Kering SA (owner of Gucci – as well as Yves Saint Laurent, Bottega Veneta, Balenciaga, Puma etc) is currently experiencing it’s fastest sales growth in 4 years – in very mature fashion category.
The business grew by 6.9% to EU$12.385B from 2015-16 in a market where, according to Bain’s Luxury Index Report, sales were generating revenue of Eu$249B (-1%). As a side note a lot of this was driven by the Chinese customers slowing spend on luxury goods (this group represent 30% of the luxury market – the largest single consumer group, however most of their spend is outside of Mainland China with China itself only representing Eu$18B  that’s 7% of the total regional spend).
Anyway back to Kering.
A lot of this growth has been driven by the reinvention of Gucci (which represents approx. 33% of the groups sales and 2/3rds of it’s operating income). Gucci’’s revenue was +21% for the fourth quarter – which is double what analysts had anticipated.
The full year sales for the brand exceeded $4B euros (US$4.3B) for the first time (FYI they only opened 15 stores during this period taking their total footprint to 520 stores). Added to this Gucci has moved from a wholesale to retail model, where retail now contributes 83% of their total sales (+70% from ’09).
What’s that you say – a fashion company that’s not a pure play (aka. Amazon) or fast fashion retailer (aka H&M or Zara) – growing revenue in a mature market…and a mature company at that. (FYI Kering was established in 1963 and Gucci was established in the 1920s).
Yes.
So how did Gucci pull this off? 
Well, the growth of the result of some pretty counter-intuitive but very logical moves on behalf of Gucci’s CEO Marco Bizzarri.
Bizzarri was appointed in 2015 (prior to that he was the CEO of Bottega Veneta where under his leadership the brand doubled revenue), and as part of the reinvigoration of the brand he (+ his team) chose to focus on organic growth – and importantly on balancing the immeasurable (creativity) with the measurable (business). Something not many are able to do in the fashion business – where creativity can often been seen as a cost, not an investment; and in some cases it’s seen as the less ’serious part’ of the business because it doesn’t talk in numbers or tangible $$ outputs.
This is an industry where Einsteins quote certainly rings true – “not everything that counts can be counted”. 
To quote Bizzarri:”I think we got too used to growth and profitability (prior to his joining), and more growth and more profitability. That is obviously great, but ultimately profitability doesn’t always help the intangible value of the brand. So you can continue growing the business over two, three, four years, despite the fact that the brand might be losing momentum. At a certain point if the brand is no longer regarded as having value or influence by fashion’s opinion leaders, it is going to go down – not slightly or incrementally, but really go down, 20 percent or 25 percent.”
Underpinning this balance of art and business philosophy; are 3 steps the business took to turn itself around. It sounds simple, but let’s not confuse simple with easy…
Step 1: They identified their customer had changed, so their creative director had to also: 
Bizzarri identified that Gucci needed an image more inline with a new, younger luxury consumer. In order to translate this vision he did something incredibly counterintuitive (when everyone was betting on ‘celebrity designers’ like Nicolas Ghesquière, Riccardo Tisci etc) he chose a relatively unknown designer, Alessandro Michele.
 Mr Gucci - Alessandro Michele

No Name to Mr Gucci – Alessandro Michele

Michele, a ‘no name’ at the time, had been with the brand since 2002 (working under Tom Ford for a period), was chosen as the new creative director. Michele is now synonymous with Gucci and a star in his own right.
Michele developed a unique aesthetic for the brand, combining his unique understanding of the brand and it’s historical codes with a contemporary sensibility. This was only possibly because Bizzarri trusted him, to quote Michele (talking about the CEO):
Marco respects creativity and creative people. He understands that the power of a fashion company lies in its creativity. I mean, when we talk together about fashion he often says, ‘I don’t know, I don’t know, I don’t know…’ But he knows very well about fashion, and understands what is needed.”

Now that is a level of respect that exists between the art and science of Gucci.

Marco Bizzarri & Alessandro Michele

Marco Bizzarri & Alessandro Michele

 

Step 2: They reduced and rationalised their range to fit the new creative direction: 
Then Michele and Bizarre transitioned all main categories to the new brand aesthetic, reinterpreting the key iconic signs of the brands past with the new distinctive creative direction. The two key items being the Dionysus bag and the Princetown shoe – both of which are claimed to be the most successful Gucci product launches in terms of sales (we’ve seen so many copies of these).
All Gucci Everything: Dionysus Bag and Princeton Loafers

All Gucci Everything: Dionysus Bag and Princeton Loafers

They have gradually focused the range by substituting products that aren’t consistent with the creative vision, overall reducing the number of product numbers and variation in each store, balancing price clusters by rationalising entry price points. This sounds so logical, but very often brands expand their range to grow sales – something that inevitably leads to discounting, sales eventing and poor sales.
Step 3: They invest in upgrading their existing network, not opening more stores: 
Another seemingly counter-intuitive and yet oh so logical move, they choose to limit their store openings and instead invest in their existing network with the hope of driving organic growth. Basically, forget the inflated growth figure which you get when you open a new store. They aligned their store network with the new brand aesthetic.
Alessandro Michelle – the same man who created the produce, designed the store – creating a new store concept as well as tools that certain stores could use in place of a full renovation.
Gucci Updated Alessandro Look - Rodeo Drive Store

Gucci Updated Alessandro Look – Rodeo Drive Store

Added to this they finally looked at growing their e-commerce platform, something the luxury industry have been notoriously slow at doing. In the case of Gucci.com the vision is for it to meld brand narrative with e-commerce (aka not just another sales platform).
Sounds so simple, but as we all know sometimes simplicity is the hardest thing to achieve.
At the heart of the transformation is a culture of respect for art and commerce…
What underpins all of these steps is the genius of the creative direction of Alessandro Michele and the trust of a CEO in Bizzari. It’s the perfect marriage of art and commerce that has created this new Gucci. A place where brand love translates to actual sales. At it’s heart that’s culture.
To quote Bizzarri once again ‘I wanted to create a company in which one the most fundamental assets was respect and humility amongst its staff..Michele is an example of how I expect everyone to behave: respect other people, no harassment, no authority for authority’s sake’. 
The respect Bizzarri has for Michele and vice-versa is the key to the success of Gucci. Their relationship exemplifies that art and business together, not business above art, is the key to success in the world of fashion.

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Author Pippa Kulmar

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