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GUCCI- FASHIONING INDIA A CASE STUDY ON RE-

EMEREGENCE OF THE BRAND GUCCI IN INDIA
GUCCI
FASHIONING INDIA
INTRODUCTION
The House of Gucci or simply Gucci is one of the more established premium fashion brands
in the world. Its success worldwide has depended largely on its effective marketing
strategies and a wide product range. Founded in Florence in 1921, Gucci as a leading luxury
brand has been created assiduously over a period of many years. Helping in this brand
positioning are its core values: unequalled craftsmanship, outstanding quality and Made in
Italy (with one exception of watches, which are produced in Switzerland) tag. This high
profile luxury range portfolio includes the premier flagship brands: Gucci, Bottega Veneta,
and Yves Saint Laurent.
It ranks 46th in Business Weeks Top 100 Brands with a revenue of 3,389 million in 2008.
It has 560 stores worldwide and a number of franchisees and high-end department stores
that display the brands. The total no. of employees at end of year 2008 was 11,484.

GUCCI- INDIA STORY

However, Guccis Indian story so far has been far from encouraging. It had entered Indian
market three years ago but since then has parted ways with its Indian franchisee Vijay
Murjani of the Murjani group. The Murjani group started as an apparel maker and grew up
to launch several brands in India and abroad, retailing premium products line. It has also
been distributors of Calvin Klein, Tommy Hilfiger and French Connection brands in India;
yet, it couldnt make the desired effect with Gucci brand name in the country. Presently,
Gucci has entered an agreement with investment banker Ashok Wadhwas Luxury Goods
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Retail, set up by I- Bank Ambit Corp and is in the process of converting it into a 51: 49 joint
venture

Luxury Goods Retail has now bought over Guccis franchisee rights as well as three
operation stores in Delhi and Mumbai from the Murjani Group. In its new makeover, Gucci
will follow many other international brands such as Marks & Spencer, and Mothercare to
move from franchisee model to ownership model. The latter usually offers brands better
control over operations and the flexibility to chart an independent course in the market
whenever it finds a favourable business ambience. Understandably, Gucci wants to ensure
that the re-emergence with Luxury Goods Retail gets all the push it needs, not only because
it wants to be successful the second time, but also in view of the vast opportunity India
provides in the luxury goods retail space.
THE INDIAN FASHION RETAIL LANDSCAPE
FDI SCENARIO: While considering the scenario in retail trading in India, one has to
bear in mind that this sector is one of those few where FDI (foreign direct investment) is
not freely and healthily allowed. Although, FDI is fully admissible in cash and carry
wholesale (back-end retail), it is admissible only up to 51 per cent in single-brand front-
end retail. Most international brands look to set up their 100 per cent- owned stores in any
market in order to ensure that they can stay in complete control and drive brand
reputation their own way, but Indian rules do not allow that yet. All of these international
brands, therefore, have either tied-up or trying to tie-up with local corporate and
entrepreneurs, to make their presence felt in the country, and to offer their services for
back-end operations like sourcing, logistics, inventory management, among others, for
front-end retail operations
MODES OF ENTRY OF FOREIGN RETAILERS: Each country has its own
sets of policies and regulations on the modes of entry which need to be complied with
before accessing the market. In India too, foreign companies need to adopt one of the
following methods to participate in its burgeoning market.
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MERGERS & ACQUISITIONS- most common. This may result in foreign majors
looking to make strategic investment in existing Indian companies to leverage their
presence in India and simultaneously by combining the local companys expertise with
greater understanding of Indian sensibilities.
DISTRIBUTION -Foreign brands entering in India through distribution channel
wherein the foreign company sets up local distribution office and supplies products to
Indian retailers. Swarovski, Hugo Boss etc. have chosen to enter the Indian market through
distribution channels. Some Indian companies that are in the process of entering into
distribution agreement with foreign brands include Thanks, Vama, Escape, Murjani Group
etc.
FRANCHISING - Another mode which is also widely used by several global brands to
enter Indian market is by engaging franchisees. This model provides benefits of owning a
business without any significant risk.
JOINT VENTURES
Since the partial relaxation of the policy allowing FDI up to 51 per cent in single brand
retail, several luxury brands such as Louis Vuitton Moet Hennessey (LVMH), Christian Dior
and Hermes have converted their franchise agreements into joint ventures. This is big news
for fashion lovers in India, where business from out of the country has been restricted for
so long.

