Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Burberry blasted for double standards
This is the eighth in a series highlighting operations of foreign luxury brands in Korea. ― ED.
By Park Jae-hyuk
Burberry Korea Representative Director Kim Min-hee
By Park Jae-hyuk
Burberry, which has become a byword for trenchcoat, has made public its Korean unit’s business records so far, unlike other luxury brands such as Chanel, Louis Vuitton and Gucci, which have avoided disclosing their sales volume and donations in Korea.
The transparent business practice of the British luxury brand, however, has been overshadowed by its stingy social contributions in Korea in consideration of the amount of money it earned here.
According to Burberry Korea’s financial statement, Wednesday, the company donated 17 million won ($15,000) in 2015, 7.4 million won in 2014 and 4.2 million won in 2013. Last year’s figures are not yet available.
The absolute sum of donations may seem better than those of other luxury brands such as Bulgari Korea and Swatch Group Korea, both of which do not even have donation categories on their financial statements.
But the ratios of donations to profits before taxes were a mere 0.06 percent in 2015, 0.02 percent in 2014 and 0.02 percent in 2013 ― a far cry from what the global head office posted on its official website.
“Since 2010, Burberry has been donating 1 percent of group-adjusted profit before taxes to charitable causes,” it said. “We are committed to supporting the communities where Burberry employees live and work by giving financial support, employee time and in-kind donations.”
Burberry Korea, which is led by Representative Director Kim Min-hee, explained that its U.K. head office directly donated about 200 million won to Korean society in 2015 and in 2016 through Burberry’s global foundation. Yet, the total ratio of donations to profits was below 1 percent.
“Compared to domestic firms, foreign enterprises tend not to be sensitive to public opinion,” said Park Ju-gun, head of domestic consultant CEO Score. “Foreign firms donate big only if they face bad news. Hence, their donations are unsteady more often than not.”
On top of poor donations, Burberry has also been criticized in Korea for its discriminatory pricing policy.
Last September, the luxury brand cut its product prices in Hong Kong by 10 to 15 percent and the range was 20 percent for some products as the pound fell after Britain’s decision to exit the European Union last June. At that time, the pound against the Hong Kong dollar fell 9.75 percent.
However, the fashion house acted in belated and unsatisfactory fashion in Korea as it marked down product prices by 9 percent on average this year, even though the pound’s exchange rate against the Korean won dropped nearly 17 percent after Brexit.
“Pricing is actively managed as appropriate for Burberry’s customers, business and brand,” the company said in response to the criticism. “Burberry has made some adjustments to prices on selected products in Asia as part of this business-as-usual approach, not in response to trading patterns.”
Such measures would help Burberry Korea enhance its bottom line, most of which has headed toward its head office. It sent back more than 70 percent of the local office’s net profit in dividends to its U.K. headquarters in 2015, which was criticized by Rep. Hong Il-pyo, currently of the Bareun Party, during a National Assembly audit last year.
Founded in 1856 by Thomas Burberry in England, Burberry has focused on ready-to-wear outerwear, fashion accessories, fragrances, sunglasses and cosmetics.