Luxury consumption: Gucci's response to recession

In my earlier blog in July (http://pauravshukla.blogspot.com/2008/07/luxury-consumption-will-it-really-be.html) I had stated that Luxury consumption will not affected as much globally by this recession. However, within the last six months the market performance of luxury companies has made analysts shift from one end of the pendulum to another.

As many consumers look to cut costs for all their expanses to cope with this downturn, one would expect their overall spending patterns to be adversely affected, with the luxury goods segment being one of the hardest hit. However, Robert Polet, chairman of the Gucci Group disagrees with most views. While he agreed that consumer psyche vis-à-vis buying behaviour has taken a hit, he believes that his company is in the business of selling dreams – and you can’t put a price tag on a dream. These views were captured in one of his interviews at INSEAD business school.

“People buy our brands because they want to be a part of a particular dream… So people before going into the store, they decide ‘I would like to be part of that dream.’ And that is an emotional decision. It’s an aspirational decision for many. And they’re seduced when in the store; they’re seduced by the product, by a really desirable product that you cannot resist … This is not about selling bags or shoes or ties or suits. This is about ‘Would you like to be a Gucci man or a Gucci woman?’”

Polet stated that Gucci will take a less reactive approach to this recession rather than tackling the crisis head on. This meant Gucci will not change its broad strategy but make several tactical changes only.

“Let me just reaffirm the importance of actually sticking to your strategy because the strategy that you build around brands is the strategy for the longer term. You manage brands for a long life or longevity, so you don't sort of whisk them around every quarter or every year or every two years, and that is come hell or high water I would say. But you know what, times change and there are things that you need to adapt to and in the short term – change your tactics.”

Polet is now counting on Asia to cushion the Gucci brand from the shock waves of the ailing economy. Gucci has already opened 24 stores in China while it had none just four years ago. “I'm absolutely convinced of it and it's actually happening as we speak. Asia is delivering its part of the portfolio that we knew that it would deliver.”

The three things I stated in one of my earlier blogs (http://pauravshukla.blogspot.com/2008/07/luxury-consumption-will-it-really-be.html) and (http://pauravshukla.blogspot.com/2008/08/managing-luxury-brands-in-recession.html) about mass consumption of luxury, global travel and the Asia impact still seem to be working.

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