INDIA AS A MANUFACTURING HUB FOR GLOBAL LUXURY
BRANDS
Global luxury brands have taken advantage of Indias human resources available at a
more reasonable price. It is estimated that the manufacturing of luxury items in India can
grow to US $ 5 billion in near future. There is no dearth of skilled talent in the country.
Brands like Louis Vuitton and Italian textile company Frette known for its premium linen
are looking at India as a manufacturing base for their products. There are yet others who
simply source their requirements from India. Thousands of factories in Dharavi (largest
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slum cluster in Asia) produce goods worth US $ 500 million, majority of them for the export
market. The cost advantages particularly in labour intensive sectors like leather and
accessories as well as apparel add to the advantage of the country.
Cost is a major consideration while choosing a destination for manufacturing. The average
cotton yarn spinning cost at US $ 2.5 per kg is lower in this country than it is in all the
countries including China. The average wage rate in India is at US $ 0.75 per operator hour
as compared to US $ 1 of China and US $ 3 of Turkey.
Also, luxury products require a touch of exclusivity and handwork with much detailing.
Such high demands cannot be economically met by mass producing countries like China.
Bespoke luxury which is synonymous with Indian luxury makes India well poised to cater
to the luxury industrys requirement. India has manufacturing units of different production
capacities and can cater economically to large and small consignments alike. International
brands that have already started sourcing from India have found that the fundamental
strength of the country is its strong production base of a wide range of fibres/ yarns
ranging from natural fibres to synthetic and man-made fibres.
While discussing Indias production capacity of yarns, Ludhianas recently launched
Apparel Park, created over an area of 100 acres deserves a special mention. The park
would facilitate access to world-class infrastructure and advantage of common facilities
which include an effluent treatment plant, resource centre, conference hall, exhibition hall,
training centre, commercial and retail outlets for suppliers, forwarding agencies, service
units, testing lab, R & D centre and hostel for workers. The park, when in operation fully, is
expected to add another US $ 200 million to the countrys exports. India is all set to
challenge Chinas position as the worlds backyard for manufacturing in the next 3- 5 years.
Chinas aging workforce is putting pressure on wages and costs. It is becoming a more
expensive place, and India can work this to its advantage. In a survey by the US based
business magazine Fortune, India made products were found to be preferred to China
made products.



