Pestle analysis of Gucci. Gucci is an iconic luxury Italian fashion company. Guccio Gucci was the founder of the Gucci brand. He opened up his first Gucci shop in 1906. But in 1921, he formally established the company in Florence, Italy. A French conglomerate company, Pinault Printemps Redoute, bought the brand in 1999. Gucci is nowadays a subsidiary of French luxury fashion brand, Kering.
According to a study conducted by statista.com, the annual revenue of Gucci in 2019 was 9.63 billion Euros. Out of which the net income of the company was 1.56 billion Euros after excluding all the expenses. According to an estimate, conducted by spglobal.com, the net profitability of the company decreased to 569.3 million Euros. The pandemic of covid-19 has reduced the net profit of Gucci by approximately 30% in 2020.
Some of the main products of Gucci are makeup, ready-to-wear clothes, handbags, accessories, home decoration items, shoes, fragrances, and perfumes. According to an estimate, the brand has more than 520 luxury fashion retail stores worldwide. The company has employed over 13059 people at its retail stores to manage various daily operations.
Today, we’ll discuss the pestle analysis of Gucci that various macro-environmental factors impact the world’s iconic fashion brand. If you want to learn about the internal factors that impact its growth and profitability, checkout swot analysis of Gucci. Here’s the pestle analysis of Gucci;
Political factors Impacting Gucci
Asian markets like China & India
Although China and India are one of the top economies in Asia; but both of these countries have no clearly defined intellectual property laws. Gucci, on the other hand, spends millions of dollars on the training and development of its artists and creative team.
When a brand like Gucci enters into such a market without having any protection, piracy would jeopardize the functionality of the company. The investors of Gucci aren’t willing to take such risk of entering into such markets where their investment isn’t safe.
As we know that Gucci is a multinational luxury fashion brand and the company is operating its business worldwide. Then political influence like regime change and the political movement towards implementation of certain laws could have a very bad impact. Therefore, the brand has to keep an eye on the political environment of the country.
Import & Exports
Whenever a new government introduces new tax reforms, it ultimately impacts the consumer prices of the product. When the company increases the prices, the demand for the product increases or decreases depends on the economic circumstances. Gucci has had a very bad experience with import/export taxation, and it negatively impacted the growth of the company. If the brand can find cheap labor, then it would positively change the profitability of the company.
Economical factors Affecting Gucci
Economic circumstances like the living standards of the people and the purchasing power of the people play a very important role. For instance, Gucci has the reputation of following the price skimming strategy and buying high insurance. Resultantly, the GDP, living standards of the people, and buying power of the customers have improved because of the company’s efforts.
As a multinational brand, Gucci has to make many international deals with different countries and regions across the world. Speaking of international trade, the exchange rate of the country matters a lot. The stability of the currency is also very important. If the currency is weak, it would be difficult for you to convince the investors because it makes them suspicious and untrustworthy.
Less Buying Power due to Pandemic
The pandemic of covid-19 has locked people to their houses and shut down businesses. Many people lost their jobs and received minimum salaries during the lockdown. As a result, the buying power of the people reduced to a great extent. That’s the net income and profitability of Gucci has decreased by approximately 30% in 2020 compared to the last year.
Growth in Developing Economies
The economic circumstances are visible to everyone. If we compare the growth rate and profitability of the luxury fashion industry with other businesses, it’s much better. The growth rate of Gucci is comparatively very good if you keep in mind the pandemic and lockdown situation. The fashion industry of the Asian market has had great growth in recent years.
Social factors Impacting Gucci
Gucci has the status of being a luxurious brand and the company offers its products only to the elite class mostly. The brand has always delivered the best quality products like fur coats, leather bags, and other items to its customers. As a result, the company has created a strong database of loyal customers over the years.
Criticism by Social Activist
Many environmentalists and social activists have severely criticized Gucci for using animal fur and skin for coats and handbags. Some environmentalists have even claimed that the fashion industry is wasting scarce natural resources.
The young customer market is getting very cautious about environmental issues. If such claims and criticism keep on increasing, then it would be very difficult for the brand to attract new customers.
Rise of Middle/Lower Class
The economic circumstances are making it difficult for people to make both ends meet. The worldwide population comprises of middle and lower classes of people. Therefore, Gucci has to change its marketing strategy and start focusing on the middle/lower class people.
Endorsing Social Reforms
One of the most admiring and appreciating characteristics of Gucci is that the company is fair to its employees. The brand has proved its commitment to improving the lives of people across the world. Gucci has also raised its voice supporting gender equality, the emancipation of women, the health and wellbeing of children, and the protection of art.
Technological factors Impacting Gucci
Using Technology to Reduce Cost
Technology has improved a lot of processes like designing, production, distribution, and many other operations. If Gucci uses any of those advanced technological tools at its production facilities, then the company would be able to reduce various costs. Hence there’ll be more profitable for the company. Gucci has also recently opened up a call center in Florence to provide a more personalized experience to the customers.
The good thing about Gucci is that the brand is already active on different social media platforms and the brand has got millions of followers. The company should improve its online store like Amazon and Alibaba to increase the conversion rate.
Gucci is already working on various latest technologies to increase the efficiency of its logistics, production, and distribution systems of the company. For instance, the company has launch startup incubators to foster the culture of innovation and technology at the workplace.
Legal factors Impacting Gucci
Obeying the Laws
Gucci has a history of following the laws of different countries and delivering quality products across the world. The company also treats its employees fairly by providing them high salaries and annual tours.
The lawsuit against Forever 21
Gucci filed a lawsuit against Forever 21 and the Italian brand claimed that Forever 21 has stolen the green-red-green and blue-red-blue trademark strips of the company. On the other hand, Forever 21 said in its defense that the company uses different designs, ornaments, aesthetics, and decorative. It had nothing to do with the trademark of Gucci.
Litigation against Guess
Gucci also had a brutal litigation experience against Guess. It lasted roundabout for more than 10 years. It ended in the form of settlement between both brands.
Environmental Issues Affecting Gucci
Realization towards Eco-Friendly Material
Gucci has realized the importance of an eco-friendly environment. Now the company is fully committed to take all the necessary steps toward the protection of the environment and nature. The main and top objective of the brand is to find the environmental-friendly raw material.
This is the only way for Gucci to survive in an environmentally cautious market. According to the fashion and leather industry kills approximately 75 billion animals every year for various reasons. The brand has realized the concept of animal cruelty and it would take responsible steps to become a role model for other organizations.
After a careful study of the pestle analysis of Gucci, we have realized that the company has a strong market position even during the pandemic. The brand is also obeying the laws and regulations of different. I think that’s why the company has survived different periods in history.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.