PESTLE Analysis of Gucci

Gucci belongs to the fashion industry and is a renowned brand across the globe. The company is located in Italy and is famous for manufacturing range of high-end items including clothes, handbags, jewelry, watches etc. PESTLE analysis of Gucci includes exploration of the environmental factors and their impact on the company operations and sales.

Political Factors

First and foremost, political stability is considered to be a major source of growth for an organization. Moreover, the decision to continue with the business operations in a country is guided by the level of political strength of the region. The war instigated by Russia has resulted in the decision of Gucci management to cease its operations in Russia (O’Connor, 2022).

Manufacturing process of high end fashion requires sustainable trading relations as supply of the raw materials is managed from different regions around the world. Trading sanctions and deterioration in the trading relationship can disturb the flow of raw materials and finished good for Gucci.

The company is selling its products in international market, and its revenue and profitability is affected by the level of tax that is imposed on its products. A high level of tax applied on the import of fashion brands would eventually effect the price at which the product is available in the market. A high tax would result in higher price which may discourage people from purchase.

Economic Factors

Recession and rising prices carry implications for different organizations as the increasing price requires higher capital input to manage company operations. In addition, inflation results in revised prices that reflect the adjustment of the impact of higher cost of operations ranging from procurement to sales.

Even though the recession during 2008 and 2009 was expected to have a significant effect on the sales generated by the high-end luxury company, Gucci has been able to perform better than the forecast. In a similar way, inflation has not been able to result in any significant decline in the demand for its range of products.

One of the reasons that despite inflation, the sales and demand has not shown any major changes is that the affluent target market has not been impacted by the rising prices (Hartmans, 2022). In fact, Gucci has been able to achieve a 20% increase in the revenue, despite the ongoing inflation. However, the continued inflation has resulted in an eventual decline in demand.

Social Factors

The demand for high end luxury fashion items is highly dependent on the affordability and income of the consumers. The wealthy status is a driving force behind the demand for Gucci products. The taste and preference of people and perception regarding a luxury brand as a symbol of status encourages the affluent target market to purchase these products.

Gucci has been able to identify the changing needs of its target market and developed products that were aligned with the preference of its millennial consumers (Primo, 2018). It has been noted that 50% of the people purchasing products from Gucci comprise millennial and Generation Z, suggesting the successful market presence managed by the company.

One social factor that has negatively affected the sales of the fashion giant is COVID-19. People traveling to other countries and purchasing high end luxury items while on visit were restricted during the pandemic and couldn’t travel or make purchases. However, after the pandemic, Gucci has been able to increase its sales and traveling restrictions were removed.

Technological Factors

Technology has created significant changes in the way fashion industry and luxury fashion brands connect with the consumers. Gucci has been able to gain benefit from the SEO tools that enable the company to create engaging content that is focused on the target market and enhance its reach.

Social media assists the company to reach its millennial and Gen Z market effectively (DeAcetis, 2020). Through the use of social media, Gucci has been able to develop a loyal customer base and also managed its publicity, making it a renowned brand among the young consumers.

In addition, virtual reality has added to the consumer experience as the company is able to offer its customers digital shopping experience. The management has been able to create a personalized shopping experience for the people through integration of call center which can be readily accessed via smart phones by the consumers.

Legal Factors

Regulations related to trademark offer support to the company to maintain rights over its intellectual property. Gucci has to keep updated and survey the market for counterfeit products and take legal action accordingly. For instance, the company has filed a lawsuit against a Japanese brand that was engaged in creating a parody of its logo (Ryall, 2022).

Gucci has to follow the employment laws and ensure ethical treatment of its workers. The company has faced issues in the domain of unethical management of the employees in China. The issue was addressed through the replacement of those managers that were engaged in unethical behavior towards the staff members.

Environmental Factors

The management at Gucci takes environmental issues and its impact on the environment as an integral part of its business. An example of the company’s commitment to being environment friendly is evident in the form of its effort in going green. For example, in 2009, Gucci has obtained LEED certificate, being the first one in the industry to have this achievement (Gucci, 2021).

The offices and its outlets are developed keeping eco-friendly themes at the core. Energy saving has also been integrated as 88% of the lighting arrangements involve LED lights. Reducing carbon emission is also a part of the sustainability plan of the company. Moreover, the waste is being handled and recycled to reduce the harm caused to the environment.

Conclusion

Gucci is affected by political and social stability of a country. Significant changes in political climate, economic strength of a country or social dynamics can affect company’s business operations. The management has been using technology to connect with its consumers and also investing in environmentally sustainable solutions to retain a positive brand image.

References

• DeAcetis, J. (2020). How Technology Is Helping Luxury Fashion Brands Gain Traction. Forbes. Retrieved from: https://www.forbes.com/sites/josephdeacetis/2020/10/04/how-technology-is-helping-luxury-fashion-brands-to-gain-traction/?sh=4dbe69e13640
• Gucci (2021). Impact Report. Retrieved from: https://equilibrium.gucci.com/impactreport-2021/
• Hartmans, A. (2022). The wealthy are splurging on Ferraris, Gucci handbags, and expensive Champagne, while McDonald’s customers can’t afford combo meals. Business Insider. Retrieved from: https://www.businessinsider.com/gucci-louis-vuitton-owners-kering-lvmh-earnings-strong-amid-inflation-2022-8
• O’Connor, T. (2022). Unpacking Luxury’s Response to the War in Ukraine. Business of Fashion. Retrieved from: https://www.businessoffashion.com/briefings/global-markets/unpacking-luxurys-response-to-the-war-in-ukraine/
• Primo, D. (2018). What Can Luxury Brands Learn From Gucci About Millennials? Forbes. Retrieved from: https://www.forbes.com/sites/forbesagencycouncil/2018/11/02/what-can-luxury-brands-learn-from-gucci-about-millennials/?sh=79f848e25e5b
• Ryall, J. (2022). Gucci loses trademark lawsuit to Japanese firm known for parodying logos. South China Morning Post. Retrieved from: https://www.scmp.com/lifestyle/fashion-beauty/article/3192586/gucci-loses-trademark-lawsuit-japanese-firm-known