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INDIAN LUXURY MARKET
To evaluate Guccis prospect of reemergence in India, it is important to look carefully at the
countrys expanding luxury goods market. Fashion trends in India are being increasingly
adopted from the Western styles of clothing and other fashion accessories and widely
expected to witness high growth in the upcoming years. In recent years, the Indian fashion
industry has started showcasing its work in ramp shows such as the many India Fashion
Weeks and promotes Indian haute couture in the domestic as well as international markets,
thanks to an ever increasing numbers of Indian diasporas abroad. The luxury goods market
in India is one of the worlds most diverse and exciting and a challenging one for brands
seeking to gain a presence there. Brands and retailers that want to capture a share of
this fast-paced industry need to learn its ropes and adapt to the market conditions, or risk
missing the bus in one of the greatest untapped business opportunities in the country.
The Indian retail market is also evolving rapidly with requirement of more product lines of
fashion and luxury goods. The organized retailing is also developing at a breakneck speed.
It is amicable to all that fashion is a vital part of both the retail industry as well as the
brands. In fact, fashion has led the retail industry boom to a great extent and it has
sustained its dominance in every malls, markets and stores and revolutionized the
merchandising system in retail industry. Brands in apparel, textiles, jewelry, accessories,
footwear, cosmetics and salons raised the business to more than 40,000 crore.
In this scenario, India is still a virgin market for global high end luxury players. Companies
like Louis Vuitton Moet Hennessey (LVMH), Swatch Group and Chanel are the only ones
represented, in a limited way. Others like Aigner, Montblanc and Cartier, are present
through licensee agreements in lifestyle store. But despite the immaturity of the market,
there are already clear trends developing particularly in the penetration rates of luxury
brands into the mens and womens sectors.
There also exists a dichotomy - while luxury clothing, fragrances, premium brands of
footwear, home electronics and high-end watches have achieved good penetration among
male Indian consumers, items such as cufflinks, belts, wallets, luxury wines, champagnes
and cigars still rate low on the wish-lists of many Indian men seeking luxury brands.
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Among women, jewellery, cosmetics and skincare can already boast high levels of
awareness, followed by categories such as underwear, handbags and mobile phones, but
lifestyle items that have yet to make an impact include gourmet food, tableware and
imported furniture even in the widely travelled consumer groups.
For consumers who are brand-savvy, luxury brand names come under one of two distinct
titles: classic brands and high fashion brands. Classic names include Chanel, Gucci, Versace,
Salvatore Ferragamo, Balenciaga, Christian Dior, Louis Vuitton and Prada names that
suggest enduring value. Among the high fashion brands or brands in the luxury market that
command consumers attention are names like Armani, D&G, Moschino, Calvin Klein, Hugo
Boss and Ralph Lauren.
The new Indian consumers earning has increased manifold and she is aware of
internationally reputed brands, with increased foreign travels. In final analysis, more and
more Indians are pursuing a lifestyle based on ostentation and consumerism, impressing
others with wealth and power, owning exclusive items and owning them fast.
INDIAN LUXURY PRODUCT MARKET- A SNAP SHOT

Luxury Product Market in India for
the study of Guccis prospect will
reveal a phenomenal growth
Of this, Luxury Products, Luxury
Services, Luxury Assets constitute 11.6%, 22% and 67.4% respectively.
The table below gives an indication of consumer expenditure on clothing and footwear
from 1995- 2007. Clothing includes: clothing material, garments and other clothing items.

BILLIONS(RS) 1995 2000 2002 2004 2006 2007
CLOTHING 765.9 951.6 897.0 983.3 1080.1 1143.2
FOOTWEAR 89.2 122.2 101.1 113.6 128.6 134.1
TOTAL 854.7 1074.1 998.1 1096.8 1208.7 1277.2


