Case Study

Decoding Gucci’s
Merchandising “There’s something

Success
happening. It is the link
between business and
creativity. And the more
I work in this business, the
more I think it is less and less
numbers-driven and more
and more product-driven.”
— Marco Bizzarri, 2015
By Chantal Fernandez and Hannah Crump

How can a luxury brand stay in the zeitgeist without abandoning its distinctive point of
view? BoF examines the business case for Alessandro Michele’s chaotic, wide-ranging
collections in an era where culture and trends are more fragmented than ever before.

businessoffashion.com September 2019

Executive Summary
At the start of the Marco Bizzarri and Alessandro Michele era at Gucci in 2015, industry analysts
wondered if the brand would break from the aesthetic of the ultra-sexy Tom Ford Gucci era, which
had been continued by Ford’s successors long after he had left the business in 2004. But the
leaders recognised that culture had changed radically in the intervening decades: sexuality
and gender were increasingly fluid, and the internet had turned niche interests into mass market
trends with much shorter lifespans. Michele’s fantastical design lexicon came at exactly the right
time, providing a rich world of escapism for the luxury shopper that was a near-instant hit and has
managed to continue to captivate shoppers.

Key to Gucci’s success is a simultaneous creative and merchandising strategy that has shrewdly
brought equal attention to short-term fads and staple products which, under Michele and Chief
Merchandising Officer Jacopo Venturini’s control, feel part and parcel of the same universe.

While the approach led to dramatically fast growth in the first years, sales have started to slow
down in 2019, decreasing 2 percent year-over-year in North America in the second quarter
of 2019. During the same period, the sales growth rate in the Asia Pacific region also slowed to
23 percent versus 47 percent the prior year.

In this case study, BoF examines Gucci’s powerful merchandising strategy and explores how
it has driven record-breaking growth, while also addressing the challenges Gucci faces now as
the mega-brand starts to lose its “cool” factor and slow down in growth.

Have you been forwarded this Case Study? Read more deep-dive analysis by exploring a BoF Professional membership at
businessoffashion.com/memberships or contact professional@businessoffashion.com

