Restructuring after Burberry — Iwata’s turn away from department stores (2017)

The author’s view

The prescription in Iwata’s medium-term plan — e-commerce, directly operated stores, own brands — was not itself misdirected. The problem is better read as one of timing. In the five-odd years between Burberry signalling a review in 2009 and the licence expiring, the company prioritised preserving its star division and failed to shift resources into brands of its own; that unpaid bill came due at the same moment the main brand disappeared. The reformer took the wheel only after the wound was deep.

For a wholesale apparel firm the department store was both a shortcut to affluent customers and a constraint — the cost of holding floor space, and a trade custom that measures everything by counter sales. That Sanyo Shokai went through two rounds of voluntary redundancy and withdrew from sales floors without reaching profit suggests that rebuilding a distribution model is not completed by cutting headcount and stores. How that unfinished problem was handed to the next administration has to be read alongside the rebuild under Shinji Oe.