2006 2010 2015 CAGR
$ 500
million
$ 1220
million
$ 2550
million

20%
Rs.2500 Rs.6100 Rs.12750
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THE LUXURY CONSUMER PROFILE
Guccis entry when it re-launches in India will be shaped up by the new face of India to a
great extent. The global luxury brands are realizing the potential of the new Indian
consumers and while setting up shops in India are focusing on the target group. As disposal
income rises, Indians increasingly spend on international lifestyle symbols. House hold
incomes in India are accelerating with changing income pyramid as individual earning
grows manifold. Around 1.7 million Indians qualify as rich (sub-definitions are Super Rich,
Sheer Rich, Clear Rich and Near Rich) a figure that is set to more than double in the next
five years. In sharp contrast to consumers in more mature markets, the spending power of
Indians earning between US $20,000 and US $40,000 still puts them on the countrys rich
list and makes them well worth targeting by brands keen to secure an Indian market
presence.
Profile of the Indian luxury consumer, based on the latest study by research group KSA
Technopak provides the following information:
He/ She is primarily a resident of urban India
Lives in a household earning more than about 800,000 (US$18,000) a year, where the chief
wage earner is male and average age between 36 37 years
Owns a premium/luxury saloon car such as a Honda Accord, a Vectra, a Skoda Octavia etc.
Amongst the women consumers, 65% are housewives Most consumers are educated to
post-graduate level
Their incidence of foreign travel is 53%
44% travel abroad for holidays at least once a year
TARGET GROUP FOR LUXURY BRANDS:
INDIAS OLD MONEY: The royalties of the industrial dynasties, the high net-worth
Indians (HNI) were born and brought up in the proverbial lap of luxury. They are brand
savvy and are jet setting the Mecca of shopping in London and New York. This group is
notches above the emerging class of new rich in terms of tastes and knowledge about
brands.
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THE NEW MONEY ENTREPRENEURS: They are the poster children of new
India creating their own hard earned wealth. In 2007 India led the world in HNI population
growth at 22.7% (World Health Report). They have their own set of rules and values.
Luxury brands targeting them have to tweak their message and marketing to woo them to
this side.
THE GOLD COLLARS OF THE CORPORATE WORLD: This age group of
35- 55 years is a paradoxical group. They have the wealth but not the mindset to spend on
luxury brands like the previous two groups. With high brand awareness and conscious
about the value for money, selling luxury brands to this group is a challenge and brands
will have to communicate the value addition to their already achieved aspiration status to
get them interested.
THE BPO GENERATION: IT/ ITE/ BPO, its a broad spectrum employing millions
of young Indians; some of them are getting the first taste of good life and therefore
yearning for more. As more money reaches their hands, this group is also aspiring to move
up the ladder. And with some 200 million Indians in the age group of 20-30 and with
heavy- bottomed population pyramid theres an ever-increasing supply of people crossing
into their 20s, and being a part of this ever-swelling group.
India at 22.7% has the highest High Net-worth Individual (HNI) population growth rate
compared to Russia (14.4), Singapore (15.3), Indonesia (16.8), South Korea (18.9), Brazil
(19.1), China (20.3) .
For any international brand trying to cater to Indian consumers has to bear in mind certain
nuances in the spending manner of Indian consumers. For an Indian owning a luxury brand
would mean accomplishment. According to a study by American Express, inside the
Affluent Space, Indian consumer has a desire to prove that Ive made it. He is an aspirer and
for him luxury is a reward, a hard earned indulgence which is a mindset very different
from a European consumer for whom luxury is an experience.
The Asian middle class powered by India and China is fast replacing Europeans and
Americans as the global consumers who anchor the world economy, says a study by the
Asian Development Bank. Indias booming middle class or those who spend between $2
and $20 ( 93 to 930) a day on purchasing power parity basis is now spurring
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consumption and innovation in the country, said the study. 205 million Indians joined the
ranks of those spending this amount from 1990 to 2008, second only to Chinas 800 million.
This countrys growing middle and upper-middle classes have recently given rise to self-
described "brand freaks, who crave the latest luxury goods.
Indias elite have long enjoyed luxury goods imported from the West. But Indians who cant
afford $600 sunglasses -- yet still have some disposable income -- have also been splurging
now. Recent openings of stores at two of the countrys highest-end malls puts into focus the
ever increasing consumerism amongst Indians. At New Delhis Select City Walk, women
nearly caused a stampede as they crowded into a MAC cosmetics store, many of them in
search of a popular brand of eye shadow. Women said they were thrilled that they didnt
have to wait to go abroad to shop for these items anymore. International designer houses
including Prada, Jimmy Choo, and Louis Vuitton, as well as brands such as Rolls-Royce and
Mont Blanc, have already identified this growing consumerism as business opportunity and
have either set up shop or beefed up operations here.
The media houses have also joined the bandwagon, creating aspirations and awareness
amongst Indian consumers. Vogue magazine, the bible of high- end fashion, launched its
thick Indian edition; the most glamorous in a long line of magazines from Elle to Marie
Claire that now have editions here. A recent article in Vogue headlined "The rise of ME
culture" chronicled how much the Indian paradigm has changed, with women finding more
disposable income and freedom to spend on their own needs rather than on the traditional
extended family
THE COMPETITIVE TREND: Market for classic brands and high fashion brands
has remained largely untapped though there is already a competition at the high end mass
market brands with Gap, Benetton, Adidas and Reebok and other international brands very
commonly seen on the Indian high streets. Reebok leads the sports footwear market in
India, outdoing Nike and Adidas. That competition heats up in Indian market can be judged
from the following points
The success of brand clothing stores such as Pantaloon, Westside and Shoppers
Stop has made erstwhile textile manufacturers turn to apparel marketing. In the future,
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large textile chains Vimal from Reliance Industries, Madura Garments, Aditya Birla,
Siyarams and S Kumar for example are expected to become strong apparel brands.
Indias largest apparel maker Madura Garments is emerging on the retail canvas
with a two pronged agenda. It has embarked on capturing the value conscious consumer
with Smart Buys at one end and is currently moulding its Planet Fashion formats into
mini- departmental stores replete with industry leading brands. Madura Garments has
supplemented its portfolio by roping in Levis for denim wear and Monte Carlo for winter
wear. It is also exploring other brands across sportswear, ethnic wear and accessories.
Aditya Birla Nuvos fashion arm which owns brands such as Van Heusen, Louis
Philippe, Allen Solley and Peter England has been keen on identifying with the average
customer at price points of 249- 449 through Smart Buys. This format has also been
designed to liquidate stock for the company. With a warehouse look, it will revive in-house
labels Elysee, Byford, SF Jeans and Spin Off through three stores in the first leg.

