The first thing that comes to one's mind on hearing the word "Gucci" is likely to be the double-G motif on a Gucci leather handbag or a wallet. This logo, coupled with the bold red and green bands on suitcases, satchel, wallets, and bags, has become one of the most copied trademarks in the world. With its headquarters in Florence, Italy, Gucci operates some 661 stores across the globe. 187 stores of these 661 are located in emerging markets, with 79 stores in Greater China.
The Gucci group is into creating and selling leather goods, shoes, jewelry, perfumes and other luxury goods. It also consists of several world famous brands including Bottega Veneta, Alexander McQueen, Yves Saint Laurent, Balenciaga, Sergio Rossi, Stella McCartney, Boucheron and Bedat & Co. Some of these brands have existed since the company's inception, while others are relatively new.
Gucci, also known as the House of Gucci, was established in 1906. Guccio Gucci, the founder of Gucci, had worked in the kitchens at the Ritz Hotel in London, before returning to Italy to work on his inspiration. The grandiose luggage carried by wealthy guests who stayed at the Ritz was what had inspired Guccio Gucci to make leather luggage.
Despite numerous ups and downs, and a market recovering from recession, Gucci Group NV reported increase in earnings in Q2 of 2011. The company reported revenues of ? 737.7 million as against ?626.7 million reported for Q2 of 2010. This boost in the revenue has been due to sales in the Asia-Pacific region going up by 1%. This sale increase was actually fueled by sale of footwear and accessories. Some of the strongest responses in favor of Gucci came from India and the Emirates, where brand awareness is now slowly gaining a foothold.
Though competitors like Chanel, LMVH, Richemont, Armani, Dolce & Gabbana etc., fight with Gucci for the market share, Gucci still has its share of supporters. Approximately 41% of Indians and 37% people from the Emirates said that they would prefer a Gucci product over 24 other designer brands from their own country.
This response is definitely a morale booster. The prospect of entering emerging markets like China and India is very lucrative, and a company as experienced as Gucci cannot afford to miss this opportunity. Also, Gucci can look at further acquisition, which will allow it to enter various other business segments, should the need to create more luxurious products arise in future.
Though the market abounds with opportunities, Gucci has learnt to keep its eye open for threats, the hard way. The company has had quite a few familial feuds and law suits that it has dealt with in the past, which left it battered, bruised and vulnerable. This had paved the way for Invest Corp to take over the company, which later contributed towards stabilizing Gucci's operations. Since the fashion market is exclusive, it is nigh impossible for new entrants to penetrate the market and gain the footing that these established companies have.
However, existing competitors will battle it out to get the chunk of the market share in various segments. One of the major threats to companies is operating expense. Profits are minimized as companies have to spend huge amounts of money in advertising, marketing, acquisition, control of distribution channel and other strategies, in order to stay abreast of the competition. If Gucci cannot compete with the others in the same league, then it will have to bow out of the market, or will have to be taken over by other firms.
Along with these threats, counterfeits eat away a major portion of the profit that is meant to reach the company that creates the genuine product. In Iran, for instance, there are places that sell counterfeit Gucci goods as people want to be fashionable, but cannot afford to spend on genuine designer goods.
- Will Gucci be able to stop counterfeit products being sold under its trademark?
[...] Gucci Group has strong market positioning attributed to its focused digital expansion and emerging market outlook. It's green and social responsibility centric brand positioning will offer long-term sustainability. On long-term basis, the company might acquire niche fragrance and other accessories manufacturer in EMEA and Latin America markets. Future Research Scope The future research scope involves the following: ➢ Changing consumer purchasing behavior across emerging luxury goods market worldwide and its impact on Asia focused businesses such as Gucci, Prada etc. [...]
[...] There has been aggressive shift towards expenditure on luxury goods in Asia with Gucci aggressively expanding into emerging markets such as India organically in next 18-24 months. The total estimated global core addressable market for the enterprise stood at US$111 billion stipulated to reach US$128 billion by 2013. Global: Marketing & Promotional Strategic Developments In 2011, the marketing and advertising expenditure on Gucci fragrance segment increased to US$28 million on year-on-year basis. Fragrances and other accessories accounted for 11% (2010: of Gucci Group annual revenues in 2011. In Interbrand 2011 Survey, Gucci stood at thirty ninth most valuable brand with value of US$ 8.8 billion (www.interbrand.com). [...]
[...] Industry Overview Luxury leather goods, fragrance, footwear and accessories are the core addressable segments for Gucci in United States and international markets. Gucci is fourth largest luxury goods distributor worldwide with market share of in 2010-2011. Source: Verdict Research (May 2012) Europe will remain the largest market, its global market share will slip to Similarly, the share of the Americas, currently the third largest global market for luxury goods, will decline by 1.8 percentage points between 2011 and 2015. These market share declines are due to the ongoing projected sales increases in Asia Pacific, excluding Japan (Verdict Research, 2012). [...]
[...] Many leading European luxury retailers such as LVMH, Richemont, and Hermès now generate 50–60% of their turnover outside Europe. Burberry LVMH Richemont Polo Ralph Gucci Group Lauren Growth Bn) share Margins from Europe from Asia countries operating price for standard delivery Risks, challenges and Limitations Gucci faces steep macro and micro risks due to its operations across 50 countries worldwide. The core risks are as follows (PPR Annual Report, 2011): ➢ Low employee retention and higher labor disputes will hamper competitive advantage. Lower retention rates of key designers will hamper sustainability. [...]
[...] Further, it has steadily diversified its value proposition through collaboration with automobile manufacturers such as Fiat, Ford Corp and General Motors (i.e. indirect brand marketing). ➢ Promotional: Social media and online display advertising are the core promotional platforms for Gucci Group in United States and other markets worldwide. The company's facebook digital platform hosts 4.5 million fans slightly lower than Burberry ( 6.2 million) and higher than Chanel ( 3.2 million). In 2011, the company established digital channel on Youtube for its luxury fragrance brands. [...]
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