Mulberry is desperate for a turnaround after its fourth profit warning earlier this year. Half the brand’s stores are in Asia, but sales are heavily skewed towards Europe and the US, and its China business is feeling the neglect. This is a direct result of price hikes following a switch to higher quality leather in an effort to upscale the brand.
The brand has also been suffering from a leadership crisis. Emma Hill, Mulberry’s creative director since 2008, quit last year following a creative and operational conflict. In March, CEO Bruno Guillon, the man behind the price increase, resigned and was replaced by his predecessor, Godfrey Davis.
Hoping to revitalise its image, Mulberry teamed up with model Cara Delevigne, scrapped planned price increases and introduced a “mid-priced” range retailing at US$800 to $1,200.
DIAGNOSIS 1 Qing Wang
Qing Wang, professor, Warwick Business School
Despite the runaway success of recent years, Mulberry suffers from a number of weaknesses. The company’s sales growth is too concentrated on the UK, Europe and USA. For example, in 2011, sales at its New York and Paris stores grew by 122 per cent and 151 per cent respectively.
Despite almost half of Mulberry’s stores being in Asia only a handful are in China, compared to more than 100 Burberry stores in China.
There can be little doubt Mulberry is currently in a transitional period as it attempts to transform itself from a humble British heritage label to a global luxury brand. However, the huge price increase last year for its high-end products to match its aspired exclusive luxury status appear not to have been thought through. The price hike was based purely on cost considerations and not backed up by strong narratives.
It seems to me that the brand’s management failed to appreciate that even with the right ingredients Mulberry possesses — such as fine materials, craftsmanship and a “made in Britain” label — a true luxury label requires time and process to develop.
The latest knee-jerk reaction to reduce prices due to a profit warning will only add to consumer confusion about the company’s brand image as to whether it’s an affordable luxury like Coach or an exclusive luxury like Burberry.
DIAGNOSIS 2 Amrita Banta
Amrita Banta, managing director, Agility Research & Strategy
Mulberry has taken several hits this past year, with falling profits since the departure of creative director Emma Hill in 2013. The luxury brand invested in improving the quality of leather used in their bags and significantly raised prices to reposition in a more premium space. The strategy backfired. Christmas sales went poorly, particularly in the UK and South Korea, leading to pre-tax profits falling from US$43 million to $23m in the year to March 31.
Consumer demand in China was misjudged by the brand. Mulberry tried increasing their prices even as today’s rising middle class demographic looks towards affordable luxury.
The brand now faces the challenge of repositioning itself yet again, and reconnecting with core customers. Prices of popular bags such as the Alexa and Del Ray are projected to fall by up to US$160 each, as Mulberry now focuses on the US$800 to $1,200 bracket.
Social media engagement proves to be another crucial area. Mulberry is using these channels to drive audience engagement in China, having launched on Weibo in 2013 and later WeChat. An integrated platform that combines messaging, mobile news and a mobile wallet, WeChat allows Mulberry to reach the rising middle class demographic and spread its brand heritage.