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Marketing Strategy of Gucci

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Anjali Khurana
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Marketing Strategy of Gucci - December 7th, 2010

The House of Gucci, better known simply as Gucci (Italian pronunciation: [ˈɡuttʃi]), is an Italian fashion and leather goods label, part of the Gucci Group, which is owned by French company Pinault-Printemps-Redoute (PPR)[citation needed]. Gucci was founded by Guccio Gucci in Florence in 1921.[1]

Gucci generated circa €2.2 billion worldwide of revenue in 2008 according to BusinessWeek magazine and climbed to 41st position in the magazine's annual 2009 "Top Global 100 Brands" chart created by Interbrand.[2] Gucci is also the biggest-selling Italian brand.[2] Gucci operates about 278 directly operated stores worldwide (as of September 2009) and it wholesales its products through franchisees and upscale department stores.[3]

Gucci was founded in 1921 by Guccio Gucci. In 1938, Gucci expanded and a boutique was opened in Rome. Guccio was responsible for designing many of the company's products. In 1947, Gucci introduced the Bamboo handle handbag, which is still a company mainstay. During the 1950s, Gucci also developed the trademark striped webbing, which was derived from the saddle girth, and the suede moccasin with a metal horsebit.

His wife Aida Calvelli had a large family, though only the sons—Vasco, Aldo, Ugo, and Rodolfo—would play a role in leading the company. After Guccio's death in 1953, Aldo helped lead the company to a position of International prominence, opening the company’s first boutique in New York. Rodolfo initially tried to start an acting career as a matinee idol but soon returned to help direct the company. Even in Gucci’s fledgling years, the family was notorious for its ferocious infighting[citation needed]. Disputes regarding inheritances, stock holdings, and day-to-day operations of the stores often divided the family and led to alliances. Gucci expanded overseas, board meetings about the company’s future often ended with tempers flaring and luggage and purses flying[citation needed]. Gucci targeted the Far East for further expansion in the late 1960s, opening stores in Hong Kong and Tokyo. At that time, the company also developed its famous GG logo (Guccio Gucci's initials), the Flora silk scarf (worn prominently by Hollywood actress Grace Kelly[citation needed]), and the Jackie O shoulder bag, made famous by Jackie Kennedy[citation needed], the wife of U.S. President John F. Kennedy.

With the assistance of Tom Ford and Domenico de Sole, GUCCI became one of the great successes of the sector. In 1921, Guccio Gucci founded a company in Florence, for the manufacture of luggage and saddles of high-quality. In 1938, he opened a shop in Rome, then in New York in 1951 and following that in Paris, Palm Beach, Tokyo and Hong Kong. In 1987, the brand had to face disputes between the GUCCI heirs and a buyback by Investcorp which resold it in 1997. In 1990, Tom Ford became the creative director for the women's ready-to-wear clothes section, then in 1994, he became the artistic director. In 1999, Gucci formed a strategic alliance with PPR and became a multi-brand group. The Gucci Group consists of GUCCI, YSL, Alexander Mc Queen, Stella Mc Cartney and Balenciaga. Luxury fashion houses have shown a significant growth since the Eighties. However, in order to maintain a share of the dream associated with the purchase of a luxury item, the latter cannot be mass produced. Moreover, the house must respect the integrity of its quality, its distribution network, and innovation in its products. It must therefore combine growth and development to maintain the luxury character of the brand.

International Marketing Global Luxury Goods Prepared by: Tamás Halasy July 7, 2003 MBA 1 2002/2003 Word count: 2,389 Table of contents TABLE OF CONTENTS2 GUCCI'S MARKETING FORMULA3 MARKETING COMMUNICATIONS3 Advertising4 Direct Marketing4 PR4 IMAGE4 GROWTH MARKETS5 STANDARDIZATION OF THE MARKETING OF LUXURY GOODS6 GENERALIZATIONS RELATING TO THE GLOBAL LUXURY GOODS INDUSTRY7 SOURCES8 Gucci Gucci is a global retailer of luxury, high quality fashion items: handbags, small leather goods and luggage, shoes, ties and scarves, RTW, watches and other personal items such as key chains, money clips, pens, etc.