businessoffashion.com 2
 Context
More is More
“The idea from the very When Marco Bizzarri was named chief
executive of Gucci in December 2014,
beginning was to have the brand was in dire need of a refresh.
While Gucci represented half of Kering’s
product that is exclusive revenue, sales had been falling and years
had passed since the Florentine leather
but to create a culture goods maker was a star brand in luxury
of inclusivity.” fashion, as it was during the Tom Ford
and Domenico De Sole years in the 1990s.
Marco Bizzarri Ford’s Gucci era was defined by a
glamorous, unsubtle sexiness that initially appeal to as many of those fragments as
shocked consumers accustomed to a more
aristocratic vision of the brand. But the
approach brought in a new audience, and
sales more than tripled between 1994 and
1996. When Ford departed in 2004, he
was succeeded by Alessandra Facchinetti,
who left less than two years later, and then
Frida Giannini, who successfully led the
brand for almost a decade without setting
a new creative vision. But by the time she
was dismissed at the end of 2014, Gucci’s
sales were beginning to slide — down 1.8
percent year-over-year. The brand was no
longer a leader in the industry.
“[Giannini] is no instigator of trends or
ideas. In fact, she seems firmly against
them,” said critic Cathy Horyn in the
New York Times in 2010.
When a newly appointed Bizzarri started
to formulate a plan to bring Gucci back
to the forefront of fashion, he recognised
that a continuation of Ford’s template
was no longer going to work. Culture,
consumer expectations and shopping
habits had changed radically since the
the Tom Ford days. A new consumer
generation, and those who shared their
“millennial mindset,” were demanding
transparency and trust from brands with
clear values, and looking to their peers
for recommendations more than ever
before. Traditional ideas of masculinity
and femininity were changing, as was the
nature of gender and sexuality. China’s
luxury goods market dipped in both
2014 and 2015. Department stores were
struggling to attract customers who were
turning to online multi-brand players.
Perhaps the biggest change was reflected
in how the internet had fragmented
culture. Once upon a time, the singular
power of the high-fashion runway and
the glossy magazines that reported on
them six months later were the driver
of fashion trends. But thanks to the
explosion of social media, which had
businessoffashion.com
disrupted traditional media, shoppers
were increasingly looking to style bloggers,
celebrities and friends for inspiration on
what to buy and how to dress.
“The idea from the very beginning was to
have product that is exclusive but to create
a culture of inclusivity,” said Bizzarri
in 2018. “The differentiating factor is
inclusivity.” Gucci’s new approach would
require producing an offering that could
possible — a quick, palpable change that
would be a signal to both the industry and
the consumer.
“I decided to anticipate the exit of Frida
to accelerate the change,” Bizzarri told
BoF in 2015 about bringing in a new
creative lead ahead of the Autumn/Winter
2015 menswear show. “If we waited until
the women’s fashion show at the end of
February, I would have lost six months.
Six months for Gucci today is too long.
I wanted to create a kind of disruption.
The world today is going so fast. We are in
the digital age and six months today are
not six months before. Gucci was in
a moment where it needed to make a big,
big statement.”
The industry was indeed shocked when
Bizzarri hired the otherwise unknown
Michele for the mammoth task of leading
Gucci’s next creative era, and that Kering
would rest the fate of such an important
brand on anyone but a star designer.
By backing a long-time Gucci insider as the
brand’s next creative leader, Bizzarri bet
on an unproven and radical rethinking of
the Gucci aesthetic — a maximalist, ornate,
gender-bending, romantic point of view —
that marked a new era at the brand as soon
as the first model walked down the runway
in January 2015.
Michele’s vintage-inspired “more is
more” approach, meaning every model
was accessorised and mixed and matched
to what felt like the maximum potential,
went counter to the dominant themes
in fashion at the time, in particular the
stark minimalism of Phoebe Philo’s
Céline. From 2008 to 2017, she turned the
underperforming brand into an influential,
distinctive fashion authority known for its
casual separates and unfussy, cool aesthetic.
“The idea for the [first] two shows was:
don’t think about being commercially
viable. Make a statement that’s going to
3
Context
the extreme. Then, you can fine-tune it
afterwards,” Bizzarri told BoF in 2015.
The first collections were certainly a
different kind of extreme from what
fashion was used to at the time.
Indeed, Michele brought a vision to
Gucci that was anything but understated.
“I am trying to cause a little revolution
inside the company—to push another
language, a different way to talk about
beauty and sexiness, which is an old
word,” he told Vogue in 2015. “It’s about
sensuality now. When I started the first
collection, I was thinking not in terms
of fashion but in terms of attitude… that
sense of beauty which I tried to find for
an old and beautiful and charming brand
like Gucci.”
Culturally, Michele’s vision of a magical
fantasy world came at exactly the
right time. His first two years on the
job were marked by a rise in populism
and a sharpened sense of identity
politics goaded by disinformation
online, protests and moral judgements
of political enemies. Consumers were
eager for the escapism and optimism
of fur-lined loafers, rainbow pleated
skirts and sweaters embroidered with
the face of a lion.
Michele’s Gucci was embraced by critics
for its personal nature, vintage-inspired
design and romantic styling. Others
described it as anti-luxury, as in not
pretentious, and anti-sex in its modesty
and androgyny.
Exhibit 1: The Creative Eras of Gucci
The luxury brand’s annual revenue surged under the creative direction of Alessandro Michele.
Gucci Annual Revenue (USD, billions)
1994: Tom Ford promoted to creative
8 director, and Domenico De Sole
named CEO the following year.
6 2004: Alessandra Facchinetti
appointed creative director
of womenswear.
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Gucci Group, PPR/Kering, Getty Images
businessoffashion.com
The new design approach was also
strategic: it enabled Gucci to absorb and
“Consumers were eager for
reflect the ebb and flow of trends through the escapism and optimism
its own lens without wiping the creative
slate clean and starting again. of fur-lined loafers, rainbow
“The mega trend today is not about pleated skirts and sweaters
exclusivity,” Bizzarri told investors in
June 2018. “The exclusivity could be about embroidered with the face
a product, but the exclusivity of a brand
is something very different. Today, what of a lion.”
is going to win is inclusivity of the brand,
in all the aspects — shops, advertising,
communication and people, especially.”
Gucci positioned itself as a community in
its campaigns and on social media, a club
that consumers looking to claim a sense
of belonging could join.
As Michele’s collections started to
reach stores in 2015 and 2016, shoppers
responded with wholehearted approval.
Sales on a comparable basis grew 13
percent in 2016, after two years of
virtually no growth, and began surging
in 2017 with an increase of 45 percent.
“What is absolutely important? We never
target an age,” said Bizzarri in 2018. “We
didn’t want to target the millennials.
We didn’t want to target a specific age
bracket. We always wanted to target a state
of mind. And that’s the reason why all the
age brackets are growing… But it very much
is cross-generational appeal. And that to
me is the one that is creating a difference
versus anybody else in the industry.”
2006: Frida Giannini named
creative director of both
womenswear and menswear.
2015: Marco Bizzarri becomes CEO
of Gucci and names Alessandro
Michele creative director.
4
Strategy

Merchandising
Newness

How did Bizzarri’s strategy take shape in

Michele’s vision and Gucci’s product offering?

