Reuters :
Gucci holds the luxury spending downturn mainly responsible for its poor performance but the Italian fashion brand may also have itself to blame, suggesting it could be time to change strategy and hire fresh talent.
Every major luxury goods maker has been hit by the worst spending slump in five years as concerns about economic growth and conflicts in the Middle East and Ukraine hampered demand from the Chinese, Russians and Europeans.
Big brands have also been suffering from consumers’ growing appetite for smaller, less widely distributed labels, particularly in key markets such as China, which was the luxury goods industry’s main growth engine until 2012.
“I think for some brands there is a saturation and a brand fatigue issue in certain markets like Asia,” said Scilla Huang Sun who runs the Julius Baer Luxury Brands Fund.
Gucci, Burberry and Louis Vuitton, part of industry leader LVMH, have all worked hard in the past three to five years to rebuild the aura of exclusivity they lost by going too mass market and milking the label too hard in the mid to late 2000s. The volume-based strategy made shareholders rich but also diluted the brand.
Based on sales performance, some big fashion labels, such as Louis Vuitton or Hermes, appear to have done a better job than Gucci at rebuilding or supporting that exclusive image.
Gucci’s sales have been steadily declining over the past year while Louis Vuitton’s revenues are still growing, albeit in low single digits, and Hermes-which always kept volumes under control-together with Burberry, are still enjoying sales growth of more than 10 percent.
Prada could be the next victim of brand fatigue, having warned that it expected no sales growth this year. Prada was one of the brands that opened the most shops last year, leading analysts to wonder if it was not starting to be over-exposed.
Analysts and investors say Gucci got rid of too many accessible items and on average, raised prices too much. They also mention lack of innovation, which affects brand desirability and ultimately investor sentiment and growth prospects.
A spokeswoman for Gucci’s parent Kering, which also owns Saint Laurent and Bottega Veneta, maintained it was “satisfied with Gucci’s upscale strategy that is underway,” making reference to its third-quarter sales presentation.
Gucci holds the luxury spending downturn mainly responsible for its poor performance but the Italian fashion brand may also have itself to blame, suggesting it could be time to change strategy and hire fresh talent.
Every major luxury goods maker has been hit by the worst spending slump in five years as concerns about economic growth and conflicts in the Middle East and Ukraine hampered demand from the Chinese, Russians and Europeans.
Big brands have also been suffering from consumers’ growing appetite for smaller, less widely distributed labels, particularly in key markets such as China, which was the luxury goods industry’s main growth engine until 2012.
“I think for some brands there is a saturation and a brand fatigue issue in certain markets like Asia,” said Scilla Huang Sun who runs the Julius Baer Luxury Brands Fund.
Gucci, Burberry and Louis Vuitton, part of industry leader LVMH, have all worked hard in the past three to five years to rebuild the aura of exclusivity they lost by going too mass market and milking the label too hard in the mid to late 2000s. The volume-based strategy made shareholders rich but also diluted the brand.
Based on sales performance, some big fashion labels, such as Louis Vuitton or Hermes, appear to have done a better job than Gucci at rebuilding or supporting that exclusive image.
Gucci’s sales have been steadily declining over the past year while Louis Vuitton’s revenues are still growing, albeit in low single digits, and Hermes-which always kept volumes under control-together with Burberry, are still enjoying sales growth of more than 10 percent.
Prada could be the next victim of brand fatigue, having warned that it expected no sales growth this year. Prada was one of the brands that opened the most shops last year, leading analysts to wonder if it was not starting to be over-exposed.
Analysts and investors say Gucci got rid of too many accessible items and on average, raised prices too much. They also mention lack of innovation, which affects brand desirability and ultimately investor sentiment and growth prospects.
A spokeswoman for Gucci’s parent Kering, which also owns Saint Laurent and Bottega Veneta, maintained it was “satisfied with Gucci’s upscale strategy that is underway,” making reference to its third-quarter sales presentation.
