Category: Gucci

Sales Analysis

Although Kering owns several luxury brands like Alexander McQueen, Balenciaga, Bottega Veneta, and Yves Saint Laurent, the most impressive sales results in 2015 were demonstrated by Gucci, whose revenue in the fourth quarter rose 13.4 percent (“Kering: 2015 Results” 4). Considering that Gucci accounts for over 60 percent of Kering’s profit (Brinded par. 3), such an increase is important to the holding company. Also, Gucci is involved in more collaborative projects (“Kering: 2015 Results” 19). For example, at the beginning of 2015, Kering entered into a partnership with Safilo, a prominent Italian company that creates and distributes sunglasses and other types of eyewear as well as sports equipment, for the design, production, and supply of Gucci Eyewear products.

Kering stated that Gucci’s growth after several years of decrease is due to “directly operated stores in mature and emerging markets” (“Kering: 2015 Results” 4). Other reasons for the success listed in the same statement include new creative vision and new business strategy. The changes are associated with the appointment of Alessandro Michele as the new Creative Director of Gucci at the beginning of 2015. In this position, Michele is in charge of all collections and the brand image of Gucci. The Honorary Chairman of Kering François Pinault said, “Gucci’s creative momentum and ambitious strategy, launched last year, are delivering tangible results: sales growth is accelerating in the second quarter on top of tough comps” (Thompson par. 11).

Since the recent success in terms of sales and revenue of Gucci is the result of its new creative strategy, which is still being implemented by Michele, it can be assumed that the brand will continue to grow in the next year. Pinault stated, “I am confident that the work of our creative teams and the commitment of all our associates will enable us to extend our growth trajectory in 2016 and beyond” (Brinded par. 12). Gucci’s growing popularity ensures the fulfillment of this forecast.

Merchandise Strategy

Like all luxury brands, Gucci markets its products with the emphasis on superior quality and maintaining certain status and image. Gucci’s target audience is young people with high income in both developed and developing markets. Another similarity with many other luxury stores is that Gucci distributes products through directly operated stores.

At the company, special attention is paid to training the employees so that the service provided is outstanding and to the location of stores, which should be high-profile districts. All these efforts are made to gain the loyalty of the audience, which, for luxury brands, tends to be rather selective and demanding. It is also important that the image of Gucci is supported by famous customers as well as celebrities who advertise Gucci, including this year’s new “faces” of the brand: Tom Hiddleston and Vanessa Redgrave.

Another component of Gucci’s recent success is the company’s technological achievements. Gucci employs many benefits of e-commerce, including the omni channel shopping that improves the customer experience by offering multi-media coverage and access to merchandise.

Merchandising Calendar

Marketing of luxury fashion products is chronologically bound to fashion weeks. A fashion week is a series of events and activities within approximately one week where fashion products are presented to the public and the media. The most prominent fashion weeks are conducted twice a year in the four “fashion capitals” of the world: New York, London, Milan, and Paris. Menswear and womenswear fashion weeks are traditionally held separately, although it is not always the case. At a fashion week, the clothes and accessories are presented that will be marketed the next season, approximately six months later. However, the suggestions to change this pattern are heard more and more often today. With the growing accessibility of fashion products and the increasing portion of online purchasing in the industry, within the next decade fashion weeks may shift to the “see now, buy now” model.

The Gucci 2016 Fall Winter ready-to-wear collection was presented at the New York fashion week in February 2016 (Mower par. 1). The collection was warmly received by critics, who also noted that, despite having been in the position of the Creative Director for only a year by that time, Michele became one of the most copied fashion designers. Other important dates in the Gucci calendar are menswear and womenswear spring summer 2017 shows held in September 2016. The clothes and accessories presented at these shows will be marketed starting next spring.

Merchandising Analysis Table

Works Cited

Brinded, Lianna. “Gucci Is Cool Again.”Business Insider. 2016. Web.

Kering: 2015 Results 2016. Web.

Men’s Fall Winter 2016 Runway 2016. Web.

Mower, Sarah. “Fall 2016 Ready-to-Wear: Gucci.”Vogue. 2016. Web.

Thompson, Adam. “Kering Sales Jump as Gucci Brand Shines.”Financial Times. 2016. Web.

Women’s Fall Winter 2016 Runway 2016. Web.

Introduction

It is important to note that the rate of profitability and volume of sales for products and services are dependent on a multitude of factors. They can be essential and inelastic, or they can be highly elastic due to their luxurious nature. The given analysis will focus mainly on well-known Gucci bags, which provide an outstanding example to demonstrate how luxurious products operate in the economy.

