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Burberry Plots Social Retail Concept in China With Tech Guru Tencent

Burberry Group plc wants to get more social with luxury consumers in China.

The London-based luxury fashion brand has entered into an exclusive partnership with technology firm Tencent to create a social retail store concept that combines social media and retail for a digital and physical experience in which engaged communities can interact, share and shop.

The first retail store laboratory, powered by Tencent technology, will open in the first half of 2020 in Tencent’s hometown of Shenzhen, China—the country’s technology hub dubbed the “Silicon Valley of Hardware”—in the new MixC Shenzhen Bay development According to Burberry, the test-and-learn space will offer “unique experiences that connect luxury customers’ social and online lives to their physical environments.”

The laboratory will test innovation ideas that “can be expanded to the rest of the Burberry network in China,” Burberry noted.

A report from RICS Software in June 2018 noted that 74 percent of consumers use social media to guide purchase decisions and that social platforms can help drive in-store traffic. Moreover, 60 percent of consumers engage with a brand via social media before making a purchase, and those that do so will spend 20 percent to 40 percent more in the long run.

Marco Gobbetti, Burberry’s CEO, called the project with Tencent “an example of the step-change in our ambitions for the next phase of our transformation.” Social media, he said, “is becoming such an important part of the luxury customer journey, particularly in the inspiration phase, and retail needs to keep pace with this.

“Continuing with our history of innovation, we wanted to explore the connection between these touchpoints by merging social media and the store experience to reflect the way luxury customers are engaging with brands,” Gobbetti added. “China was the obvious place to start as it is one of the leading hubs for innovation and technology and Chinese consumers are some of the highest users of social media.”

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Davis Lin, president of Tencent, said, “The future of retail lies in digitalization. Through more efficient online-to-offline connections, more personalized engagement and shopping experiences, along with exceptional, differentiated content and value-added services, we will enhance the customer experience and deepen brand loyalty.”

Disclosure of the partnership with Tencent came as Burberry also posted first-half results for fiscal year 2020.

For the half ended Sept. 28, the fashion house said operating profit was 202 million pounds ($260.1 million), a 16.8 percent increase from 173 million pounds ($222.8 million) in the year-ago quarter. On an adjusted basis, operating profit rose 14 percent to 203 million pounds ($261.4 million) from 178 million pounds ($229.2 million).

Revenue rose 5 percent to 1.28 billion pounds ($1.65 billion) from 1.22 billion pounds ($1.57 billion). Retail comparable store sales rose 4 percent in the quarter, with new collections growing strong double digits, offset by a softer performance of replenishment product lines, the company said. The current period’s results reflected the firm’s use of a new accounting standard.

“New product now represents a high proportion of our assortment and the customer response has been positive delivering strong double digit growth,” Gobbetti said of results. “We also continued to strengthen momentum around our brand and transform our distribution.”

Burberry delivered results in line with guidance, despite the decline in Hong Kong, he added. Luxury sales in Hong Kong have been impacted by the pro-democracy riots in the area.

Fiscal 2020 is the second year of the company’s multi-year plan to transform the Burberry brand, focusing on re-energizing the label and aligning distribution to its new positioning in luxury fashion as well as establishing a new product offering. According to Burberry, new product represents about 70 percent of its assortment in mainline stores, including a more comprehensive range of leather goods.