During 2022, when sales of Gucci were slowing down, I wrote several Future of Luxury columns on the luxury brand, dissecting its strengths and, in particular, its weaknesses.
The exit of former CEO Marco Bizzarri — who is one of the luxury executives with the best track records, and who was credited by François-Henri Pinault, Kering chairman and CEO, as having “masterminded the execution of Gucci’s outstanding growth strategy” — comes at a time when the brand seems to have lost its direction and confidence. Following the departure of Alessandro Michele, advertising campaigns and initiatives have lacked emotional storytelling, reminding me of Gucci’s last underperforming period, before the appointment of Bizzarri as CEO.
One of the biggest achievements of the Bizzarri-Michele era was in bringing Gucci’s storytelling back. When Tom Ford stepped down, Gucci had started to lose its luster as it was focusing too much on product and heritage while neglecting its customer-centric brand storytelling — a story of being against conventions and celebrating the freedom of individual expression. Over the last five years, I have used Gucci in many of my luxury master classes and MBA programs as a best-in-class example of brand storytelling, which contributed to the house’s hype and meteoric growth in recent years.
Gucci became one of the most dynamic brands, leading the change with an all-gender focused MX collection, sustainability initiatives like abandoning fur, and campaigns that were inclusive in terms of age, skin color, and sexual orientation. While Gucci did not invent brand collaborations, it went all in and pushed cross-fertilization to new heights with its hacker project with Balenciaga. Among them, “Human Gucci,” K-pop star Kai, became the human reincarnation of the brand and started a trend that others followed, including launching his own capsule collection that created a buzz across Asia.
However, during the last two years, I have been increasingly approached by investors and analysts of the sector who are increasingly concerned that Gucci is focusing too much on attention-grabbing collaborations that may in fact devalue the brand, like collections with Adidas or Disney. Their concern is that these initiatives draw aspirational clients to the brand, who may buy one or two items but then don’t return or become price sensitive. Because of the assortment and client mix, Gucci may be more exposed to the risks of a recession than some of its competitors.
Another concern is Gucci’s strong dependency on the Chinese market, which has slowed down significantly based on the latest GDP growth numbers.
Additionally, I often hear that the brand’s rapid growth made it too ubiquitous without a consequent higher-priced and limited-edition strategy that draws VICs to the brand in the same way as Louis Vuitton is able to do. As a result, to many, Gucci became too big too fast, too dependent on fashion trends, and not as relevant in high-priced leather goods and accessories as its competitors.
I remember a few conversations with industry observers saying that Hermès is leather and accessories first, adding a bit of fashion, while Gucci is perceived too much as fashion first, adding some accessories and leather goods. While all of these are individual observations and opinions, they may provide pointers towards what the brand needs to focus on in order to grow in revenue and margins.
On June 29, HSBC downgraded Kering to “hold” from “buy.” According to Vogue, HSBC analysts commented: “Despite the group announcing a new designer for Gucci, with Sabato De Sarno joining this May and his first products likely to be available in stores at the very back end of this year or early next year, some investors will question if this is going to be enough to reignite the Gucci brand. Some investors are clearly asking for a change of Gucci CEO even if that leads to a brand reset with margins being cut before any rebound is seen.”
In my opinion, one of the most critical tasks of Gucci’s new management is not to forget who the brand is and not falling into the trap of trading in brand storytelling for pushing products. Luxury is about a human connection, and creating extreme value for clients. This requires brands to be master storytellers, to innovate and inspire.
Storytelling was Gucci’s biggest strength. The product portfolio can and probably should be recalibrated towards more exclusive items, more intricate craftsmanship, and more innovation in materials, finishes, and styles that wow the audience. But the most critical thing for Gucci now is to stand for something in a bold and unapologetic way, to have swagger and ignore conventions.
If Gucci can regain its confidence and pair this with products that excite and inspire, its future will be bright. It’s a brand admired by Gen Z and in an excellent position to grow as Gen Z’s influence increases. This is a lesson for all luxury brands: In the face of adversity and challenges, your core values should not change. What needs to change are the expressions of your values. Brand storytelling was never as critical as it is now.
Source : JINGDAILY