Names of some foreign retailers who received FDI clearance recently:



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Brand Nautica owned by US Apparel major VF Corp, is present in India through a 51:49 JV
with Arvind Mills, called VF Arvind Brands. They also offer sharper price points averaging
at 2500. The brand has also expanded its limited range
Fashion label Tommy Hilfiger has been acquired by US based apparel company Philip Van
Heusen (PVH). This is marketed in the country by Arvind Murjani Brands, JV between
Murjani group and Arvind Brands. They also hold license for PVH- Calvin Klien
Riding on Reliance Retails shoulders Reliance Brands a subsidiary of Reliance Retail in
their endeavor to become a luxury retail powerhouse tied up with Marquee brand Polo
Ralph Lauren and Versace prt-a- porter which cater to the lower end of the fashion
conscious market. Reliance Brands is entering into equity partnership on 49:51 with other
global fashion houses
High-end international brands such as Armani, Noraletto, Raymond Wiel and Burberry
have entered the Indian market through joint ventures with Indian retail players.
Christian Dior opened its first ever boutique in India, with other luxury brands like Versace
expected to follow right behind. Other international retailers like Louis Vuitton, Fendi and
Bulgari already have stores opened in India, as the demand for luxury goods keeps rising
CREATING AN INTERNATIONAL LUXURY FASHION BRAND
Foreign companies are always fine-tuning their marketing strategies and adopting a brand-
positioning that maintains a strict consistency between perceived prestige and price
premiums so as to preserve their brands exclusivity.
Bvlgari Jewelry, Watches, Accessories, Fragrances, Jewels, Leather Goods, Skin Care and
Hotel & Resorts
Ralph Lauren - Apparel, Shoes, Belts, Bags, Sunglasses, Hats, Fragrances, Accessories
Christian Dior Fashion products, Accessories , Handbags, Shoes, Small Leather Goods,
Timepieces, Jewellery, Dior Phone, Baby Dior, Perfumes, Bags
Louis Vuitton - Mens bags, travel products, wallets and small leather goods, belts ties
and accessories, fashion jewellery, sunglasses, books and pens, shoes, watches, ready to
wear dresses
Versace Fashion accessories. Atelier, watches, fine jewellery ,mobile phones, fragrances
and cosmetics, home collection, pallazo Versace, Versace corporate
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Gucci Baby products, belts, fine jewellery, fragrances, handbags, hats and gloves, mens
and womens shoes, scarves, silver and other jewellery, small accessories, sunglasses, ties,
travel and business stuff, wallets, watches
Yves Saint Laurent (YSL) Fashion products, accessories, beauty products, fragrances
Bottega Veneta Ready to wear dresses, handbags, small leather goods, shoes,
accessories, key - rings, sunglasses ,fashion jewellery, fine jewellery
Burberry Mens and womens and kids apparels, pre-collection, sports products,
accessories, eye-wear, time-pieces, beauty products, fragrances.