Product Description

The Gucci bag is a luxury item that is sold by the luxury fashion brand Gucci and purchased by consumers who value high-end fashion and are willing to pay a premium for the brand’s iconic style and quality. According to economists, the definition of luxury and necessity use income elasticity of demand (Karlan & Zinman, 2018). On the one hand, a luxury item is a product with a high-income elasticity of demand, meaning that as consumers’ income increases, their demand for the product increases (Burke & Abayasekara, 2018). On the other hand, a necessity is a product with a low-income elasticity of demand, meaning that consumers will continue to demand the product even if their income decreases (Karlan & Zinman, 2018). In this case, the Gucci bag would be considered a luxury item as it has a high-income elasticity of demand. In terms of complements and substitutes, the Gucci bag has complementary products such as high-end clothing and accessories, as well as luxury jewelry. However, it has substitutes such as other luxury fashion brands such as Louis Vuitton, Chanel, and Hermès.

Demand Factors

There are several factors that can influence the demand for a product, such as the Gucci bag, by buyers. Macroeconomic factors include interest rates, inflation, and the overall state of the economy. If interest rates are low, consumers may be more likely to purchase luxury items like the Gucci bag because they have more disposable income. If the economy is in a recession, consumers may be more likely to limit their spending on luxury items (Salvatore, 2019). Microeconomic factors include the price of the product, advertising, and personal income. For example, if the price of the Gucci bag increases, the demand for the product may decrease. However, if the brand launches a new advertising campaign, this may increase demand for the product. Additionally, if a consumer’s personal income increases, they may be more likely to purchase luxury items like the Gucci bag. Other factors that can influence demand for the Gucci bag include the location of the buyer and the weather. If a buyer is in a location with a high concentration of high-end retailers, they may be more likely to purchase a luxury item like the Gucci bag.

Supply Factors

The supply of Gucci bags by the company is influenced by several factors as well. The first one is production costs, which include the cost of raw materials, labor, and production processes that will impact the company’s willingness to produce and sell the Gucci bag. If the cost of production increases, the company may choose to reduce the supply of the product. The second factor is technological advances since the latter processes can increase the efficiency of the company’s operations, which may lead to an increase in the supply of Gucci bags. The third one is competition because the level of competition in the market for luxury bags can influence the company’s willingness to sell Gucci bags (Salvatore, 2019). If competition is high, the company may choose to reduce the supply of the product in order to maintain its premium pricing. The fourth factor is government regulations and taxes, which can impact the cost of production and the company’s ability to sell Gucci bags. The last factor is market demand because the level of demand for Gucci bags will influence the company’s willingness to supply the product.

Fixed and Variable Costs

The production of a Gucci bag involves both fixed and variable costs. Fixed costs are costs that do not change with the level of production, such as rent for a factory, salaries for employees, and depreciation on production equipment. For example, the rent for a Gucci factory and the salaries of its employees would be considered fixed costs, regardless of the number of bags produced. However, variable costs change with the level of production and include raw materials, labor costs for production, and energy costs. For example, the cost of leather and other materials used to produce the Gucci bag, as well as the labor costs for sewing and assembling the bag, would be considered variable costs (Salvatore, 2019). It is likely that the company incurs some costs that have both a fixed and a variable component. For example, the cost of advertising and marketing the Gucci bag would have a fixed component in the form of salaries for marketing personnel and a variable component in the form of the costs of specific marketing campaigns.

Conclusion

In conclusion, the Gucci bag is a luxury product with high-income elasticity of demand and complementary and substitute products. The demand for the Gucci bag is influenced by a range of factors, including macroeconomic factors such as interest rates and inflation, and microeconomic factors such as the price of the product and personal income. The supply of Gucci bags by the company is influenced by a range of factors, including production costs, technological advances, competition, government regulations, and market demand.

References

Burke, P. J., & Abayasekara, A. (2018). The price elasticity of electricity demand in the United States: A three-dimensional analysis. The Energy Journal, 39(2), 123-146. Web.

Karlan, D., & Zinman, J. (2018). Price and control elasticities of demand for savings. Journal of Development Economics, 130, 145-159. Web.

Salvatore, D. (2019). International economics (13^th ed.). Wiley.

