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Gucci’s strategy: What does it take to be #1 hottest brand?

How has the Italian brand stayed relevant to generation after generation of luxury customers?

Key takeaways

 Gucci’s strategy to be the hottest brand is to promote inclusivity: appealing to everyone, rather than a specific gender. To that end, the Italian luxury house offers its customers more ready-to-wear to best capitalize on fashion trends.

• Gucci balances its assortment by dividing its offerings: 40% trend-oriented articles and 60% classic styles.

• Gucci is part of the group of brands spearheading sustainable fashion. It would be beneficial for the Italian brand to highlight this effort to boost its image as an eco-conscious company.

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One hundred years ago, in Florence’s scenic Tuscan city, Italian artisan Guccio Gucci began building a leather-goods business. Along with his sons, he established the company and built a solid reputation. Before long, they began diversifying their leather offerings to include fashion pieces, and the iconic fashion house Gucci was born. 

Acquired in 1999 by the second-largest luxury conglomerate globally, KeringGucci enjoys a position among the hottest luxury brands in the world and keeps its spot on the Lyst podium almost every quarter.
Gucci has always known how to differentiate itself from its peers and achieve massive growth. Whether under the direction of Tom Ford and Domenico De Sole in the 1990s or today, with CEO Marco Bizzarri and creative director Alessandro Michele at the helm.

In 2019, the Italian luxury house generated nearly €10bn in turnover for Kering, continuing the double digit-growth it had seen since Michele and Bazzari took over in 2015.
Gucci has been hard-hit by the covid-19 crisis and has seen sales decline more than 22%. But François-Henri Pinault and his team at Kering have the know-how to keep Gucci continuously attractive to consumers. How has the Italian brand stayed relevant to generation after generation of luxury customers?

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Gucci’s strategy: offer exclusivity through a culture of inclusivity

Gucci’s status as an established fashion house doesn’t make it outdated — quite the opposite. As Gucci CEO Marco Bazzarri told the Business of Fashion, “The idea from the very beginning was to have a product that is exclusive but to create a culture of inclusivity.” Gucci’s approach requires producing offerings that appeal to many different segments of the population. 

The company’s goal is to capitalize on trends — similar to that of mass-market brands. Accomplishing this requires the Italian house’s assortment mix strategy to include more ready-to-wear articles than its competitors, such as Christian Dior and Yves Saint Laurent. 

Nevertheless, luxury brands, which depend on sales of core groups of largely unchanged staple products season after season, trend-driven items can provide the much-needed relevance and buzz that helps brands stay at the center of the cultural conversation. 

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This tactic isn’t without risk. Companies risk cheapening the brand’s integrity, which could make consumers less likely to purchase staple items. That was the risk Gucci’s strategy took over the past five years — and it paid off. 

Then came Covid-19.

As Kering chairman and CEO François-Henri Pinault said during an annual review meeting, Gucci needs to find the right balance to appeal to old-money customers and the younger generation. With this in mind, should we expect more timeless, traditional products in the coming seasons? 

Classic vs. fashion-focused

According to the Business of FashionGucci’s strategy is about finding the right balance between fashion-oriented products and classic, staple pieces. The Italian company stays true to its brand heritage — producing timeless, always-in-style articles — while adapting key pieces to keep up with the latest trends.

It is how Gucci has responded to conservative devotees for decades — those consumers who may not choose to buy a logo-embellished loafer but see a backless style of the staple shoe as an appealing kind of stylistic risk. Whether one looks for timeless classics or fashion-oriented products, everything is possible at Gucci

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Retviews data show that Gucci has the highest share of fashion-oriented articles than its competitors — especially in shoes.

Moreover, Bizzarri stated that the fashion house tries to follow the 30-70 ratio rule for new vs. carryover. Some originals can become carryovers, and some carryovers with low stock turnover can go out. Gucci has followed this strategy to ensure it stays relevant and appealing to consumers of all ages.

Speaking the younger generation’s (Trendy) language

Gucci’s strategy is to capitalize on trends and appeal to all genders. However, Kering and Gucci have figured out how to speak to the younger generation — a value-driven cohort searching for inclusivity and empowerment. In terms of style, Gucci beat out its competitors to capitalize on the mini- to nano-bag trend. 

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Reimagining its iconic bags in smaller sizes and balancing classic colors with fashion-forward hues, Gucci put its inclusivity objective on display.

Sustainability: the reality is way better than it looks

It can be challenging to define what exactly “sustainable” means in the context of fashion. Should we consider only the raw material used to make an article or examine the entire production process?
If we look solely at the “eco-responsible” products labeled by the fashion house in Gucci’s case, one could state that the Italian company isn’t doing much in sustainability. However, results are even gloomier from its competitors’ side.

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However, Kering is among those companies spearheading the fashion industry’s efforts when it comes to sustainability. Since 2018, Gucci‘s operations and supply chain have been entirely carbon-neutral, and it has earned multiple other sustainability certifications. This week, Gucci announced its investment in the online resale platform Vestiaire Collective, taking another step toward sustainability.

To this end, Gucci uses more wool — considered a more “sustainable” fabric than cotton —  than its competitors as one of the most-used materials for its ready-to-wear collections.

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Combined with a firm transparency policy regarding ethics, standards for raw materials, and sourcing, Kering is well on its way toward its goal of making Gucci’s garment production process 100% sustainable.

One question arises: Shouldn’t Gucci make it easier for its consumers to quickly find out which articles are sustainable and which ones aren’t?

Conclusion

2020 has revealed the weaknesses in Gucci’s strategy, relying too much on non-local customers. As François-Henri Pinault stated during Kering’s annual meeting, the brand continually works on being relevant for its local target market. A good example is the collaboration capsule between Gucci and Detroit vs. Everybody — only available for the US market.

Still, if one were to only look at annual reports and raw numbers, one could come to an incorrect conclusion about assortment. Indeed, the ready-to-wear division only generates 18% of Gucci’s revenue but accounts for 30% of its assortment. Could there be an opportunity to optimize Gucci’s assortment? Perhaps — but fashion isn’t all about numbers. 

Fashion is about style, self-expression, and — as Jean-Noel Kapferer said — “Fashion is the aphrodisiac of consumption.”
Gucci is not going to stop us from wanting more.

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