Gucci Group

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  • Topic: LVMH, Gucci, PPR
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  • Published : November 6, 2012
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Technology and Innovation Strategy

Individual Assignment: “Gucci Group” (11/06/2012)

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Matteo Berzoini
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1. Provide a competitive positioning of the luxury industry back in 1990. How was Gucci positioned?

2. Which critical moves allowed De Sole to reposition Gucci?

3. What do you think about the acquisition of YSL and Sergio Rossi?

1. Market Worth and Composition: By 1999, the worldwide luxury goods market was worth $60 billion, with a sales growth rate of 6% per year. Overall, the sector was mainly composed by 35 companies, which accounted for about 60% of the market, plus a “competitive fringe” of smaller companies. Among the top players, six of them had revenues over $1 billion, the majority (15 to 20) had revenues from $500 million to 1 billion and the rest lied within the $100 million to $500 million dollar range. Products: The typical portfolio of a luxury goods company comprised seven main product categories: leather goods, footwear, high-end apparel, silks, watches, jewelry, perfumes and cosmetics. Most of these luxury companies were pursuing a differentiation strategy, by proposing different types of products that shared the same spirit of luxury and exclusivity with the brand, but tended to focused on just two or three of the categories mentioned above. Target clientele: The typical consumer of luxury goods ranges from wealthy and discerning women aged around 30-50 to younger (especially Asian and Japanese) girls, beginning around the age of 25. Ownership structure: Most of the luxury companies in the industry were Italian or French family-owned, single-brand firms (like Gucci, Armani, Prada, Chanel and Hermès). Louis Vuitton, which in the 1990s was already owned by the LVMH Group, represented one big exception. LVMH was a multinational conglomerate with a wide product portfolio, which included, aside from leather goods and fashion, also champagne, spirits, perfumes and cosmetics. Production: Most luxury companies shared a mix of three production strategies: in-house manufacturing, outsourced production and licensing. Among those, Hermès heavily relied on in-house production, mainly because its success stemmed from its unique craftsmanship techniques. On the other side, companies like Gucci, Prada and Louis Vuitton outsourced their production to small Italian/French firms in order to minimize their fixed costs. Pricing: Being the leather goods one of the most high-margin products among the companies’ portfolio, three pricing ranges could be identified: the high-end companies (top of the market) like Hermès, which were able to sell a leather bag starting from $4300, the middle segment companies (like Prada, Gucci and Louis Vuitton), with prices ranging between $600 and $1200 and the lower-end companies (like Ferragamo) which positioned themselves at the lower end of the luxury scale. Brands: Every company had its own brand “personality”, which was consistent with its pricing positioning and with the firm’s values, history and vision about fashion and luxury. Hermès, for example, with its unique, hand crafted, leather goods placed most of the brand’s emphasis on its traditional, elegant and classic image. Hermès was the exclusive brand per excellence, worn by the most rich and influential people in the world. One step behind there were Louis Vuitton and Gucci, with both firms heavily relying on their classic and stylish passed reputation: in the 1990s they were striving to maintain an exclusive relationship with an high-end, wealthy and mature clientele and, at the same time, to get attention from young and wealthy fashionistas asking for a “modern luxury”. Prada, on the other hand, decide to take a modern, anti-luxury take on luxury, by selling slightly cheaper and more aggressive/glamour products than its competitors. Gucci: To fully understand Gucci’s positioning in 1990, it must...
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