The Second Wave of GUCCI Globalization Creates a Luxury Culture

In Tokyo’s bustling Ginza business district, passers-by looked up at the giant bronze screen on the Sony building and immersed themselves in the virtual image above—a gleaming building across the street.

Gucci flagship store opened a while ago, not only caused consumer attention, but also attracted the attention of the business community.

This dazzling store is decorated with sumptuous mahogany and travertine. The shop includes three handbags, two jewellery departments, a men's and women's clothing department, a café with Gucci chocolates, an art gallery and an event hall.

Gucci declined to disclose the cost of the store, but it is located in the world's most expensive location. A report released by the Japan Real Estate Institute in 2004 stated that the land price here is US$12,753 per square foot. A comparable building is the Prada store in Aoyama. The shop was built in 2003 and costs about 80 million US dollars.

However, although Ginza’s flagship store is one of Gucci’s biggest investments in retail stores, its real significance is that luxury retailers are beginning to adopt a department store-style strategy.

Goldman Sachs luxury analyst Jacques-Franck Dossin said: "This is the latest stage in the evolution of the retail approach."

“Thirteen years ago, luxury brands were withdrawn from third-party retail stores, such as department stores, in third-party retail stores and transferred to their own stores. Later, they began building eye-catching buildings for flagship stores.”

“Now, they are looking at adding new elements to the shopping experience and increasing brand connotation by shaping the brand's modern atmosphere.”

The second wave of globalization

Fran?ois-Henri Pinault, CEO of Gucci Group's parent company Pinault Printemps Redoute, said: "We think this is the second phase of globalization. At first, all stores It all looks the same; now, they are tailored to the local market.”

Earlier this year, The Future Laboratory in London conducted a study on American Express and concluded that "eagerness to experience" is the first priority for luxury consumers willing to be loyal to a brand. factor.

This is evident in the changing appearance of retail stores. From the Prada New York store (with its own cultural performance space) to the Louis Vuitton Paris Champs-Elysées Avenue flagship store (art gallery and bookstore), luxury brands are increasingly investing large sums of money. Note on this belief: Only products are not enough.

Mark Lee, CEO of Gucci, said: “The initial plan was to use two floors for retail stores and then add several company offices.” But after taking over the company in 2005, he decided to retail. Maximize space. "This seems to be a better investment."

Add cultural elements

The retail store’s business strategy has also changed, focusing on revenue while also focusing on brand communication. For example, Louis Vuitton allowed the Art Gallery of the Champs-Elysees store to open on Sunday, believing that it added a cultural element to the store.

Mark said that the "vertical structure" of the Gucci store allowed it to place cafes and promenades high and encourage customers to walk up the store. Art galleries and cafes create another attraction: Just as a new fashion collection can drive retail volume, an art exhibition or a new set of Gucci chocolate may also have the same effect.

Department stores are accustomed to having restaurants and cafes in the shops, but also high-end shops such as Borders and popular shops such as Colette.

The business model of luxury brands is the same: the longer you leave potential customers in the store, the greater their chances of spending money there.

Hugh Devlin, a partner with the law firm Withers, said: “Suppose you shop with your friends and they want to go to the Gucci shop for coffee. Even if you may not be able to go under normal circumstances, because you and them are Together, so you go." Withers specializes in the legal business in the field of luxury goods.

In Japan, encouraging consumers to develop this habit is particularly important. In the past decade, although Japan has been a vital market for luxury brands, the taste of consumers in the country has recently shown signs of change.

Dawson said: “Japanese consumers seem to be moving away from providing luxury brands that offer a full range of outfits. They may even think that wearing something that is not so expensive is cool.”

Mark said that Japan is Gucci's largest retail and retail market, which accounted for 22% of its global revenue in 2005. Therefore, it needs to try to extend the time people stay in the store.

The risk of losing the elite

But this strategy hides a risk that luxury brands face: losing the privileged position of elite class suppliers. Dawson said that since a luxury brand has opened a large store that attracts all visitors, it also creates “a huge hall for a wide audience. By definition, a wide audience is not exclusive”.

Of course, Gucci has been trying hard to dispel this feeling. It placed a high-end leather bag next to the entrance to the store, while a lower-priced canvas bag was placed on the second floor.

Customers can use coin trays, shoe pulls, and handbag poles when shopping. In the display of handbags, raw leather mats are spread out, while in the dressing room are Gucci-embroidered long coats. Purchase behavior is referred to here as the "sales ceremonies."

Mark Lee said: "One of the main goals is to showcase Gucci's most luxurious side."

Devlin said that with the Museum of Art (used to hold various exhibitions, such as displaying photos in Gucci's 85th anniversary album), the implied hint is that "Gucci is a taste maker and knows how to appreciate culture."

The risk of a store taking a cultural route is that it may give people a feeling of disappointment, he continued. “As an art exhibition space, they are not really big enough to play the same effect as galleries. This makes it show its original appearance - a marketing strategy.”

This advertising component is one of the reasons why luxury brands almost never mention "return" when they talk about flagship stores. Their value lies not only in the contribution to sales, but also in the fact that they have given the brand an extra boost that cannot be quantified.

Devlin said: "Only from a commercial point of view, this striking flagship store is indeed a failure. It is very difficult for them to recover their costs."

However, Louis Vuitton said that its flagship store in Champs-Elysees was profitable after less than one year of operation. In an interview with a magazine in 2003, Miuccia Prada claimed that her company’s large-scale stores “had almost crazy sales”.

  How to achieve profit

Gucci Group CEO Robert Polet believes that Ginza flagship stores can achieve profitability within 12 months.

"You spread it over the entire network," Devlin explained. "Profit is not the key. The object of investment is the myth of the brand. It makes people not only want to spend more money in this store, but also in other stores. ."

However, as Dawson pointed out, the economic effect is an unstable balance. Building some of these flagship stores may increase profits, but if you build too much, the investment burden will be too heavy, making the retail network unbearable.

When talking about Gucci, Mark pointed out that the Ginza store is likely to be the beginning of Gucci building a series of stores in different markets. From an appearance point of view, they will be different - depending on the specific environment they are in - but they will all adopt a similar multi-level retail approach.

At the same time, Polly said Bottega Veneta, one of Gucci's sister brands, is preparing to open his flagship store near the Gucci Ginza store in the coming months.

“The diversity approach will continue for some time,” Dawson said. “To a certain degree, I think we will see a new store concept. It may be more private, less focused, more Focused audience."

"But in our opinion, this is unlikely to happen in a very short period of time."

Devlin agrees. "It's just the most public expression of what we all know, that shopping is entertainment."

"If you can provide popcorn and carbonated drinks again - not to mention Gucci brand chocolate - "It would be better."