Some luxury brand managers will do anything to maintain the prestige image that is the foundation of their brand's equity. Of course, maintaining a high price point is a major component of any prestige brand strategy, and marketers must also be highly selective in deciding on where to sell their prestige products. But when it comes to luxury brands and the need for exclusivity, it is also important to maintain a modicum of scarcity in terms of how many of its products are available for sale.
The last point is difficult because marketers must make advance revenue forecasts for year based on market analysis, and the manufacturing department/division or contract manufacturer must produce the necessary inventory to meet demand. But luxury brands, like most manufacturers that don't want to run out of what they sell, often end up making too much stuff. And rather than unloading them on the cheap, marketers opt to destroy any excess merchandise. This is often accomplished by incinerating it.
Luxury brand Burberry, in a nod to pressure from environmental NGO's, is differentiating itself from the rest of the pack in disavowing the practice of destroying excess inventory, an incredibly wasteful exercise to be sure. The company believes that modern luxury is a socially and environmentally responsible endeavor, and it is probably correct on that assumption. "Green" has been a big social trend for a long time now.
Indeed Burberry destroyed over $5 million in excess stock last year, and so it begs the question as to how marketers will avoid the items being sold in outlet stores or on the "grey" market. That information, however, is not yet known to the blog-writing public. Stay tuned.
Discussion: Bearing in mind that the company cannot receive a tax credit for taking a loss on the excess goods if they give them to charity, what suggestions do you have for Burberry marketers as to what they should do with the merchandise?
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