Gucci takes long term view in India

27 November 2012

NEW DELHI: Gucci, the fashion and leather goods brand, believes India presents unique challenges compared with China and other major markets, and requires a mixture of investment and "patience".

The luxury label, which is part of PPR Group and entered India in 2007, unveiled its fifth – and biggest – store in the country earlier this month, based at The Oberoi hotel in Gurgaon.

By contrast, it now runs over 50 branches in China, where it has been active since the mid-1990s. Patrizio Di Marco, Gucci's president, said the two nations were at very different developmental stages.

"China is not comparable to India. The developers have to understand that India is not New York, you cannot charge so much here," he told the Economic Times.

To take just one example, Gucci's stores in China become profitable earlier than in India, with the latter country also generating lower sales than Gucci's other large international markets.

"In absolute terms, we are selling much less here. We are trying to do our best, but we have to be patient," di Marco said. "But in relative terms, India's performance this year, in comparison to last year and the year before, is very interesting and growing in percentage terms." 

Gucci hopes to near profitability in India by the mid-point of the decade. To drive longer term progress, it will allocate "significant resources" to the country, opening new stores and rejuvenating old ones.

"In a market like India, a two to three year [period] is [a] reasonable time to break even. So, we are looking to do so within three years," di Marco said.

"We will spend a significant amount of money here and are working on a number of projects," he added. "Gucci is serious about this market and will not miss any good opportunity to expand presence."

However, alongside a high import tax on premium goods, rules stipulating that foreign firms taking full ownership of single-brand stores source 30% of materials from India is proving problematic.

"We are in the works for a number of projects. But retail is one of the biggest obstacles," di Marco said.

"A brand can marry the best of the craftsmanship of this country with the best of the craftsmanship of the other, but if it is an obligation, then I am sorry ...We have 45,000 people working for Gucci in Italy and that will remain."

Data sourced from Economic Times; additional content by Warc staff