past. Having more frequent and tighter collections that can be really targeted — whether they're targeted from a calendar point of view for some form of event, geography or function — that allows you to be much more precise in the way you design, you buy and you sell.
And the other element is the fact that we also have a big project, which is advancing and progressing well, [focused] on having a clear global view of our inventory and being able to manage it more efficiently.
So, with all of this, we are now in a position to [stop] destroying finished products, which we think, frankly, is just not modern. We think that modern luxury that doesn't take into account the social and environmental responsibility really has no meaning. It's an important belief that we have in the company. And it's not just Riccardo and myself. I think this is embedded in the culture of the company and the people here. We don't think it's relevant going forward. You have to start from design and think what impact it has on the world.
IA: There was a huge backlash in July when it emerged that £28.6 million of products were destroyed last year. Surely this must have played some part in the decision to make the announcement now? One of the reasons brands like Burberry have destroyed unsold product is to protect the brand. But now, destroying product can also be damaging to the brand.
MG: Absolutely. Now, to your first point, it certainly has accelerated something that was already in progress. Clearly, we're responding very quickly to the second part of your question, where you said it's not like what it used to be in the old days, where [brands] want to destroy everything because customers wouldn't be happy — no, now customers are not happy if you don't care about the environment they live in.
So, I think you have to approach this in the same way you approach our business. Our business is about creativity. You can be creative in a way that you structure and you change your business model. We know it's doable because we have already been working on it and are well on our way.
By the way, you know that that number was inflated by that beauty transaction [signing a licensing deal with Coty] last year. We had a lot of beauty inventory. That was a one-time thing. Otherwise, we [would be] far from that number. It was a very specific situation. But at the same time, we are transparent about it. We write it. It’s been in our annual report and we've been writing that for a very long time.
IA: Which made me wonder: this practice has been disclosed in Burberry's annual report for years. Why do you think this year it became such a flashpoint now?
MG: I think it's because it's the world we live in today. This is what people care about today. We care about this — and our people here care about this. We do it first and foremost for us, for who we are, for who our customers will be. There's an obvious link with who you are [as a brand] and the customers that you attract. As you said, it has been in our numbers and in our reports for a long time, but people care a lot more about that today. Even if you capture the energy [created] in the process of destroying or incinerating the product, it still doesn't feel right. It's not right.
IA: Now that you've decided to stop this practice going forward, what measures will you have to take to protect brand and IP? Because there are still risks. Where will this product go and how will you ensure you are still protecting the Burberry brand and its products?
MG: As I said, I think there are a number of processes and progress that we have made so far that gave us the confidence to go all the way. We were already working on finding important alternatives to [product] destruction, and a big part of that we had already solved. Beauty is a bit of an exception, because as you know, beauty products expire and when they expire, there's no legal way to recycle them. You are obliged to destroy them because they are hazardous. This is a specific thing, and last year it was also exacerbated by that fact. But frankly speaking, we also have a business model that is based on full-price stores, and we also have some outlets and so we have also in our business model the capacity of exiting a lot the necessary amount of end-of-season products that we generate. We know that it won’t be an issue for us — it’s not going to change anything for us in terms of distribution or IP.
IA: You can have solutions that dispose of the waste and the excess product at the end of the cycle, but as you say there are things further up the value chain that can also help us to ensure we are creating products that the customer actually wants. There is all this technology available now — AI, machine learning — that helps us to predict what people want. Will you be employing this kind of technology to limit the amount of wasteful product that comes at the end?
MG: Definitely. That technology is used more today if you work in digital marketing than it is in predictive merchandising, if we can call it that. But we're certainly very, very, very interested in that and we’re studying ways to do that. Do we have anything right now that is working? No. But I think it is definitely the next area where we want to apply that. I think there is a lot of possibility in there, a lot of potential in there, together with having collections that are more targeted and focused.
IA: So tell me why that model works better when it comes to waste.
MG: [It works] simply because the collection is more targeted and more relevant, they have a point of view, they have a meaning to exist. They don't just fill a merchandising brief that is about the tops and the bottoms and coats. And then you have this volume of product that has to cover a season that is designed at one point in time. You know better than me that the velocity of the consumer is changing, so by the time they finish designing it and by the time it's delivered to the stores, things have evolved.
You have calendar occasions that are important, you have weather and geographical occasions that are different from one another. For us, for example, outerwear is a pillar of our company, but clearly there are markets where outerwear is more important and other markets where casual products are more important.
And then you also have collaborations — ideas that run around the function of a product or a type of product. You target a certain client. You have a collection that is more casual or a collection that is more elegant for occasions. By breaking that down, if you can create the system to work on that then obviously it gives you your focus and your target.