Fashion is, by definition, temporal and sneaker — trend-driven items are a

reflective of changing seasonal desires
for, say, high waisted jeans instead of
low-waisted ones. In some value market
segments, these trends can last a few days,
a few months or years. If a brand misses
out on a major trend, its sales can be
weakened for multiple seasons.
For luxury brands that depend on the
sales of a core group of largely unchanging
product from season to season — in Gucci’s
case, a logo belt, a leather loafer, a white
frisson on top of the core offering that can
provide cultural relevance and buzz and
help a brand remain front and centre in
the cultural conversation. But playing to
trends can also pose a risk if it cheapens
the integrity of a brand, and makes a
consumer less likely to buy a staple item
that they no longer consider timeless.

businessoffashion.com 5
 Strategy

Inclusivity is the New Exclusivity

Luxury brands are constantly balancing The brand is “very ready at the right
“The ability to please between multiple poles; they must moment when something is becoming
various different embody the zeitgeist without appearing
to chase it, and underscore their brand
mainstream and is becoming desired or
needed from a consumer perspective,”
appetites in terms of identity with safer pieces that remain in order to capitalise on trends. It’s an
constant from season to season, without approach that allows the brand to appeal
consumers makes Gucci boring consumers. to more than just millennials.
a brand that is, in some Gucci’s goal is to create as wide ranging a “If you break it down piece by piece, you
reflection of existing and potential trends see that anything can be sold at a very
ways, contemporary as possible, playing to as many potential high level,” said Bizzarri of Michele’s
consumers as possible. Not just boundary- collections in 2018, when he explained
and traditional” pushing millennials, but also conservative how the brand is careful to combine
fans of the brand for decades who may not fashion and commercial products in its
Mario Coletti
choose to buy an embellished loafer, but advertising campaigns.
see a backless style of the staple shoe as
their own kind of stylistic risk.
“The ability to please various different
appetites in terms of consumers makes
Gucci a brand that is, in some ways,
contemporary and [at the same time]
traditional,” said Mario Coletti, UK
managing director of Nextatlas, a company
that uses artificial intelligence to analyse
trends across social media. Coletti said
that consumers recognise Gucci, but don’t
connect that brand identity to a specific
product or category, making its wide range
of entry point products more relevant.

Source: Getty Images

businessoffashion.com 6
Strategy

Evolution Not Revolution

In order to maintain momentum, Gucci

Exhibit 2: A Game of Balance needed to deliver more than the maximalist,
campy, vintage-inspired trend it ushered
Gucci underscores its brand identity with safe pieces that remain constant into fashion. It needed to play to the trends
season on season, while balancing the offering with trend-driven products
infiltrating the rest of the fashion market in
for less conservative fans of the brand.
a way that felt on brand, and in line with the
aesthetic that defined the way a fragrance
campaign was photographed, or influencers
were dressed together at the Met Gala.
Fashion Orientated Classics Key to that strategy was Jacopo Venturini,
chief merchandising officer, who joined
Gucci from Valentino in March 2015,
and has an unusually close partnership
with Michele and Bizzarri that has been
critical to the brand’s success. Venturini
works alongside Michele’s design team
to create more commercial versions of
his handbags and shoes throughout the
design process, instead of doing so after
the fact based on crunching the numbers
of what has worked previously, as is more
common throughout the industry.
“The way in which merchandising [at
Gucci] was managed in the past was very
much figures-orientated,” Bizzarri told
BoF in 2015. “I had tonnes of data. I mean,
if I asked how the handbags were doing,
I had 2,000 key performance indicators!
The strategy was very much [orientated]
to the figures and less to the feeling or
sensibility of the product. So I decided to
change the structure of merchandising
and hired [Jacopo] from Valentino. I
really wanted to work with him, because
I saw that he was so into the product, the
sensibility of the product.”
“What I didn’t want was for Alessandro to
do the collection, and then at the end of the
season say, ‘the bestsellers, you need to
do [them] in a different colour, a different
size,’” he continued. “It’s too late. You need
to do it together with them. And together,
the three of us, we need to meet like this.
Because of course, if someone is [just] going
to protect his vision and say, ‘I won’t show
you what I’m doing,’ that is something that
cannot work any more today. Especially for
a big company like ours.”