KEY ISSUES FACING THE INDUSTRY:
Apart from competition, any brand entering the Indian market has to take into account
several constraints and limitations that the market condition poses.
LACK OF HIGH-CALIBER WORKFORCE: The demand for skilled workforce
for the luxury sector is increasing, however the supply is limited. While the number of
luxury brands prevalent in the country is increasing there is an insufficient pool of high-
caliber sales associates to cater to the growing demand. To broaden the resource pool of
retailing professionals in the country, many retailing institutes have emerged in the
country such as Indian Retail School, with many other retailers setting up in-house training
programmes and training institutes.
LACK OF SUITABLE INFRASTRUCTURE: The rentals are steep and choice is
limited for luxury stores which are typically limited to five start hotels. The high real estate
cost drives the rental pricing and it does not get offset by the actual sale figure and
therefore it will be few years before retailing bears fruit.
where the fashion brands put up their outlets in 1200 to 2000 sq ft area, the rentals hover
around 800- 1200 per sq ft.
Even as organized retailing growth is taking place at a fast clip, luxury brands often find it
difficult to locate the desired destination for luxury brands. These brands need presence at
high streets, which is typically the global norm. But in India, high street concepts have yet
to catch up at right locations. Though shopping malls have proliferated, luxury brands need
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to be extremely choosey about the location and be conscious about other tenants which
form the complexion of a mall. High end malls in India are scarce and the ones marked for
completion have been delayed owing to various problems like costs and labour.
Many brands make big errors in their estimate for the intrinsic nature of the country. They
rarely crossed $500 per square feet / year sale against an expected minimum of $1,000.
Fendi, Girad Perregaux and Burberry have pulled out after partnership failed to click and
business calculations went wrong.
MAJOR COST COMPONENT:
Rent: The rental costs are skyrocketing. Typically rent is 8- 10% of sales in matured luxury
markets whereas, in India it constitutes 25- 30% whether they are stand-alone store or
located in a shopping mall.
MARKETING AND SALES: Retailers spend approximately 3- 4% of turnover to
promote the brands and create awareness.
CAPITAL EXPENDITURE: Usually capital expenditure for setting up a luxury
brand retail store in the range of US $ 400- 600 per sq ft while for premium brands it
usually ranges from US $ 80- 100 per sq ft.
INVENTORY COST: Retailers typically maintain inventory from 2 months to as high
as 6 months. In the case of apparels there is a lot of dead stock each season owing to the
fast changing nature of fashion. This entails substantial working capital financing
requirement and the capacity to absorb dead stock.

DUTIES: Given Indias high tax and duty structure, many brands are absorbing some of
the hit in an attempt to keep prices parallel to other markets. However, this is severely
affecting their competitive spirit. For example watches attract excise duty of 16% and
customs duty of maximum 20%. The landed cost of watch imported to Mumbai turns out to
be 50- 60% over and above the CIF value. If variable costs such as sales tax, octroi are
added, it totals to 88%.


