SWOT Analysis of Gucci 2020



Name Gucci
Industry Lifestyle and Retail
Founded 1921
HeadquartersFlorence, Italy
CEO Marco Bizzarri
Revenues€ 3,072.2 billion, 2020
Profit US$ 17.63 billion, 2020
CompetitorsChanel, Christian Dior, Burberry, Ralph Lauren, Prada

Company Overview

Headquartered in Florence, Italy, Gucci is a luxury fashion company. It was established by Guccio Gucci in 1921, and it was valued at $12.1 billion in 2013. Its revenues are more than $4.7 billion, reaching 31st place in the Forbes World’s Most Valuable Brands list. Its brand value is estimated at $22.6 billion, with $10.8 billion generated worldwide (Forbes, 2020). Today we are going to perform a detailed SWOT Analysis of the company:



Gucci Strengths 2020:


  • Brand equity and brand image.

    Gucci is a brand associated with a luxurious life. Forbes (2020) estimates its brand value at $22.6 billion in 2020, raking the 31st company on the list. 

  • Market presence.

    The company has numerous stores across the world. Although it is based in Italy, there are more than 200 stores opened in emerging economies, while only more than 100 in Western Europe. This strong international market presence is corroborated by the fact that they have the highest number of stores open worldwide compared to other luxury brands, according to Statista (2020). 

  • Product variety.

    The portfolio of products is incredibly vast, covering not only apparel, but also accessories, cosmetics, and many others. Other product collections, such as luxury handbags, are not the main source of revenue, as their clothing and style remain the tenet of their success, becoming the symbol of luxury.

     
  • Corporate social responsibility.

    Gucci takes part in numerous social responsibility activities. For instance, they founded the “Chime for Change”, a global campaign. In addition to this, the company puts its employees, suppliers, and the community on top of its priority list (Martin, 2020). They follow employability standards, provide appropriate working conditions, and ensure the safety of their workers. 

  • Workforce.

    Gucci’s main asset is its labor, highly trained through numerous development programs. Gucci invests massive amounts of resources to ensure the success of their human resources, so they are not only trained but also motivated to expand their achievements. 

  • Repatriation of demand.

    In 2020, Gucci’s revenues took a dip in the first months but increased by 44% in North America this quarter compared to 2019. Bain (2020) cites the group’s CFO who attributes this increase to the repatriation of demand coming from wealthy American tourists. 




Gucci Weaknesses 2020:


  • Media criticism.

    Gucci has been the subject of scrutiny due to their ad campaigns. They are accused of using female sexuality and using unhealthy standards. For instance, Straus (2016) states that they were banned by the Advertising Standards Authority of Britain because of a marketing campaign that had unhealthily thin models. 

  • Counterfeiting.

    As with any other luxury brand, Gucci’s products have been counterfeited for many years, especially in developing countries, and they had numerous trademark disputes (Sundar, 2019). What is more, this problem is still actual and it is not likely to disappear in the future, as Lieber (2019) argues. 

  • Continuous development.

    Companies in the fashion industry must continuously develop and innovate. They need to change, update their product lines, and make sure they offer new collections that reflect consumer’s preferences and tastes, keeping up with changing trends. The main issue is that it does not only require a strong change culture, but also financial resources. 


Gucci Opportunities 2020:


  • Industry growth.

    Fashion will never cease to exist, no matter what the future holds. Statista (2020) shows huge growth in the next years, remaining one of the most important industries. Even more, Caminiti and Rosenbaum (2020) state that the industry is expected to reach $51 billion by 2023, growth mostly attributed to millennials and Gen Z. 

  • Emerging markets.

    India and China are now hot spots for luxury brands, as growing income thresholds and the population who wants to become more like the West shift their attention to European and American brands.


     

Gucci Threats 2020:


  • Substitution.

    Even for a luxury brand with premium products, Gucci is still threatened by the abundance of substitute products. Its main competitors, such as Chanel, for instance, can provide similar products regarding quality and sustainability. 

  • Competition and rivalry.

    The fashion industry faces fierce competition, perhaps even more compared to other industries. As a result, it can become extremely challenging for the company to maintain its competitive advantage and expand its market share. For example, Gucci has been directly threatened numerous times by Christian Dior, Burberry, and Ralph Lauren, and this competition can be detrimental to the company if they are not continuously innovating. 

  • Legal landscape.

    The government laws and regulations can be changed at any time. These might materialize into revenue drops or brand damage for the company, either directly or indirectly, especially considering increasing customer awareness regarding fair practices. 

  • Revenue drops during the pandemic.

    Due to the coronavirus pandemic, Gucci reported a drop of 12% in its revenues during the third-quarter sales because of the absence of tourists in Asia. On the other hand, Hermes, the French brand selling high-priced handbags reported a 4.2% increase at the same time in Asia (Dalton, 2020). In addition to this, the company was also hit by the closures of production facilities in Italy, where the pandemic hit first on the European continent.

Image Source: Statista

  • Exposure to risks.

    Gucci relies upon its popularity in China, and the company exposed itself to major disruptions due to the virus. Another risk in the current societal landscape is that customers might change their taste in fashion. 


Gucci SWOT Analysis Conclusion:

  • All in all, Gucci is one of the main luxury brands on the global market. Despite this, they are faced with numerous threats, mostly raising concerns due to their major revenue drops in 2020, while some of their competitors managed to have more stable, or even increasing workflows. The company’s main strength, namely its brand image across the world, should be leveraged in order to capture more market share in the emerging economies, such as China and India, and further, diversify their revenue streams. Fortunately, there is a positive trend in the American economy, but the management should implement a diverse array of strategies to mitigate these risks.





References

Bain, M. (2020). The latest trend in luxury shopping: buying in your home country. | Quartz.

Caminiti, S. and Rosenbaum, E. (2020). Coronavirus and luxury retail: Shopping for used Hermes, Cartier in Covid era. | CNBC.

Chavie Lieber (2019). Instagram is flooded with fake Louis Vuitton, Gucci, and Chanel. | Vox.

Dalton, M. (2020). Gucci Struggles as Pandemic Keeps Tourists Home. | Wall Street Journal.

Forbes, (2020). Gucci [online]. | Forbes

Felsted, A. (2020). Bloomberg – Are you a robot? | Bloomberg.

Lu, G. (2020). The Most Valuable Luxury Brands For 2020. | Boss Hunting.

Statista (2020a). Apparel: market growth rate worldwide 2020 | Statista.

Statista (2020b). Topic: Gucci. | Statista

Straus, E. (2016). Gucci Advertisement Banned in Britain Because of “Unhealthily Thin” Model. | Time.

Sundar, S. (2019). Gucci Goes After Alleged Counterfeiters in New Suit. | WWD.

Wright, G. (2020). Sales plunge at Gucci owner Kering amid Covid19 | Retail Gazette.

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