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Expanding Gucci Sets Sights on India

Indian consumers soon will be able to pair their silk saris with Gucci hobos by shopping locally.

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MILAN — Indian consumers soon will be able to pair their silk saris with Gucci hobos by shopping locally.

The Italian luxury goods house will open its first boutique in India, in Mumbai, this month. An opening party is slated for Oct. 13. Gucci also will open a store in New Delhi by the end of the year, followed by another in the same city next year.

Gucci chief executive officer Mark Lee cited India, together with China, as markets that have the potential to counterbalance the weakness of Japan for most luxury goods houses.

“We had been working on entering India for the past couple of years,” said Lee. “There is no question in my mind that this is an important market to develop, but it took time to identify the first location — this was our main challenge.”

The company has secured a location in Mumbai’s new Galleria shopping mall in Nariman Point. “It’s a very nice location, visible from the street, with windows on the Arabian Sea,” said Lee, who wanted to avoid positioning stores in luxury hotels, the most common retail destination for major brands until now.

The sprawling one-story, 3,400-square-foot boutique is modeled after Gucci’s latest generation of boutiques, such as Tokyo’s Ginza store, which opened last November. “However, there is no cookie- cutter approach — we always evolve and adapt our stores to the locations,” said Lee. For example, for the Mumbai boutique, Gucci has custom designed chocolate brown turbans for the staff.

The executive declined to provide sales projections, but said he was confident about business in India. “We have been working with Indian customers in other locations, and we believe India will become one of the most important markets,” said Lee.

He noted how the population has a sophisticated taste for luxury goods and shares a passion for fine jewelry and high-end accessories with more mature markets. “India is a good fit for Gucci,” said Lee. “We feel the excitement.”

Indeed, according to a global online survey of 23,500 consumers in 42 countries by ACNielsen, Gucci is the most popular brand among Indians, followed by Christian Dior.

This story first appeared in the September 25, 2007 issue of WWD.  Subscribe Today.

Echoing other luxury goods executives, Lee said India still lacks a strong infrastructure and has no history of organized retail — although steps are being taken to correct those limitations. And despite limited retail space, a knotty bureaucracy and high import duties and taxes, India is emerging as one of the most alluring markets for luxury goods companies. According to a study by luxury goods association Altagamma, consumption of international luxury products and brands in India is expected to triple in the next five years. In 2005, the total market size for upscale and luxury products in India was estimated at $14.8 billion.

The expansion in India fits in with Gucci’s overall strategy to further develop its business in the Asia-Pacific region. The company grew 20 percent in that market in the second quarter of 2007, driven by China, which showed 118 percent growth in the second quarter of the year, and Hong Kong. At Gucci, Japan is not under the Asia-Pacific division, but is treated as a separate market.

“Our global reach is a key success factor at Gucci,” said Lee.

Although the executive predicted China will become the most important market for the luxury industry in due course, he was optimistic about business picking up in the current market leader, Japan, despite the weak yen. The company is investing in that market by upgrading the quality of its stores and products. “Japan is our most important country in terms of retail business,” said Lee. Gucci has been present in Japan for more than 40 years, and 53 of its 227 directly operated stores worldwide are in that country. Tokyo is the largest retail volume city in the world for the firm.

In September, Gucci reopened its Tokyo Aoyama flagship after an extensive refurbishment. “We were pioneers in Aoyama in terms of retailing,” said Lee. The store opened in 1999 and the ceo said it was a “natural process to renovate it and bring it up to date,” as it had not been touched since the opening.

The executive said the changes were “not simply cosmetic” as the company has expanded the space to over 12,300 square feet from 8,000 square feet, adding a third story and expanding the ground floor.

In the fashion-forward district, Gucci has chosen to display merchandise by mood — casual, formal or evening — in a unisex format, so each floor carries both men’s and women’s pieces. “We’ve noticed couples like to shop together in Aoyama,” said Lee.

Highlights of the renovation include the three-layered facade decorated with dark bronze glass and a bronze metal mesh with a glittering surface; a 32-foot stainless steel screen that hangs from the third floor to the foot of the first, and a handrail on the staircase that displays a web-like design of matte nickel and gold, modeled after the facade of the Gucci store on New York’s Fifth Avenue in the Seventies. The rosewood furniture upholstered with velvet mohair was custom-made for the store.

The Aoyama store is one of three flagships for the brand in Tokyo, together with stores in Shinjuku and Ginza. Lee said he is pleased with the brisk business at the Ginza store, which opened last November. “It’s surpassing our expectations,” said the executive, noting it is by far the biggest unit by gross sales and Gucci’s number-one door in every single product category. Last year, Japan accounted for 19 percent of the group’s revenues of 17.93 billion euros, posting a 4.1 percent growth in “a challenging scenario.”

In Hong Kong, which Lee described as “still the heart of Asia-Pacific,” Gucci opened its ninth store in November, called Gucci Elements, based on the name of a new shopping mall in the city. The unit is the company’s largest store on one floor, covering 11,000 square feet. Lee said building the brand in China helps boost sales in Hong Kong, noting that 25 percent of customers in Hong Kong hail from Mainland China.

Gucci has been present in China since 1996. By yearend, the company will count 16 stores in that country, six more units than the year prior. All are directly operated stores. Gucci was also one of the first companies to open new stores in most of the second-tier cities in China, such Shenyang, Xian, or Qingdao.

To mark the reopening of Aoyama and the Elements store, Gucci has created a number of site-specific, limited edition accessories. In addition, Gucci schedules two seasonal big-scale events and fashion shows each year in Hong Kong to keep building the brand image in that market. “We are known for these events, our customers expect them from us now,” said Lee.

Citing “excellent performance” also in South Korea, Australia and Malaysia, Lee said a store opened in Ho Chi Minh City, Vietnam, this spring. “Vietnam is not at the same level as China or India, it’s an emerging economy, but sales in the new store have consistently surpassed our expectations,” said Lee.

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