GUCCI: OPPORTUNITY FOR GROWTH When Gucci hired Frida Gianni as its creative director in 2006, she helped grow the brand by emphasizing the labels rich heritage and promoting the sexual aesthetic that it had become known for. By 2014 however, the brand was in crisis as critics complained that Gucci collections lacked creative content and the company experienced a steep decline in profits. This disappointing financial performance resulted in the abrupt departure of both the CEO and creative director, which left the company without a clear creative direction.1 At the beginning of 2015, newly appointed CEO Marco Bizzari was faced with the task of renewing the brands image and ensuring that it regained its dominance at the top of the luxury fashion market. GLOBAL FASHION INDUSTRY OVERVIEW The global personal luxury goods market reached sales of over $300 billion in 2018 and is characterized by many competitors aggressively vying for market share.2 Demand for luxury goods worldwide continues to rise, fueled by a rebounding US economy and strong demand in Asia. Consumer shopping is typically split between online sales and brick and mortar retail stores that sell either a single flagship brand or multiple luxury brands. The majority of luxury sales still takes place in physical stores and many well-known brands like Louis Vuitton and Chanel have pursued a strategy of global expansion through opening and operating their own boutique outlets. Over the last decade, almost all the major luxury brands have made significant investments to boost sales via their e-commerce platforms. In fact, online sales are expected to continue expanding and represent 25 percent of the global luxury market by 2025.3 To maintain foot traffic, traditional brick and mortar luxury retailers are using technology, such as virtual reality (VR) to provide customers with enhanced experiences in-store. The majority of individual luxury brands are owned by large conglomerates and the luxury fashion market is divided into a number of distinct segments. Although the haute couture segment is the smallest, for many fashion houses it is the most important since it caters to societys elites and allows designers to showcase their most exclusive collections. The larger ready-to-wear segment consists of lines that are more widely available to wealthy consumers and are typically sold at upmarket retail outlets. In order to increase their appeal, some fashion houses had also started targeting the high-end segment of the market with more affordably priced product lines. This was especially appealing to younger consumers who had less disposable income but were attracted to the image of the brand.4 COMPANY HISTORY Gucci is an Italian luxury brand of fashion and leather goods founded in 1921 by Guccio Gucci in Florence, Italy.5 From scarfs to bags, the brand quickly established a reputation for their unique designs and became a favorite of the celebrity community. In 2000, the company survived a hostile takeover bid by LVMH Mot Hennessy Louis Vuitton and was ultimately purchased by the French holding company Kering. After decades of strong growth however, by 2013 the brand appeared to have lost its creative edge with declining sales leading to the departure of its CEO and creative director. Responding to rapid changes in preferences among consumers in the luxury goods was imperative given Guccis significant contribution to Kerings overall revenue.6 In January 2015, Marco Bizzari was appointed President and Chief Executive Officer of Gucci, after serving as CEO of Kerings Luxury Couture & Leather Goods division. He was given the responsibility of reinvigorating the Gucci brand and recapturing its marketplace position as an exciting modern brand that could appeal to millennial consumers. It was not clear to industry observers however, what this new brand position would entail and what image the company would embrace. Many of those decisions depended on the new creative director that was hired. As a signal of the changes happening at Gucci, Bizarri showed his willingness to break with tradition by hiring Alessandro Michele, who had been with Guccis creative department since 2002 and was known for his eccentric maximalist taste.7 Although Michele did not have as much experience as other candidates for the position, he understood Guccis culture and the nature of the fashion industry. This decision was pivotal since it would significantly impact Guccis performance and the long-term perceptions of the company. Gucci also invested in revitalizing its online presence, which in 2014 had slipped to 41st in the rankings of the best global brands.8 This compared unfavorably to other fashion brands like Yves Saint Laurent and Louis Vuitton that had embraced e-commerce and aggressively expanded their digital and social media presence. In the face of this changing digital landscape, it was obvious that Gucci needed to develop an effective digital strategy in order to remain competitive. Bizzari was also contemplating whether Gucci should introduce a more affordable line of products to target millennials, who represented a growing share of the market. This strategy had worked for other brands but Gucci had always resisted this approach to avoid diluting its exclusive brand image. COMPETITORS Some of Gucci's top competitors are other major luxury fashion brands like Burberry and Louis Vuitton. It also competes against other fashion brands owned by the Kering group such as Yves Saint Laurent. One of the top Gucci competitors, Burberry is a British iconic brand founded by Thomas Burberry in 1856. Burberry is well known for its distinctive check pattern and has a strong reputation for innovative designs. The company is also a digital pioneer and the brand is sold in over 400 stores worldwide. The companys strong brand value and sophisticated digital marketing strategy has enabled it to achieve global brand recognition.9 Headquartered in Paris, France, Louis Vuitton is considered one of the most dominant luxury brands in the world. The company produces an assortment of products including leather goods, handbags, ready to wear collections and fashion accessories. Louis Vuitton cultivates a celebrity following and is renowned for its collaboration with prominent artists and designers to create special edition collections. In additions to its iconic designs, the company is known for its strong stance against persons producing counterfeit imitations of its products and has actively pursued litigation in several markets to protect its intellectual property rights.10 Dolce &Gabbana was established in 1985 by Domenico Dolce and Stefano Gabbana. Their collections identified by their great style which are reflective of Italian tradition. Their portfolio consists of high-end clothing, fashion footwear, stylish watches and assorted accessories. The companys unique designs and reputation for innovation has attracted a loyal following. The company however, faced a major backlash in 2018 after airing a racially tinged advertising video that offended many Chinese consumers and led to the cancellation of one of their fashion shows in Shanghai 11 Established in 1909, Chanel was primarily known for its haute couture collection and high prices relative to other luxury brands. The family-owned private company was much smaller in size when compared to other luxury conglomerates such as Kering and LVMH.12 Although Yves Saint Laurent began in 1961 as a haute couture house, it quickly established a strong presence in the luxury ready-to-wear segment. The brand was strongly associated with the concepts of youth, freedom and modernity which was reflected in its collaboration with cool artists like Daft Punk and Andy Warhol. Yves Saint Laurent has also invested heavily in social media to develop a loyal brand community and promote products on its e-commerce platform. 13 In recent years, the luxury fashion industry has experienced lost sales or diminished brand excitement due to the growing prevalence of counterfeiting. Chinese companies in particular have been accused of producing ready-to-wear collections that display brazen thefts from big name brands like Gucci and Prada. Through innovative use of social media, fast-fashion companies such as Forever 21 have built up a solid customer base and disrupted the luxury retail market. These companies have also been able to bring their collections to market faster than the original brands. Operational efficiencies, affordable prices and brand positioning allow these companies to offer affordable alternatives to the original high-end brands and led to growing commercial success.14 Turning things around at Gucci in the face of increased competition and falling sales thus represented a significant challenge for the new management team.

1. What are Guccis strengths and weaknesses compared to competitors in the luxury goods market?

2. What actions should Marco Bizzari take to compete more effectively with other luxury brands?