Source: Getty Images

businessoffashion.com 7
Strategy

As a result, simpler pieces still feel

authentically part of Michele’s vision, not a
secondary line of watered-down products.
“All these pieces became best sellers,” said
Bizzarri at a meeting with investors in
2016. “But these pieces are completely
aligned in terms of aesthetic to the looks.
So, this is not a commercial collection or
an image collection. The collections are
completely blended together and they give
the same coherent message.”
Each collection includes about 30 percent
“new” product, and 70 percent “carryover”
product, but the designation is a dynamic
one, meaning new styles can become staples.
“Newness… is fashion driven or
functionality driven,” Bizzarri said to
investors in 2018. “Some of this newness,
according to the product, can become a
carryover afterwards. And some of the
carryover that is more slow can go out. So
this way of managing very actively and
proactively is, to me, a big asset of the way
which merchandising is managed today.”
Indeed, Bizzarri described the
partnership between the brand’s
“The collections are
creative and merchandising functions completely blended
as “the only way in which we can really
expand and attack different sectors and together and they give the
different consumers.”
same coherent message.”
According to data from Lyst, many of the
Gucci items that made the top ten list by Marco Bizzarri
ranking each quarter were logo products
— corresponding with the rise of the logo
trend — including the Gucci logo leather
belt (one of the brand’s most successful
entry-point products) and slide sandals
that featured a floral motif mixed with
the brand’s interlocking G pattern.
Gucci has bet on trends that have staying
power and generate high interest, like
florals, animals and 1970s-inspired style.
But the brand has also invested in less
popular or faster-fleeting trends, like
logo-mania, hats and headscarves and
1980s-inspired style.

Exhibit 3: Gucci’s Merchandising Model

Gucci has innovated on the traditional relationship between the merchandiser and creative
director to enable a closer relationship between commercial and runway collections.

Collection Development Customers

Creative Director

Expresses Develops
creative vision runway looks
Merchandiser

Conceives commercial Estimates sales and

Expresses customer,
product lines quantifies stock to Product to distribution
market and business
collaboratively with achieve planned sales channels
insights
creative director and profit margin

businessoffashion.com 8
Conclusion
Losing the Limelight
€ 10 B
Gucci’s annual revenue
target for 2020
—2%
in Gucci’s North American
comparable sales in Q2 2019
—34%
in Earned Media Value in H1 2019
compared to H1 2018
Source: Gucci; Tribe Dynamics
businessoffashion.com
Since Bizzarri and Michele took over
Gucci, the brand has become the
industry’s standout success story and
industry leader. Revenue has more than
doubled since 2014, thanks to a sharp
uptick in 2016 — less than two years after
Michele presented his first collection.
The transformation is a remarkable
accomplishment that has required
a cultural evolution inside Gucci’s
organisation in order to move quickly
and capitalise on the brand’s momentum.
The brand executed a shrewd digital
strategy that encouraged the sharing of
organic content created by consumers on
social media and highlighted a new type
of influencer — often lesser-known artists
and other creatives who collaborated
with the brand, lending it an authentic
emotional resonance that is a key part to
success in fashion today.
Michele’s vision for Gucci was a critical hit
and, after an initial spike, it was inevitable
that consumers would grow tired of the
approach without continued “newness.”
Still, Kering’s goal for Gucci was ambitious:
In summer 2018, the company announced
that it had its sights set on €10 Billion
in annual revenue, making it one of the
largest luxury fashion brands in the
world by 2020. Gucci profits also grew
at a remarkable rate, with earnings
before interest, tax, depreciation and
amortisation tripling between 2014
and 2018 to €3.5 billion, making up 76
percent of Kering’s overall profits.
But in 2019, Gucci’s revenue and profit
growth began to slow, with sales on a
comparable basis rising 13 percent in the
second quarter of 2019 versus 40 percent
the same period the prior year. During the
same period, North American comparable
sales for the brand decreased 2 percent. Its
earned media value decreased 34 percent
in the first half of 2019 compared to the
first half of 2018, according to data from
Tribe Dynamics.
Scandals that threatened Gucci’s diverse
reputation have also slowed down the
brand. The 2019 North American sales
slide came after the brand was criticised
for selling a balaclava sweater that
resembled blackface. It proved to be even
more controversial than 2017 accusations
that Gucci had copied Harlem designer
Dapper Dan’s designs in its Resort
runway show. The brand apologised and
championed Dapper Dan as part of its
community, helping him reopen his atelier
and collaborating with him on collections.
The recent decelerations are signs that
Gucci’s ability to create trends and
dominate the fashion conversation
is coming to an inflection point. Can
its trend-inclusive strategy work long
term? Will its distinctive identity lose its
appeal? What happens after it reaches
€10 billion in revenue?
Best case scenario, Gucci’s new staples
like the Dionysus handbag, Ace sneaker
and Princetown leather loafers keep
fuelling sales while Michele continues to
excite shoppers with seasonal surprises,
like hiking sneakers and gold metal
ear coverings.
One brand that has gone on a similar
journey is Burberry. Even though the
British brand is a much smaller company,
and not always traditionally considered
luxury by its European peers, Burberry
became one of the most innovative and
fastest-growing fashion brands under the
leadership of creative director Christopher
Bailey and Angela Ahrendts between 2006
and 2015. Revenue soared 27 percent in
2011 and 24 percent in 2012. It was the first
brand in the industry to use social media
and the internet to rethink its marketing
and connect with shoppers.
But its creative and communications
strategy eventually stagnated and
grew stale, and its competitors caught
onto its digital tactics. Sales waned
after Ahrendts left in 2014 and Bailey
took on the dual leadership role. The
brand perception grew muddled and
the Burberry creative formula became
predictable. In March 2018, the brand
hired Riccardo Tisci as creative director.
Tisci brought a radically new brand
identity to Burberry, introducing a
new monogram and playing to multiple
consumer segments, including streetwear.
While his designs have appealed to young
shoppers, it remains to be seen if Tisci
can bring Burberry back to the centre
of the fashion conversation. Perhaps the
brand waited too long in the afterglow
of its peak to take action on the kind of
serious creative change required to push
the brand forward.
9
Conclusion