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GUCCI AS A COMPANY
Tradition: Italian
Incorporation: The Netherlands
Listing: NYSE and Euronext Amsterdam (AEX index)
Senior management: Mix of several nationalities
The workforce: About 11,484 employees at the end of 2008
Distribution: Over 560 directly-operated stores
Clients: Predominantly European and Asian
GUCCIS GOALS AND VALUES
Create value for the shareholders.
Create value in the brand by continuously managing the brand and acquiring and
developing new brands.
Acquire and reposition struggling brands.
Directly operate store. Internal Analysis
Acquisitions
Partnerships
Management
Horizontal Corporate Structure
EXTERNAL ANALYSIS
Declining Economy ( Euro crisis)
Demographic Trends
Luxury Taxes
Fluctuating Exchange Rates ( Asian Market)

PHILOSOPHY
Guccis wide range of products comprises watches, jewellery, clothes, perfumes, eyewear,
baby wear, home goods (including furniture, bedding and wallpaper), luggage, handbags
and gifts (that include gadgets for pets). These items are highly priced so why do customers
buy these goods over similar, less costly products or their cheap counterfeits?
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Following is the extract of an interview with Rober Polet, chairman of the Gucci Group, that
spells out the brands philosphy:
we do not try to sell dreams we do sell dreams. People buy our brands because they
want to be part of our particular dream. ... People, before going in our store, they decide: I
would like to be part of their dream. And this is a emotional decision.
On the question of exclusivity, striking a balance between exclusivity and making sure that
the products are available worldwide through international distribution channels, his
comment is:
We do things to actually make sure that we remain exclusive. 80% of our products that
Gucci brand sells are sold through the stores that we have around the world. The points
of sale are actually quite limited. with limited quantity of the same product. So the
likelihood that two people are seen with the same clothes at the same place is very low.
GUCCI AS A BRAND:
Guccis unique positioning is built on three key principals: creativity, exclusivity and the
culture of Italian craftsmanship. Constant creativity and innovation are its key drivers. Its
growth strategy is based on three areas: distribution, product offering and brand
positioning.
Gucci maintains several brands in its portfolio. The groups portfolio i.e. breakdown of
2008 revenue by brand is provided below:
Gucci 65.3%
Bottega Vveneta 11.9%
Yves Saint Laurant 15.0%
Other Brands 11.9%

Through rigorous management of image, a tight communications policy, outstanding
product quality and a carefully controlled distribution network, Gucci Group has
maintained the exclusivity of its brands and enhanced their positioning over the last few
years.
Guccis core market is Europe. However, with the worlds fastest growing economies, Asian
countries other than Japan will be a significant contributor in the future.
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Europe 34%
Japan 24%
Asia Pacific 22%
America 19%
Rest of World 1%
MARKETING
Gucci has adopted an international marketing strategy of communicating a consistent
image to its customers around the world. Guccis products and marketing methods are not
tailored according to any specific national needs or customs. It aims at reaching the
growing global market segment of the rich and newly rich. This group, as analysis shows
has a similarity of taste for luxury products.
DISTRIBUTION CHANNEL
The channels of distribution of Gucci products for its eleven leading brands are different for
each. It makes the products available to its consumers through a network of carefully
selected and directly operated stores. This type of network according to the company is the
best way to showcase Gucci products and convey their brand philosophy.
Guccis four main distribution channels are
Directly operated stores
Franchise stores
Duty-free boutiques
Department stores
In the United States, E-commerce has also become a valuable complementary channel.
The Group operates their stores directly in major markets throughout the world and in the
wholesale route offers their products to franchise stores, duty-free boutiques and leading
department and specialty stores.
Yves Saint Laurent uses not only directly operated stores but also points of sale in leading
department stores mainly in Europe to extend its reach of customers.
In 2008 the directly operated Gucci stores in Europe numbered 560.
Gucci: 212 , Bottega Vveneta: 91 , Yves Saint Laurant: 67 , Others: 78 , Total: 560

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Contribution of retail sales over wholesale has been gradually increasing over the past two
decades. In 2001 the ratio of retail to whole sale had reached 51% and47% respectively
whereas, in 1997 the retail sale was very marginal. The directly operated stores of Gucci
ensured the brands retain control over their products that could build their image around
these stores. About 70% of sales come from Gucci stores alone. A manager runs these
stores independently; bureaucracy is avoided resulting in efficient management of the
stores.