Brand analysis of Gucci: the brand’s positioning, audience, current product trends, and challenges

Gucci identifies itself as a luxury fashion brand producing clothes, footwear, and accessories. Although it already has an established image of a high-end fashion brand, the company continues to change, experiment, and bring new styles and combinations of influences to its products. The brand claims its “culture of creativity and innovation” (“Letter to Shareholders” 2) to be one of their fundamental characteristics. Other aspects of the brand listed in the self-description are that it is “eclectic, contemporary, [and] romantic” (“About Gucci” par. 1). An important component of the brand’s positioning is its association with celebrities who wear Gucci clothes to publicity events as well as in their everyday lives.

Although Gucci has recently undertaken several campaigns aimed at young people (Ali par. 1), its target audience is rather defined by income than by any other criteria like age, gender, or marital status. Since the brand does not provide any discounts to its customers, it can be concluded that the target audience consists of high-income individuals who do not need financial incentives. An important aspect of Gucci’s marketing is helping the brand’s customers demonstrate their high social status, as well as express their individuality. That is why Gucci attracts many celebrities to advertising the brand’s merchandise.

The style of the recent Gucci collection is described by critics as a combination of classic Italian art, street culture of the 1970s and 1980s, and French couture (Mower par. 1). Fall-winter items are colorful, eclectic, vintage, and informal. The mixture of chic and rebellious themes is to appeal to younger people.

The main challenge that can be recognized is the current economic situation that creates difficulties for all luxury brands. Also, there are modern-day social trends that are threats to the popularity of Gucci. Since its establishment, the brand has been associated with leather products. In recent collections, fur, ivory, and other animal products were used. With the growing social opposition to the use of such materials in fashion, Gucci may experience a decrease in the customer pool.

Recommendations

Within past year, Gucci has been successful both financially and in terms of branding and communications. Among all the brands that are part of Kering, Gucci not only gained the largest profit, but also grew in terms of financial performance compared to previous years much more than it had been predicted by critics (Thompson par. 3). However, there are always opportunities for growth, development, and improvement. Based on the analysis of merchandise and marketing, three major recommendations can be offered to Gucci: to continue the innovative strategy, to promote the image as a responsible business, and to widen the distribution channels.

First of all, Gucci would benefit from further creative innovation. It should be recognized that the recent success of Gucci, which critics responded to stating that Gucci was “cool again” (Brinded par. 1), was due to the appointment of Alessandro Michele as the Creative Director. Michele adopted new themes and styles to the collections he created for Gucci, which reignited the consumers’ interest and made the fashion designer an influential figure. If a company has a business model that is developed well enough to benefit from innovation, the company should further support innovative initiatives (Teece 191). Therefore, Gucci should not concentrate on its achievements and established styles but focus on further creative experiments as they prove to promote the brand.

Second, the company should invest in maintaining and developing the reputation of a responsible business. As the present-day economic situation may reduce the customer pool for luxury brands, Gucci should be interested in attracting new audiences. A way to do so is to promote the image of a company that cares about its customers, society, and the environment. Within recent years, Gucci has been involved in different kinds of charity, as well as increasing environmental friendliness of their manufacturing. Such activities, as well as corporate social responsibility efforts, should not only gain loyalty in existing customers but also attract new ones.

Finally, Gucci can benefit significantly from developing its existing distribution channels and creating new ones. One of the key existing distribution channels of Gucci are directly operated stores, which represent an appropriate and beneficial distribution model for a luxury brand, but can also be regarded as not flexible enough. In the modern world, a business should pay attention to online purchasing opportunities. Not in every country where Gucci merchandise is distributed, online shopping for it is available. Gucci should try to fix it without damaging its reputation of a high-end brand, which means preserving its image of not being available to everyone.

Based on the analysis of history, marketing, performance, and strategies of Gucci, it can be recommended that the company continues its successful creative innovations, builds a favorable image of responsibility, and explores broader distribution opportunities. These recommendations pursue maintaining the positive response from critics, creating stronger connections with established customers, attracting new customers, promoting a positive image, and increasing availability. Achieving these objectives will translate into higher sales and higher profit.

Works Cited

About Gucci2016. Web.

Ali, Sanzida. Gucci Consumer Targeting. n.d. Web.

Brinded, Lianna. “Gucci Is Cool Again.”Business Insider. 2016. Web.

Letter to Shareholders 2016. Web.

Mower, Sarah. “Fall 2016 Ready-to-Wear: Gucci.”Vogue. 2016. Web.

Teece, David J. “Business Models, Business Strategy and Innovation.” Long Range Planning 43.2 (2010): 172-194. Print.

Thompson, Adam. “Kering Sales Jump as Gucci Brand Shines.”Financial Times. 2016. Web.