Research
Interview Synopsis

Kering – Gucci’s slowing momentum in China

  • Public Equity
  • Consumer
  • Greater China

This is expected to be a strong year for personal luxury goods, with an industry expert predicting an average growth rate of around 20%. However, the picture is not so bright for Gucci, particularly in China.

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Gucci growth “slowing down quite unexpectedly”

Gucci as a brand is growing in China, with positive sales growth, but “momentum is definitely not as strong as some of its major competitors like Louis Vuitton”, the senior executive at LVMH Fashion (Shanghai) Trading Co Ltd said. After 30-35% growth in Q2-Q4 2019, Gucci is expected to deliver around 15% in Q1 2021. 

The specialist offered three reasons for the slowdown, including the need for a brand refresh, designer brands such as Valentino winning customers from the megabrands and Gucci’s business composition “imbalance”. They also noted that young consumers are increasingly buying products that will last longer, four or five years, spurring a trend towards handbags. “Gucci is not far behind, but Gucci is not the top of the top choices for young people in China when it comes to handbags.”

How Gucci could offset its slowdown, particularly in China, was also on the agenda. Hiring stronger brand ambassadors and leveraging technology to penetrate the market and target “invisible” customers were highlighted as key approaches.

Online growth in 2021-23 relative to total growth was also discussed, with it being noted that “in China the strategy is definitely to get more online”. However, “you need to do something fun, something new, something exciting on the internet to organically attract young consumers”.

The expert is also bullish about beauty growth, but added that consistency is imperative. “I think you need to be in the business longer than fashion,” they said. “Gucci has a strong presence in its fragrance game, almost as strong as Dior, but that cannot be their only game for fragrance and cosmetics, so they need to build more.”

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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