Gucci seeks to mix with the masses

Jill Barshay Apr 25, 2008
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Gucci seeks to mix with the masses

Jill Barshay Apr 25, 2008
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KAI RYSSDAL: Luxury brands usually don’t suffer too much when the economy goes low-brow. But this time they seem to be heading in two different directions. Gucci is struggling. It’s the first luxury company to make a big shift to cheaper down-market goods. Meanwhile Louis Vuitton is growing like gangbusters. Our New York bureau chief Jill Barshay has more on high-end retail.


JILL BARSHAY: Gucci may have become a victim of its own success. Milton Pedraza is the CEO of the Luxury Institute. He says Gucci’s problem is when times were good, it expanded its customer base far beyond the millionaire set.

Milton Pedraza: For Gucci, there’s probably a larger proportion of merely wealthy consumers. And by that I mean, let’s say young women, professionals who make $150,000 a year, but don’t have a lot of net worth. And that group has cut back dramatically. And that’s the group that, unfortunately, when you have economic recessions, trade down.

Gucci now plans to promote what it calls cheaper accessories. Instead of $3,000 leather bags, it’ll push canvas totes for $900.

Patricia Pao runs her own retail consulting firm, Pao Principle. She says luxury goods makers who’ve stuck with the ultra-rich are doing fine.

Patricia Pao: The market is going back to where true luxury goods were pre-the-1990s, where the luxury goods were really for really the top 1 percent of the U.S. population.

One example, LVMH — the Louis Vuitton group — is growing by double digits. It’s buying Swiss watchmaker Hublot, which sells timepieces for as much as $475,000. Louis Vuitton also has the advantage of a strong foothold in the country that’s minting millionaires faster than anywhere else: China.

In New York, I’m Jill Barshay for Marketplace.

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