Burberry, Burning Stuff, Killing Homeless People And The Luxury Market
(That sort of title usually reserved for emails.)
So I saw today a news article about Burberry.
They’d burned $38m worth of excess stock so that it didn’t end up going to discount stores and other outlets for normal folks.
And seeing as how I’ve written about selling in the luxury market a couple of times recently, I thought I’d dip into this topic again with Burberry as an illustrated example.
Note: You’ll probably have to abandon your ethics for a while. This article is about the luxury market, its concepts and its structure.
The whole thing is a house of cards that falls when you start using different ethical systems.
So let’s just skip that until the end.
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Luxury Items: NOT For Proles
The whole underpinning of luxury goods is that they’re not for everyone.
That’s the fundamental draw of a luxury product.
It’s Us vs. Them.
Nobody will pay ten million dollars for a gated community house when the gate doesn’t exist and it’s next to a block of flats that houses asylum seekers and immigrants.
(See the issues London is having with housing residents from the Grenfell Tower incident – they can’t not house them but London real estate just isn’t set up to give away luxury real estate to anyone with a regular human being’s budget.)
Burberry Has No Choice In This Matter
Despite what Twitter socialist bros think, Burberry can’t afford to do anything other than destroy the clothes that are not selling.
It’s not about the clothes themselves: Burberry can afford to destroy the clothes, so they obviously don’t care about the sunk cost.
It’s about the value of the items still on the shelves in stores.
The value of Burberry items has to stay consistent.
If the market is flooded with cheaper Burberry items, then the value of the items still floating around goes down.
And this is a permanent process when you have luxury pricing. Nobody is going to buy next season’s super handbag at $500 when they bought this one at $300.
And nobody is going to pay premium prices for an exclusive product that isn’t exclusive.
As much as socialist bros would like to say, “Good! Because those rich people are screwing people by charging too much!”
It doesn’t work like that at all.
The rich people will still be rich, but the employees go first. More on that later.
But Burberry’s value is in the fact it’s a luxury company. If it becomes a discount company, then it can’t produce the same products and has to operate under different market conditions. Let’s face it, it will go bankrupt because Burberry isn’t a budget company, and would be outcompeted by all the other budget companies.
And an economy based on discount brands is an economy that is weak.
Now, some people will say, “But Jamie… it’s all perceived value. It’s just a brand name!”
It’s not. Perceived value vs. actual value is a false dichotomy.
It’s Not About Perceived Value… It’s Not That Simple
A lot of Twitter naysayers pointed out that Burberry has a perceived value, and that underpins the luxury market.
This is half true, and like all half-truths, it’s probably less accurate than a full lie.
Here’s the thing with perceived value: It’s not – and never has been – a case that something has two values.
“Here are the costs to produce” and “Here’s what we sell it for.”
That’s how civilians commonly think of actual and perceived value.
But this isn’t really accurate.
Gold has a huge perceived value. It has tangible, actual value because of its perceived value. It’s a currency and asset, even though essentially it’s an element you find lying on the ground or buried in caves.
The perceived and actual values align.
And they’re dependent on the person at the time.
If someone said to me right now, “Hey, Jamie, here are ten bars of gold. Have them for free,” that would be fantastic.
If, on the other hand, I’d been lost in the desert for two days, that gold has negative value to me. It’s heavy and I’d trade it all for a ride out of the desert and a bottle of water.
The distinction isn’t clear.
What Does Your Stupid Analogy Have To Do With Burberry And Burning Products?
Burberry’s existence depends on it not being a no-name, AliExpress dropship brand that sometimes gets on Walmart shelves.
It’s not a case of “give your excess stock to the homeless so they have something to wear.”
If Burberry were to do this, then inevitably they would lose their positioning.
“Good,” says the Twitter commenter, “Because rich people are the same as poor people and we should all wear the same.”
Except if the companies who have excess stock tank their prices and lose their positioning, they will no longer exist.
No more free clothes for the poor, among other things.
But, somewhat more altruistically, pensions are emptied and employees are out of work. Stores close and the company disappears.
When it comes to luxury goods, this tends to mean both skilled and unskilled people lose work and are forced to retrain or otherwise lose their positioning.
That Sounds Like Apologia For Ruthless Capitalist Pigs!
Maybe, but that’s how it works.
The whole economy is a house of cards, and in terms of sustainability, there’s a heavy breeze blowing on that house of cards.
And really, when you start adding all those things up, a luxury handbag company doesn’t matter on the scale of things. It makes no difference.
Hence the outcry is so weak and false: give all the homeless people a luxury handbag, and they’ll still be homeless.
But luxury brands serve a purpose – like sea cucumbers, they help you determine the value of an ecosystem (or in the case of luxury brands – the economy.)
Let’s talk about selling luxury brands though: The whole key is elitism and limited access. That’s why Burberry is destroying their product instead of giving it to poor folk.