{"id":16422,"date":"2016-11-18T00:35:08","date_gmt":"2016-11-18T05:35:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/iot-the-internet-of-trenchcoats\/"},"modified":"2016-11-18T00:36:13","modified_gmt":"2016-11-18T05:36:13","slug":"iot-the-internet-of-trenchcoats","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/iot-the-internet-of-trenchcoats\/","title":{"rendered":"IoT: The Internet of Trenchcoats"},"content":{"rendered":"

Luxury and the Fourth Industrial Revolution<\/u><\/strong><\/p>\n

Burberry\u2019s business model successfully pivoted from the traditional to the digital in an attempt to differentiate itself by connecting to millennials. Connectivity has been \u201cdubbed the Fourth Industrial Revolution\u201d and is \u201ccharacterized by a fusion of technologies that is blurring the lines between the physical, digital and biological spheres\u201d[1]. One could make the mistaken assumption that a brand historically associated with raincoats would be impervious to digitalization. Instead, this post suggests the luxury industry is experiencing rapid change and firms would benefit from following Burberry\u2019s integration of the physical and digital realms. However, while Burberry has taken bold steps to position itself as a technologically savvy brand there is still room for improvement from an operational standpoint. Burberry should continue to invest in new\u00a0technologies as it executes its customer promise: delivering the message, the feeling and the products customers expect of Britain\u2019s leading luxury brand.<\/span><\/p>\n

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Why is Luxury at the Forefront of Change? <\/u><\/strong><\/p>\n

In 2014 online sales accounted for \u201c6% \u2028of the \u20ac224 billion global market for luxury goods, but drove 80\u2028% of growth\u201d and this trend is only expected to increase [2]. However, traditional brand loyalty does not necessarily translate to online presence: \u201cbrand equity that took decades (if not centuries) to build does not transfer proportionately online\u201d[2]. The diagram below shows how the \u201cluxury market remains heavily fragmented in terms of offline sales, where as few as 7 brands generate over half of site visits\u201d[2]. This suggests that brands that invest in improving their digital presence will benefit disproportionally in terms of online engagement and potential sales. Burberry was a leader in anticipating this trend and adapting accordingly. As described by Angela Ahrendts (CEO 2006-2014): \u201cEverything we are going to do is target this millennial consumer, and if we do that we are going to speak in their language, and their language is rapidly becoming digital\u201d\u00a0[3].<\/p>\n

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How is Burberry Using Digital Technology to Develop its Business Model?<\/u><\/strong><\/p>\n

Burberry has embraced technology as a tool to create a deeper emotional connection between the brand and consumers. For example, Burberry\u2019s monthly acoustic initiative streams live concerts from their flagship store to another 150 stores and mobile devices. Burberry picks local artists to reinforce the \u201cBritishness\u201d of the brand and create more authentic connections with consumers through music in today\u2019s Youtube world. However, what really sets Burberry apart is its ability to blur the lines between the digital and physical in what some have described as a \u201cphygital\u201d business strategy [4]. \u00a0For instance, Burberry recently added \u201cmagic mirrors in their fitting rooms\u2026 the mirror reads the tag of the items and shows a film of how the garment was made and what it looked like on the catwalk\u201d (see video below)[4]. \u00a0Burberry is ultimately able to\u00a0express\u00a0the firm’s\u00a0heritage\u00a0with a modern twist, through\u00a0magic mirrors and streamed concerts, among other mediums.<\/p>\n