Burberry has learned the hard way that fashion designers don’t usually make for great businessmen.
It’s almost surprising, considering the number of digital accolades Burberry earned with Christopher Bailey functioning as both CEO and chief creative officer, a role he assumed in 2014. The brand is synonymous with digital “firsts”: it was the first to run a Snapchat fashion show, pay for a sponsored Snapchat Discover channel, join Apple Music, broadcast a fashion show on Apple TV, stream on Japan’s Line and Korea’s Kakao. It was Bailey’s embrace of digital that made Burberry L2’s top digital luxury brand of 2015 and top digital luxury brand in China in 2016. But Burberry, and Bailey, have learned that a digital-first approach to fashion doesn’t necessarily sell clothes.
Sales fell 8 percent in 2015, and the British luxury fashion house is shaking up its top-management strategy. Bailey will no longer pull double duty on the design and business sides of the company. Céline CEO Marco Gobbetti has been appointed as Burberry’s new CEO beginning in 2017, while Bailey will be moved to president as well as chief creative officer.
In an announcement, Burberry said that the decision was Bailey’s, who wanted a partner in executing the brand’s restructuring, a four-year plan to improve sales announced last month. Bailey will still have a hand in the company’s overall strategic and cultural direction, but, despite creating digital buzz, his performance on both sides of the business came under fire as sales slipped, resulting in a 75 percent pay cut in June. His salary of £7.5 million ($9.7 million) a year whittled down to £1.3 million ($1.7 million).
With the appointment of Gobbetti, Burberry’s blended business-creative experiment, which began after previous CEO Angela Ahrendts left for Apple, is over. Fashion companies almost always need two brains to run the show from design and logistics perspectives.
“Fashion is a really tough job in terms of the supply chain, efficiency, store ops — for that reason, very rarely is it the same person in a creative and business position,” said Pano Anthos, managing director of accelerator XRC Labs. “You can make amazing product in the fashion space and it can be unprofitable. You see that division of labor because they’re very different businesses.”
Burberry, in trying to combine both sides under one direction, wasn’t alone. Miuccia Prada has held the title of co-CEO and creative director of Prada and Miu Miu since 2014. In June, Alexander Wang took over the CEO position of his eponymous brand. But taking over the business operations of a fashion company is something most creative directors aren’t designed to do.
“Broadening the role of the creative director can work at times, but then it becomes a problem when you want to replace the creative director to provide a fresh set of ideas to the brand. That creates more rigidity,” said Luca Solca, head of global luxury goods at Exane BNP Paribas. “The model most likely to succeed is when you have a creative director, plus an excellent head of merchandising, plus a strong CEO. Think Gucci today.”
Gucci’s strategy is to incorporate lead designer Alessandro Michele’s creative vision into every touchpoint of the brand: e-commerce, social media, email newsletters and marketing. CEO Marco Bizzarri abruptly hired Michele, who wasn’t in consideration to take over the job from Frida Giannini, in early 2015, and gave him free range to take creative risks in order to push the brand forward. Gucci’s sales are up by 4 percent in the first quarter of 2016, thanks to a healthy balance between a digital strategy and strong designs, according to Tony King, founder of creative agency King and Partners.
“Entering the digital space needs to be a part of each brand’s ethos — online strategies have to complement your work and your collection, but cannot replace it,” said King. “I wonder if consumers are tired of the noise around Burberry — they’re often in the headlines because of their new digital initiatives, but not because of their clothing.”
That speaks to Bailey’s attention being split in too many directions. While he embraced a digital-first approach for Burberry, those initiatives didn’t pay off in the form of revenue. In a recent announcement, Bailey said that part of the brand’s focus would be on figuring out how to monetize its 40 million social followers. Incoming CEO Gobbetti, it’s worth noting, is coming to the company from Céline, a luxury brand known for its resistance to e-commerce and social media.
Putting a creative designer in a lead business role is, at least right now, bad business in the luxury industry.
“As we have fewer new consumers into the market, brands have to innovate faster to convince existing consumers to spend more money on them,” said Solca. “Hence the musical chairs in the creative departments.”