Appeared In
Special Issue
WWD Milestones issue 02/23/2011

Gucci is expanding aggressively in Asia in an effort to tap into the region’s increasingly cash-rich consumers.

This story first appeared in the February 23, 2011 issue of WWD. Subscribe Today.

In just more than six years, the brand has rapidly increased the size of its network in Mainland China from just four stores to 39 boutiques. Beyond Beijing and Shanghai, it has penetrated a host of second- and third-tier cities, such as Chengdu, Dalian, Nanjing, Shenyang, Shenzhen and Fuzhou.

“In the last few years, we have grown tremendously both in terms of brand recognition and the number of stores in China,” said Patrizio di Marco, Gucci president and chief executive. “I believe that today, Gucci symbolizes a balance between fashion authority and luxury heritage, values that the increasing number of Chinese luxury consumers are seeking out along with the assurance of quality Italian craftsmanship that our Made in Italy label represents.”

One of Gucci’s highest profile openings came in spring 2009 when it opened a 17,200-square-foot flagship in Shanghai next to luxury mall Plaza 66. The five-story store features a massive golden glass facade and interiors of polished rose gold and smoked bronze glass.

“For Shanghai, I wanted to blend a modern architectural statement that fits with the contemporary feeling of the city, but also keep it firmly tied to iconic materials and elements from Gucci’s heritage,” creative director Frida Giannini said when the store opened.

The Asia-Pacific region is Gucci’s largest market, comprising 36 percent of full-year 2010 revenue of 2.67 billion euros, or $3.61 billion.

 

Sales in Asia, excluding Japan, rose 24.2 percent in the third quarter and 23.5 percent in the fourth quarter.

Of that total, sales in Greater China, which includes Hong Kong and Macau, advanced 31 percent in both the third and fourth quarters.

Gucci declined to give sales forecasts for the region.

“Today, Asia and especially China take on a greater importance,” said PPR chairman and ceo Francois-Henri Pinault, noting that 21 percent of Gucci’s 2010 sales were generated in Greater China — 11 percent on the Mainland. The latter figure suggests strong potential for expansion. “We are very far from maturity.”

Gucci also cited a sharp improvement in fourth-quarter sales in the Asia-Pacific market, which Pinault said is indicative of a “stabilization of the market.” Sales there spiked 23.5 percent in the period.

To be sure, store openings in the region are propelling Gucci’s revenue growth. For example, last year the company opened a 10,000-square-foot store in Singapore overlooking the city-state’s famed Orchard Road with a design concept mirroring that of the Shanghai flagship.

As of the end of 2010, besides the Mainland China shops, Gucci had nine stores in Hong Kong, three in Macau and 42 more elsewhere in Asia, excluding Japan.

Gucci, like most other luxury labels, has seen its sales dwindle in Japan as consumers cut back on spending against a backdrop of macroeconomic stagnation. Once a cash cow for luxury brands, Japan is posing serious challenges for Gucci and other industry players. The luxury brand is heavily exposed to that market with 59 stores in the country. That tops its French rival Louis Vuitton, which has 57 boutiques in Japan.

But recently, Gucci management said it witnessed an improvement in Japan in the latter part of last year. More specifically, fourth-quarter sales there rose 1.4 percent. That compares with a 9.1 percent drop in the third quarter.

In terms of full-year figures, Japan comprises 14 percent of the brand’s sales, making it Gucci’s fourth-largest market after the rest of Asia, Western Europe and North America. 

In 2006, Gucci opened an eight-story, 11,000-square-foot flagship in Ginza. The store also served as a debut for the brand’s first post-Tom Ford design concept. Although the Japanese market for luxury goods is hardly robust, Ginza is a prime shopping destination for Asian tourists.

“Japan remains one of Gucci’s most important markets and one in which there will be continued investment. In fact, in the last quarter of 2010 we have seen some encouraging signs of recovery, particularly in the month of December,” said a Gucci spokesman. “Japan is probably the market where the fine tuning of Gucci’s positioning, which has been under way in the last two years, will be most appreciated.”

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