The lesson for Gucci in this case is twofold. Can Gucci’s trend-inclusive merchandising
One is that the tools that have pushed strategy work in beauty, where trends also
the brand above its peers — not just its play a pivotal role? Early signs are positive:
trend-inclusive merchandising strategy, Coty said it sold more than 1 million Gucci
but also its influencer relations and lipsticks in the first month they were on
gender-fluid point of view — will inevitably sale, and that one unnamed store in Asia
be co-opted by others. Gucci will need to sold 33,000 lipsticks.
stay vigilant about the efficacy of its retail,
Lipstick is just the first step: makeup is a
communication and creative strategies
massive opportunity for them, especially
before a slowdown becomes a multi-year
given how much Gucci has embraced
problem that will be challenging to fix.
changing ideals of beauty.
In the meantime, Gucci has untapped
The brand will need to capitalise on the
growth in two key categories: fashion
opportunity before Gucci loses the peak
jewellery and, most importantly, beauty,
of its limelight. With a merchandising
the latter of which brings in €400 million
strategy that continues to introduce
in annual revenue through fragrances
the right kind of new product and new
only. The brand expanded into makeup
categories, Gucci’s growth rate will likely
with Coty with the release of a first line of
normalise to that of its leading peers, like
lipsticks in May, and could look to Chanel
Chanel and Louis Vuitton. The key is to
— which analysts estimate generates more
avoid going stale.
than $3 billion a year in beauty — as
a model. The luxury giant’s beauty line
works in part because it is the only real
entry point for its products, which offer
less of a price range in ready-to-wear and
accessories than Gucci does. Makeup and
skincare are competitive, particularly
among the big luxury brands, but are also
booming markets with fantastic margins.

Exhibit 4: Can Gucci’s Growth Be Sustained? Exhibit 5: Gucci’s Battle for Social Media Dominance

Gucci’s growth rate and EBITDA increased dramatically Gucci tops the luxury industry in Earned Media Value,
after the relaunch but slowed in the first half of 2019. but its lead is narrowing.

Growth rate (%) Comparable Revenue Growth Earned Media Value (USD, millions) Chanel
EBITDA Growth Gucci
70 500

60
400

50

300
40

30
200

20

100
10

0 0

-10
2014 2015 2016 2017 2018 H1 2019 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019

Source: Kering Source: Tribe Dynamics

businessoffashion.com 10
Additional Reading
• The Business of Fashion, Burberry Plots Life After Bailey
• The Business of Fashion, Marco Bizzarri on How Gucci’s Company Culture Fuels Business Success
• The Business of Fashion, Reinventing Gucci
• The Business of Fashion, The BoF Podcast: Marco Bizzarri on China’s Role in Gucci’s $10 Billion Plan
• The New York Times, At Gucci a Messy Exit for One Designer Opens an Unlikely Door for Another
• The Wall Street Journal, As Gucci Tripped on Social Media, Sales Fell
• Vogue, Inside the House of Gucci: Meet the New Creative Director

businessoffashion.com 11
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