Magazine article Marketing

News Analysis: Profit at the Expense of Prestige

Magazine article Marketing

News Analysis: Profit at the Expense of Prestige

Article excerpt

Gucci's plans to promote its mid-range offering to beat a recession could damage its brand.

Once the preserve only of the rich, luxury is now reliant on a wide range of consumers, leaving the sector more exposed during a recession.

As consumers tighten their purse strings, luxury brands face a quandary: lower people's expectations to retain profit, or, as some experts suggest, preserve their uber-premium status, thereby reducing the risk of brand damage.

Gucci, which is owned by French retail group PPR, last week revealed plans to promote items with lower price tags to remind consumers that, in addition, to its high-end lines, it offers goods such as its famous handbags that are priced in the hundreds rather than the thousands.

While the initiative is too late to head off a drop in sales, it may prevent a further slide. For the three months to 31 March, sales of the brand fell 3.3% to EUR513m (pounds 402m). This compares with fellow PPR-owned brands Bottega Veneta and Yves Saint Laurent, which grew 25.2% and 14.5% respectively over the same period.

Gucci has advertised cheaper lines before, as an entry point to the brand, but this has been for its licensed goods, such as perfumes and sunglasses. Its core advertising, meanwhile, has favoured its more exclusive items. 'Our aim last year was to reinforce the high-end image of the Gucci brand,' said PPR chairman and chief executive Francois-Henri Pinault. 'But we let up the merchandising and advertising pressure on our mid-range products - a segment currently dragging down Gucci's momentum.'

Luxury for less

Pinault confirmed that his brand will now remind consumers that they can buy a piece of luxury without spending thousands, a strategy that could be followed by other brands in Gucci's sector.

While some analysts view the decision as an effective way of protecting a brand against recession, Ariane van de Ven, a strategist at Brandhouse, warns of the dangers of focusing on mid-range goods during a slowdown in consumer spending. 'By promoting its least inspiring products, such as its double-G logo goods, Gucci risks losing its luxury positioning,' she says. 'The top range represents the creativity of the brand and the advertising must reflect this.'

Moreover, by focusing on items with a prominent Gucci logo, the fashion house is in danger of falling into the category of logo-heavy brands. This is a mistake Burberry made a few years ago with its distinctive camel, red and black check print, which became associated with 'chavs' due to a flood of counterfeit goods, and led to a consumer backlash against the brand. …

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