Jul 1, 2020
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Gucci makes major cuts to wholesale network

Jul 1, 2020

"We won't hesitate to stop our activities with certain multibrand clients, if necessary," said Kering CFO Jean-Marc Duplaix when the company released its quarterly financial results in April. As for Gucci, the driving force behind the French luxury group, the brand looks to have taken a hacksaw to its wholesale activities. According to fashionmagazine.it, the label has reduced its network of retail partners by 70% in Italy. 

Gucci is looking to refocus on its company-owned stores - gucci.com

According to the Italian site, starting next season, the brand will be reducing the number of its retail partners in Italy from 110 to 38. When contacted by FashionNetwork.com, Gucci did not wish to comment. 

The strategy, which aims to reprioritise the label's direct-to-consumer business, a channel which already represents 85% of the brand's total sales, comes as no surprise, as it had already been announced by Gucci CEO Marco Bizzarri.

However, with the Covid-19 pandemic proving to be particularly trying for retailers, this process seems to have been accelerated, as suggested by Duplaix two months ago. "It's an opportunity for Gucci to reconsider its distribution, at a time when exclusivity will be even more essential than before. The house's priority was stated very clearly by Marco Bizzarri a few years ago when he spoke about the need to expand our own retail distribution and drive the development of online retail."

"We need to have a total revision of the brand's partnerships, and you can expect to see a decline in Gucci's sales in 2020," continued the CFO. 

Only Louis Vuitton, Tiffany and Chanel's distribution networks are 100% retail

Wholesale revenues currently represent 15% of the Italian brand's total sales, a similar situation to Hermès. At Valentino they represent 12%, 18% at Prada, Miu Miu and Bottega Veneta, 20% at Burberry, 32% at Celine and Givenchy, and 70% at Armani, according to data published by Bernstein analysts. Only Louis Vuitton, Tiffany and Chanel's distribution networks are 100% retail. 

The objective is to cut out the middle man. Prada, Burberry and Moncler notably set out on a similar path last year. "The trend of strengthening company-owned retail is a growing movement. It's a more robust sales model than wholesale, and allows companies to be closer to their customers, as well as more profitable," explains luxury industry consultant Jean Révis.

"Europe is the region that will suffer the most from the implementation of this strategy," added Delphine Vitry, co-founder of retail and customer experience consultancy firm MAD Network with Révis. "With the decline in tourism, the luxury market will be deeply impacted in Europe, and the entire sales network, including monobrand stores, which depend on very high rents, risks being profoundly restructured."

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