IA: How hard is it to switch from the current model to this new model?
MG: It's a switch. We shouldn't underplay it or overplay it. I believe that it's just a way that we need to organise ourselves. I think we are doing it already, but it's a transition and it's takes an adjustment for everybody from design to communication and people in the store with our clients. So, it’s not irrelevant but I think it’s going to give us great leap forward, and it helps very much in managing inventory.
IA: Your other announcement is that you're removing real fur from Burberry's collections. There are other brands that have already made that decision. What was the motivation here. Did that come from Riccardo?
MG: As you know, already, there hasn’t been fur on the runway already for [two seaons] at Burberry. It was not really part of the creative vision and what we stand for. And then I think that frankly I don't think it is compatible with modern luxury and with the environment in which we live, and Riccardo has a very strong view as well on this. It's part of what Burberry is today. We're announcing it and we're making a firm commitment on it. There's a little bit to phase out as there is still some in the stores and we will phase it out, but it was already not a part of our creative thinking. It clarifies our position.
IA: When you make a decision like this, as the CEO of the business, you obviously have some cost-benefit analysis to do in terms of the impact of these kinds of decisions. It sounds like fur was a small part of the business so the impact will be small. But when it comes to product destruction, how do you think about the numbers around making a decision like that?
MG: Well clearly we do think about that because we are a public company and we have an obligation to all of our stakeholders including our shareholders. In the end, I think it is a bigger decision than just numbers and I think that the value of this decision goes beyond the investment that we're making. At the same time, as we already initiated this trajectory, we think that the impact will not be material for our accounts. We’ll be more specific when we will announce our results for the six months at the end of the year, but we are in position where it won't be material for us.
But of course there are implications, some that are monetary and some that are about the way we work. It's a change in the way we work and it's one of the objectives of the company as of today, immediately. We will focus our attention and resources on that.
IA: This responsibility agenda is something Burberry hasn't spoken much about before. Why do you think the fashion industry has been so quiet about these topics? Why do companies — even if they have programmes like this in place — not talk about it?
MG: Honestly, I do think that it was not done before for good reasons — not necessarily that it was a good decision — but it was for good reasons. We don't want ever to use those to promote the commercial aspect of the brand.
IA: You don't want to be seen as ‘greenwashing.’
MG: This is why there is a wall and there is the Burberry Foundation to which the commercial company donates 1 percent of profit before taxes. The foundation is investing those funds in the communities according to its own agenda, which is separate from commercial. So, I think it was done for the good reason that we didn't want to use it as a promotional tool or greenwashing as you say. I think that people care very much about this — much more than they cared about it before. I think that we need to stimulate the conversation there and we have to bring people along on the journey, and that's not just people in the industry but everyone.
I think the programmes that we are doing with the foundation have a difference. We have an objective of positively impacting one million people. We want to do it — and we are doing it in the areas that we have relevance and in areas where where we can be of help. The times have changed and it was probably the right decision not to talk about it awhile back, but now is the right time to be doing the things we’re doing and also to talk about it.
IA: You mentioned the employees before. Thinking about your teams here in the Burberry offices, I wonder what role your employees play in the shift in the stage? I can imagine if I were a Burberry employee and I saw that news break that I might be really upset about it.
MG: Sure, we are upset. They were upset. We are doing a lot and for the right reasons, but we got picked up on something we were doing that was not right and we needed to correct it, but it has overshadowed all the good that we all as employees are doing here. This is also why I think at this point in time we do have to make it happen and talk about it in the right way, with the right objectives and the right reasons, while keeping the two organisations and agendas really separate and completely independent. It is about the people, who we are and what we believe.
IA: Burberry will be one of the first companies to publicly announce that they are no longer employing this practice of destroying product. Do you hope that others will follow this example?
MG: Yes I hope they will follow this example. I think it's doable and it's compatible. Actually, I think not doing it is incompatible with modern luxury. We have to care. I'm sure that in all different forms [there will be others]. I don't believe in a rulebook and that you have to do things because others are doing it. You have to do it when the time is right and when it makes sense. But as I said before, when we were talking about the investment and cost, I think it is an overarching value in being authentic and transparent with consumers, and caring about what they are about.
IA: In other parts of the industry, the practice is widely used and yet it's not disclosed. You were called out because of your transparency. But hopefully..
MG: …Hopefully something very good will come out of it. And we will continue to be transparent about it, so it will show that we're doing what we're saying. Again, this is not a manifesto. I don't think we're in a position to tell other people what they should do and I don't ever want to do that. We care, we think it's important and I'm pretty sure that there will be other people out there in our industry who think the same way.
This interview has been edited and condensed for clarity