Gucci sales are in decline, in a slowing global luxury market (AFP/Archives/STEPHANE DE SAKUTIN)
Gucci has long been the driving force of the luxury group Kering. But sales of the famous Italian brand are now decidedly in decline, in a global luxury market which is slowing down. And Kering has little other solution than to relaunch it by moving upmarket.
“A group that is so dependent on a house is something dangerous,” Eric Briones, author of “Luxe et digital” (ed. Dunod), explains to AFP.
The Italian brand, known in particular for its python bags and belts, represents 50% of the turnover of the group headed by François-Henri Pinault and two-thirds of the operational profitability.
But the first quarter of 2024 looks set to be down, with sales for Gucci expected to “be down almost 20%”, Kering warned in March, and an expected decline “of around 10%” for all the group.
At the major competitor LVMH, “there are two driving forces which are Dior and Vuitton,” adds Mr. Briones. “But clearly the roadmap given for Michael Burke (CEO of the LVMH Fashion Group, the hub bringing together brands like Céline, Givenchy, Loewe, Kenzo, etc.), is to have five leading houses within five years” , he emphasizes.
Another example, Italian competitor Prada’s “obsession” is “to grow Miu Miu”, one of its brands.
Gucci is very dependent on an Asian and “aspirational” clientele, that is to say younger and less fortunate, and fans of “trendy” products. However, the Asian luxury market has not regained its pre-Covid vigor, and aspirational customers are affected by inflation.
In 2019, a few months before the Covid-19 pandemic, Gucci began an “upmarket” strategy, developing “more sophisticated, more upscale segments, with customers who have higher purchasing power” , according to its CEO François-Henri Pinault.
– “What to do with Jackie Kennedy” –
“The so-called elevation strategy, in theory, is the right one,” comments Julie El Ghouzzi, author of “Manuel du Luxe” (Presses Universitaires de France) to AFP.
Fashion is fleeting in time, luxury is more timeless. “Gucci initially has an economic model closer to that of fashion, it is necessary to renew itself more quickly. As a result, the love or disenchantment for the brand itself is cyclical,” she explains.
Elevation “is the ability to have iconic, timeless pieces, to nourish with fashion glitter”, according to the specialist.
Taking this turn for Kering, “it also means questioning a fashion positioning which was extremely strong and beneficial for Gucci”, during the Michele era: in fact, thanks to the original collections of designer Alessandro Michele (left in 2022) , Gucci’s turnover increased from 3.9 billion euros in 2015 to 10.5 billion in 2022.
“There is a huge amount of storytelling work to be done on iconic pieces: we must not starify the artistic director but the products,” analyzes Julie El Ghouzzi.
“They say ‘I bought a Kelly’ (iconic Hermès bag). We don’t know who made it, we buy the icon, the story that accompanies it: it was Grace Kelly who hid her belly with the bag when she was pregnant,” she says.
“There is something to do with Jackie Kennedy!”, an allusion to the Gucci “Jackie” bag popularized by Jacqueline Kennedy, underlines Julie El Ghouzzi.
At the same time, Kering also reviewed the governance of Gucci by appointing one of François-Henri Pinault’s closest collaborators, Jean-François Palus, at the head of the brand and around whom a new team has been forming for several months.
On Thursday, Gucci announced the appointment of a deputy general manager of the company, Stefano Cantino, from competitor Louis Vuitton and who will be responsible for “defining and implementing the brand’s strategy”.
“We did not have sufficient expertise and talent in place at key positions in the company,” François-Henri Pinault explained in February, stressing that luxury requires “very strong” expertise in sales, merchandising or sourcing.
© 2024 AFP
Did you like this article ? Share it with your friends using the buttons below.
