GUCCI GROUP lags behind LVMH, with a hasty and confusing expansion strategy

Robert Polet, CEO Gucci Group

Robert Polet, the head of GUCCI GROUP, the third largest international luxury group, spoke about the international expansion of his group which relies heavily on the emerging markets. He advised that over 60% of the investments of his group are now focused on emerging markets, which account for 32,9% of all international sales (in 2009). Mr Polet indicated China as being a crucial market for Gucci Group for the coming years, special attention being paid to South America and Eastern Europe. Mr Polet advised that 32 new stores opened in emerging markets in 2009 and the expansion will continue.

Despite all these assurances, GUCCI GROUP’s international expansion of its luxury brands has been not only slower than all direct competitors but also lacking a clear and feasible strategy. Mid 2009, GUCCI Group has had to terminate its agreement with its strategic franchising partner in India and has formed another joint venture. Still, GUCCI has a reduced presence on a key international luxury market such as India, the newly formed joint venture making very slow progress. As for China, which is THE key luxury market of all major luxury brands, GUCCI GROUP brands, especially its leading brand GUCCI are behind other competitors such as Louis Vuitton. Even Italian luxury brand Ferragamo, which many do not consider as a competitor, operates twice the number of stores than Gucci in China.

As for Eastern Europe, which has been quoted by Mr Polet as a key market, the GUCCI brand still has few stores. Most striking is also the fact that, GUCCI is present in franchising in a key market such as Ukraine (second in size after Russia) while in the tiny market of Hungary has a directly operated store which has been the worst performing Gucci boutique in Europe in 2009.

Another such confusing strategy has been applied by GUCCI in Romania, where Louis Vuitton registered a turnover of EUR 3,1 million in a directly operated store of less than 200 sqm. It took Gucci more than 2 years ago to agree on a whole sale within a  luxury multibrand store, which is considered by all wealthy customers as offering the worst customer service in Romania. Recently, Romanian media has found out from the owner of the Athenee Palace Hilton Hotel that Gucci has agreed to open a franchised store on their groundfloor, the local partner being a company which has no previous experience in luxury fashion and accessories retail.

Such ”odd” policies and strategies are applied by GUCCI in Serbia, the fastest growing luxury market in 2008 and 2009, ignoring tens of monobrand franchise proposals for the reason that the ”market is not ready”. It will most likely take Vuitton to open in Belgrade (much like in Bucharest) for Gucci to finally understand the potential of the Serbian market.

Other Eastern European markets with luxury potential, where GUCCI is absent: Poland, Slovenia and Bulgaria.

Oliver Petcu