I’m sorry madam but it’s not in stock. Just press that button though and…

Luxury fashion house Burberry has just announced a 36% increase in retail sales in the final quarter of last year.

Their shops in Asia Pacific, the Americas and Europe all reported double digit sales growth.

This is pretty impressive given that the economy is still facing turbulent times. So what’s behind the success?

One of the main drivers of this growth is China and in particular the growth in the Chinese luxury market.

Last year, Burberry acquired 50 stores in China from their Chinese franchise partner and seem to have been making the most of having them fully back “within the family”.

One of the key strategic issues facing fashion retailers is “merchandising”. In other words, making sure that the right clothes are in the stores at the right time.

There is always a balance between having money tied up in high inventory levels versus ensuring that shoppers have the item that they want to buy in stock.

Burberry reportedly have had some issues in the past when they were operating with very lean levels of inventory in some of their shops.

This meant that if people went shopping at a Burberry store and saw something they liked but found it wasn’t in stock then the chances were that they wouldn’t come back another day to buy it.

The end result was a lost sale.

The company seems to have better control of their inventory levels now and they have also piloted a new digital store format in Beijing.

If the item isn’t in stock in the shop then the customer can quickly get access to an in-store iPad and purchase the item online for home delivery. A relatively simple but effective way of trying to make sure the customer doesn’t walk out of the shop without making a purchase.