Riding high on their incredible financial success (a 35% growth in revenues over the last two years), Mark Lee , chief executive officer for Gucci, is looking forward to establishing the 86-year-old luxury brand’s presence in India. In Mumbai for the official launch of their store, at The Galleria in South Mumbai, Lee spoke to Mint about the potential for luxury brands in this market and also shares the company’s future strategy. Edited excerpts:
The Indian wedding, a time when families with the most modest means splurge. What is Gucci doing to capture this market?
We are very aware of unique cultural phenomena. Gucci is a perfect luxury brand in that sense with an incredible product authority, built up for decades across a range of product categories. Leather goods are our core business, accounting for more than 50% of the revenues of the brand. Footwear and ready-to-wear are also important categories.
Mark Lee, Gucci, CEO
In leather goods, we have categories that range from handbags to wallets to small leather goods... So we are an idea brand as a gift brand. Jewellery is a new category, but one we believe in very strongly. There is a focus in terms of real gold, real precious stones and diamonds.
Yes, we have started working on bolder pieces. But like all our products categories, it is linked to our tradition.
Is Gucci planning to set up any manufacturing facilities in India?
No. Made-in-Italy is really a... part of our strategy. We are very interested and very active in terms of developing new markets. So, we are moving in terms of entering new and exciting markets but it is very important to us, and our strategy to enter with the same products... made in Italy. We are... fortunate to be growing our revenues and we are growing our profits as well.
Our Ebitda (earnings before interest, tax, depreciation and amortization) from 2005 to 2006 moved from 26% to more than 29% as an incidence on sale and (is) growing faster than our revenue. So, we do not have a need or desire to de-localize as a means of cost-saving or in terms of increasing profit.
Many luxury brands are stocking or manufacturing special products that start at smaller price points to encourage consumers who have never bought luxury brands. Will Gucci do the same?
Not really. Within the breadth of products under the Gucci brand, we have a wide range of products. Within leather goods, we have a tradition of... designing, making and producing wallets, all forms of small leather accessories, whether it is the card case or key chain.
We don’t have anything that is specific to India in terms of lower prices or entry price points. In fact, the opposite is true, we wanted to make sure that our first store, here in Mumbai, was a full-range store. So, you find up to the most glamorous and the most expensive ready-to-wear evening dresses, coats, and items in fur and leather with high price points right down to a wallet, a key case or a pair of sneakers.
How does one sell a $1,000 handbag?
(Laughs) The first point is to create the desire. The success we have enjoyed all these years always comes first and foremost from the desire we create. No one needs luxury. The definition of luxury by nature is something is an unnecessary pleasure.
Nobody needs a $1,000 handbag! We are creating desire, but it is a two-way street. The world today has an unprecedented level of wealth. If you look at the current situation, the amount of countries that exist in the arena of luxury goods is completely different from what it was 10 years ago.
Twelve years ago, Russia didn’t exist as a luxury market and today, it is becoming one of the most important luxury markets in the world.
What is the potential for Indian women to buy and wear gowns?
We purposely wanted to make the first store a full-range store, including the full range of ready-to-wear. At the store, you will find day wear, weekend wear and evening wear. Within the very first weeks, what we’ve experienced in sales, we have very high penetration in ready-to-wear dresses and evening dresses.
We are catering to an elite segment and really, an international customer. Mumbai has really hot weather, but downstairs we are selling coats and heavyweight things because the Gucci customer is a traveller, and they may buy a coat not necessarily to wear here, but when they travel abroad.
India doesn’t have as many fashion glossies as developed markets do. What is your advertising and marketing strategy going to be here?
Magazines will still continue to be an important base of our advertising strategy as it’s a great medium to show the imagery of the brand and its very nice to have glossy, print advertising images. You have some titles, which have been around for many years, and now you also have Vogue, definitely a big step for the Indian market. Of course, events will always be important. Over time, we will study the different media vehicles to see which formula works best.
A lot of luxury brands have signed up celebrity endorsers. Will Gucci do the same or will you continue gifting products to celebrities who then sport them at social dos?
The history of the Gucci brand, fortunately, is that celebrities are attracted to Gucci. So, we’ve never had to chase celebrities. We have had a long history of celebrities following the brand. Starting with royalty such as Princess Grace, in the 1990s it was Madonna and still is today.
On a local scale, long before we arrived in India we have been dressing some of your most famous and beautiful actresses such as Aishwarya Rai some of her red carpet occasions for some of her red carpet occasions. There is that aspect which is ongoing, but it is not contractual.
Where does India fit into the larger scheme of things at Gucci?
India will no doubt in the future, in five, 10, 15 years—it is a question of time and remains to be seen—become one of the important countries in the word for luxury and for the Gucci brand. We are at the official beginning of our adventure in India. We have two more stores coming up soon in New Delhi—one before the end of the year and another when the (DLF) Emporio Mall finally opens in the first half of 2008. We will also be looking at other cities such as Bangalore.