Unfavorable Environment, Lack Of Innovation, Gucci Three Quarter Decline

According to the latest third quarter financial briefing released by French luxury group Kering (Kai Yun), sales of Gucci brands as the core of group profits fell by 1.9% over the same period last year, though slightly better than the decline of last quarter's 2.4%, but it is still not optimistic compared with analysts' forecasts of less than 1%.

Gucci will be weak. achievement The performance is attributed to the overall slide in luxury consumption, but Reuters commentators believe that it should also blame itself. There are signs that Gucci is the time to change strategies and to replace fresh blood for management.

　　 Unfavorable environment

Affected by the expected slowdown in economic growth and political conflicts in the Middle East and Ukraine, the demand for luxury goods in China, Russia and Europe has declined significantly, and the performance of the world's major luxury brands has been hit.

The traditional big luxury brands have suffered more setbacks - luxury consumers, especially the engines of growth over the past few years, Chinese consumers are beginning to buy smaller brands that are not so easy to get and sell only at Limited outlets.

"I think some brands have suffered from market saturation and brand aesthetic fatigue in some markets, such as Asia," said Scilla Huang, Julius Baer's luxury brand fund.

In the past 3 to ten years, Gucci, Burberry and Louis Vuitton have been committed to reshape the brand unique aura of brand due to the huge expansion of the market in the late ten years of this century. A heavy number strategy has brought shareholders soaring, but has diluted the brand value.

According to the sales data, the other major brands seem to do better than Gucci in recasting their uniqueness.

　　 Gucci Sales in the past year have continued to decline, while Louis Vuitton has maintained growth despite the slow growth rate, while Herm s and Burberry have even seen double-digit growth.

Reuters finds two major problems from Gucci itself:

　　 Lack of innovation

Gucci's hot core product has been around the bamboo knob for decades, including the $4500 Python skin new backpack.

"You can't always rely on revitalization of past brands, you have to have breakthroughs in innovation," says Luca Solca, director of the luxury industry research at Paris bank. Saint Laurent brand designer Hedi Slimane, also affiliated with Kering group, is a successful example of innovation.

　　 Look at other brands' innovative efforts:

Herm s banned the re launch of the classic styles of the past. Its new design and its rarity for Kelly and Birkin bags helped the brand maintain its high-end image. As the most expensive luxury stock in Europe, its P / E ratio is 27 times (compared with Kering of multi brand luxury group is 15 times, and Louis Vuitton parent is LVMH 18 times).

Chanel designer Karl Lagerfeld has launched six new products every year, and has produced at least one best seller to maintain its brand advantage. In the last quarter, every pair of flashing sports shoes worth 1100 US dollars was sold out.

Louis Vuitton hired star designer Nicolas Ghesquiere last year. He recently designed a new "V" logo for LV's exclusive handbag series worth more than 2 million euros. Louis Vuitton also opened the Frank Gehry art museum outside Paris last month, releasing a limited number of leather bags designed by six art and design masters as a 160th anniversary souvenir.

In contrast, Gucci has been steered by CEO Patrizio di Marco and the nearly ten year old designer, Frida Giannini, from 2009.

Critics of some industries think that Gucci has been struggling to reshape the brand image created by the former CEO Demenico de Sole and the designer Tom Ford.

Tamara Mellon said, "after Tom left, they lost something special." Tamara Mellon has successfully molded Jimmy Choo into a global luxury shoe brand, and is now striving to build its own fashion brand.

　　 Price Increase too high

Another reason for Gucci customer churn is that the price increase is too high - over 40% over the past 4 to 5 years, which has shifted customers to more expensive luxury brands, such as Michael Kors and Longchamp in France.

Louis Vuitton also has a raise in price, but it has a better grasp of the price raising rhythm, and the replacement of the product mix is not so radical. Of course, as the Kering group's earnings report is more transparent than LVMH Gucci and provides the details of the performance of the major brands, the impact of Gucci's performance on the performance is clearer before the world, and there is no more detailed information about the Vuitton.

Similar to Gucci's situation, there are Mulberry and Lancel of the peak group, which have experienced a sharp drop in sales after a big increase in price.

Gucci will also have to clean up the wholesale network that affects sales revenue after the sale of the department stores has led to the loss of brand image. Louis Vuitton has never been offered a discount sale or wholesale products to any distributor.

Reuters believes that Prada may be the victim of the next brand fatigue. It has issued an early warning for sales growth this year. Prada is one of the most popular new stores last year, which makes analysts doubt whether it has yet been exposed to overexposure.