The strength of Gucci is in its established, very strong brand image and international presence. Gucci has also the ability to control its distribution channels. This is part of Gucci’s defensive strategy in the chain value to capture the value added instead of giving it to the middlemen such as suppliers and retailers.

The company has also increased the number of their Directly Operated Stores (DOS) as part of the defensive strategy of taking more control of the distribution process. The 2003 figure showed that DOS accounted for 61.3% of revenues compared to a much lower 32.5% in 1999.

Its aggressive strategy accomplished through diversification and communication is also another of Gucci’s strengths. Gucci changed its strategy of carrying a single brand to branching out to a multi brand group. This strategy is also adopted by other conglomerates such as Louis Vuitton and Prada.

Some luxury companies use the strategy of focusing only on one brand and add other business segments such as what Armani, Polo Ralph Lauren, and Versace did.


This strategy is done in order to allow the positioning of the brand in the industry to differ depending on the number of brands and the number of business segments the company wants to compete in. This is the idea behind focus (mono brand) versus diversification (multi-brand). Gucci Group has more than 10 brands, including Gucci, Yves Saint Laurent, YSL Beauté and Sergio Rossi.


The weaknesses of Gucci include instability in management and financial base. The instability of its management can affect the group’s corporate strategy and vision.

The financial base is weak and alarming, with a long term debt increase from $17 million in 1998 to $143 million in 1999 and to $1.3 billion in 2003. Some brands in the Gucci group’s portfolio are still not profitable, and there is a need to promote and market them aggressively.


Opportunities for Gucci abound especially in the emerging luxury markets in growing economies from Asia such as India and China. People who come from these places who recently amassed huge wealth due to the excellent performance of the economy would definitely want to try luxurious brands such as Gucci.

There is opportunity in the consolidation of other brands too. The opportunity exists in creating competitive advantage in different business segments. There are various business segments Gucci can venture into should the need to expand and create more luxurious products arise.
Threats

The luxury goods carry premium products designed for very wealthy individuals. This demanding market spares on expense to get the best product in terms of quality, style and design. Price, therefore, is not a basis of competition in this kind of industry.

Competition largely exists on how potent and valuable the brand image has become. This is the focus of Gucci’s thrusts. Its competitor Louis Vuitton may have made its mark in size with more than 50 luxury brands in its belt and sales of 12.6 billion euros in 2004 alone but it is not exactly the single dominant player in the market.

This is because in the luxury products market, companies can carry several brands and business segments which could change their positions depending on the segments such as leather & shoes, cosmetics, jewelry & watches, wine and spirits and others.

Competition is also effectively minimized by the intense rivalry of established luxury goods. New firms would definitely find it next to impossible to penetrate such an exclusive market. The cost of maintaining and promoting this image are also prohibitive.

Companies are forced to invest huge money in brand promotions in order to maintain their image. Expenses such as advertising and marketing expenses, acquisition of competitors, control of the distribution channel and other strategies take the bulk of company’s operating budget.

The barriers to exit in this industry are low which means that survival is for the fittest. If the company cannot compete with other players in the industry then it has to fold or sell to other bigger firms which make exit quite easy and quick.

In this industry, the barriers to entry are really high and the barriers to exit are low, therefore only the select few can maintain their position in the market, while others could give up altogether or are bought by bigger firms.

Also, luxury goods do not have direct substitutes like other ordinary goods but the threat could come from imitation. Counterfeits often penetrate the market. This could take away a portion of the sales that should go to luxury goods companies.

There is also the threat of substitutes to contend with. These are products that are considered ordinary or the medium brands but can eventually expand their product lines to premium brands in the future such as Zara and Gap.

Internal threat could also come from French holding company Pinault-Printemps-Redoute (PPR) who currently owns 68% of Gucci’s stocks.
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Re: Marketing Strategy of Gucci - June 6th, 2015

Gucci is the niche marketing, Yeah i am taking about original brand and not the copy of it. Gucci is expensive have created his own market share. When you are targeting niche product your Marketing plan also depends on that. You won't see the ads of Gucci on television because they don't promote. They are not promoting to the mass audience, they have got the selected audience but loyal.
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