REVENUE BREAKDOWN:
Gucci generated US$2.4 billion worldwide in revenue in 2008 according to Business Week
magazine and climbed to 45th position in the magazines annual "Top 100 Brands" created
by Interbrand. Gucci is also the biggest- selling Italian brand in the world. Guccis total
revenue in 2008 was 3,380. 35% of its annual revenue (2,206 million) comes from
Europe. North America and Japan contribute 20% and 15% respectively. Moreover, the
operating profit remained relatively steady. 70% of its revenue comes out of its directly
operated Gucci stores.
For Gucci group as a whole the most important products are Leather goods which
contribute to 57% of sales, followed by shoes at 15%. Year 2008 revenue breakdown by
product category (%) is given below:
Ready to wear: 14.3%
Watches: 5.1%
Leather goods: 55.3%
Jewellery: 3.7%
Shoes: 15%
Other: 6.6%
Total 3,380mn
PRICES IN INDIAN MARKET :
The indicative prices of luxury items in the Indian market are provided below. The JV of
Gucci with Luxury Goods Retail will compete in the same product range where they are
likely to find a ready market. Gucci is of the opinion that given their global brand image and
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product exclusivity they would be able to price their products 50% higher than these
prices.



THE BUMPY ROAD?

Even as there is a sense of heightened optimism about the luxury brands market in India,
the fact is that the country still represents a very small percentage of the entire global
market for luxury brands. Also, the countrys rank in global competitiveness list has slipped
two notches to 51st in Global Competitive Report (GCR) of the World Economic Forum.
About 139 countries have been rated for different business criteria in terms of policies and
productivity. The global market stood at US $ 220 billion in 2007. Foreign luxury brands
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have realized that India is a nascent luxury market and there are still many challenges to
overcome.
Luxury brands have a minimum entry price point in each product category. Examples could
be Rolex, Cartier, Louis Vuitton, Roll Royce and so on. The next level of products including
fashion brands like Tommy Hilfiger and Ralph Lauren would largely fall in the super
premium or premium category. While the premium segment has seen some growth over
the last few years in the country, super premium and luxury segments have not seen
volumes getting even remotely close to make them economically viable. A recent study by
some multi luxury brands showed that average super-rich Indian spent less than one-third
of what an American family with same income in dollar terms spent on luxury goods. The
truth is that the wealthiest in India still maintain a somewhat austere lifestyle compared to
their global counterpart. They are not conspicuous consumers and spend conservatively
except for weddings. The country has recognized value in premium segment products
which are now available in large format stores. The market is not yet mature for luxury and
super-premium products.There is also a belief that a global luxury product is best
purchased overseas because it would be genuine and cost less. So, while Indians will
remain a large consumer target audience, the catchment area will be overseas markets
where Indians travel on business or leisure.
In spite of some luxury brands closing shop, there are many that have managed to expand
their presence after a certain number of years. It is widely believed that the segment has
potential for players with a long-term focus and staying power.
With an economy clocking one of the highest growth rates, with the worlds fastest growing
population that is also English speaking, a large and thriving black money running a
parallel economy and a culture seeped in festivals and gifting, India could be poised to be
the new Luxury logo land.
Luxury home, expensive car, the opulence of big fat wedding, fashion clothes and single
malt collection in the bar are all loud tell tales. There are still many challenges to overcome,
in retailing infrastructure and, in the absence of talented human resource. But then, so was
it for luxury cars, high-end mobile phones, LCD TVs and airlines.
All the 470 million Indians born after 1980 were born into consumerism and they present
too compelling a market for the luxury invaders to ignore.