The Keys to the Success of Gucci’s Turnaround
2015 was a turning point for Gucci. The storied luxury retailer experienced sluggish sales dating as far back as 2012. In 2014, the year leading up to a change of the guard at Gucci, Gucci’s operating profit dropped by 6.7% and revenues fell by 1.75%. “It went from an internationally recognized leader in fashion and became more provincial and product focused,” said Mr. Amed, from The Business of Fashion. “It was no longer a brand that would create ripples of influence in the industry as it once had under Tom Ford. When you lose creative influence, the numbers and money eventually catch up.”
Not wanting to continue on a downward trajectory in 2015 Gucci brought in a new CEO, Marco Bizzario and appointed Alessandro Michele as Creative Director. The duo injected much needed creative, inspiration and life into the brand with a focus on the millennial consumer. Fast forward to 2019 and Gucci’s reputation is intact and so are sales. Gucci’s sales were up by 16% in 2019 versus the prior year to reach $9.6 billion, quite a remarkable jump from the $3.5 billion the brand generated in 2014. If you are curious about how Gucci managed to turnaround its business and get back on top here are eight keys to its success you should consider.
1. Recognizing the power of millennial consumers. Many luxury brands shied away from millennial consumers in the past because they do not have the same buying power as older consumers. Instead Gucci followed a strategy of aggressively pursuing the millennial demographic. Speaking about this Bizzarri said: “the Gucci customer has changed radically over the last four to five years because we have become strongly dependent on millennials, who are warming to the lexicon.”
Focusing on millennials has fueled Gucci‘s growth while Prada, for example, has struggled in regions like China. "I believe this is the most important divide between brands like LV and Gucci [and Prada], who have adapted their marketing mix faster and more effectively to millennials," said Luca Solca, Luxury Analyst at investment firm Birnstein.
2. Creating a winning social media strategy. With 40.4 million Instagram followers Gucci has the most followers out of the top luxury brands. Gucci’s use of social media has been key to its growth. Gucci’s is able to translate its creative prowess into a social media presence that cuts through the noise with bold colours and vibrant imagery that allows its account to standout.
“Our approach, both in terms of product and visual campaigns, is to do something that is unique,” Bizzari says. “The point is that if you are able to spontaneously and genuinely talk to millennials in a way that they can see really comes from the heart, you are talking their language.” “Now that Instagram is the definitive medium for discovering fashion, traditional luxury brands like Gucci and Louis Vuitton have adopted the defining characteristics of streetwear, finding bold logos and exclusivity to be key to reaching younger generations," said Benjamin Schneider, a research analyst at Euromonitor International.
3. Taking risks. After his appointment as CEO, Bizzarri hoped to change the brand’s fortunes when he hired a relatively unknown designer, Alessandro Michele. Michele was not the run of the mill choice. Instead he was known for his maximalist designs, focus on streetwear and was described by Vogue magazine as “daring”.
The risk paid off. Michele went on to win a Council of Fashion Designers of America award, one of the most prestigious awards in the fashion industry. “Another explanation for [Gucci’s success over Prada] is the more gradual evolution in Prada’s designs, while both Gucci and [Louis Vuitton] have embraced more aggressively streetwear aesthetics (and have hired fresh design talent to achieve that),” said Solca.
Gucci’s turnaround was so successful that in three short years after Bizzarri and Michele joined the company, Gucci made Fast Company’s list of most innovative companies in 2018.
4. Not getting stuck in the past. Often brands and people alike deter their success by focusing on what made the successful in the past instead of realizing to achieve long lasting success you have to continually innovate. “The company was really losing speed and was a little bit dusty,” Bizzarri said speaking about the time when he joined Gucci. “There was too much emphasis on heritage. I wanted to move the company to be more inclusive, more joyful, full of more energy.” Michele was key to this by focusing on maximist designs and mow that trends have shifted Gucci is focusing more on a minimalist aesthetic.
5. Effectively changing its culture. Many turnarounds fail because employees aren’t on board with the new direction of the company. Instead of supporting it they can undermine it in many small and large ways. Bizzarri recognized the potential for this to happen and said: “changing the aesthetics was the easy part, since Alessandro had a clear idea of what he wanted,” Bizzarri says. “It is changing the culture among the employees that was hard.”
When talking about the importance of culture Bizzarri has also referenced management guru Peter Drucker by saying “culture will eat strategy for breakfast.”
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6. Knowing how to foster creativity. Brands, especially luxury brands, live and die by their creativity. Creativity is what gets consumers excited year after year and inspires them to buy more. Bizzarri’s philosophy for instilling creativity at Gucci is for employees to be more lighthearted. During his first leadership meeting after taking the helm at Gucci, Bizzarri told his team: “we need to remember that we are in fashion, we are not saving lives.”
He has also said that: “if you don’t take the work too seriously, you can experiment with things that people are not expecting. On the other hand, by taking it too seriously, you tend to replicate things you have already done, trying to be safe rather than innovative.” “I wanted to have a company culture to be one where emotion and creativity were at the front and business followed,” Bizzarri says. “A place where creativity is foster by joy, by happiness. This is a perspective that I shared with Alessandro.”
True creativity often involves creating something that is different than what currently exists. To do that true innovators often stay away from customer feedback at least in the beginning of the design process. Steve Jobs once said: “it's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them.” Bizzarri also said something in a similar vein when he said: “we listen to the customer on a daily basis, but you cannot focus too much on what they want when you want to change your business.” “The changes we made were so disruptive and different from what they were expecting, and consumers tend to prefer what they are used to. For this reason, when you begin to do something new, you need to protect the creatives in your company (from too much interference).”
Bizzarri also avoids discussing sales with Michele so that Michele can focus on harnessing his creative instincts without getting distracted.
7. Knowing what you know and what you don’t know. In 2017 Gucci set up a Millennial Shadow Committee consisting of people under the age of 35. The committee provides valuable insight from people within one of Gucci’s key customer demographics. Speaking about the group, Bizzarri said that the committee is "either discussing the same topics that we discuss in the normal meeting with executives, or giving me ideas on different processes." Bizzarri also has lunches with employees under the age of 35 were he asks them: “to give me three ideas of what we should do to improve the life at Gucci.”
8. Embracing technological change. Luxury brands for the most part have not been known for technological innovation. Many have actually resisted offering eCommerce claiming that it is too difficult to replicate the luxury customer experience online. But Bizzarri, from the time he arrived at Gucci, believed that technology was an asset. “I was optimistic about technology because I saw the possibility of delegating the most boring tasks to technology and spending more time on doing the things that I like, like being creative,” says Bizzarri. Gucci has made a number of state-of-the-art tech investments in areas such as supply-chain management, sales forecasting, merchandising, and voice assistants for in-store salespeople which has helped the brand to stay ahead of the curve.
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