Kering predicts that Gucci will hit €10 billion in annual sales, overtaking LMVH's Louis Vuitton as the world's biggest luxury brand. The path to success for Gucci has been paved by its new creative director, Alessandro Michele, whose flamboyant style has won fashion fans worldwide for the brand, driving sales sky-high.
To more efficiently and sustainably cope with the rising demand, particularly from Chinese consumers, Gucci is looking to follow the lead of Burberry and Louis Vuitton and bring an increasing share of its production of leathergoods and other products in-house. Reuters has reported that Gucci has bought out 10 local suppliers and plans to buy out an additional 10.
It is also working on joint ventures and exclusive partnerships with artisans and manufacturing facilities with the intention to sink the number of independent suppliers from 75 percent to 40 percent of its sourcing for leather products. This will help Gucci reduce lead times for the release of new products.
Last year Gucci, with €6.2 billion in sales, lagged behind Vuitton, which analysts estimated earned €8 billion, but slightly ahead of a packed field of contenders that includes Hermès. In the first three months of 2018, Gucci's revenues expanded by 48.7 percent from a year earlier and there is no sign of a slowdown.
Only Balenciaga, another brand in Kering's portfolio, outpaced Gucci's growth during the period, and the group has indicated that it could reach annual sales of €1 billion. One of the drivers of Balenciaga's growth was the tremendous success of its high-priced sneakers, which are appealing to millennials.
While Gucci has not set a hard deadline for hitting €10 billion and top spot, it expects its white-hot sales to continue to grow at twice the market rate in the coming years, especially as the demand from China grows. Global revenues for the luxury market are predicted to expand by 6% to 8%, according to a report by consultancy Bain released in early June.
The Florentine brand's renaissance has been sparked by a radical makeover inspired by the unique style of Michele, as well as the management of its chief executive, Marco Bizzarri. The brand image has been given a total refit since both men signed up in 2015, from new product ranges to stores redesigned to make them more shopper friendly and vividly attractive.
Driven by further store renovations, Gucci aims to further boost sales densities, a measure of profitability in the stores. These could eventually reach €45,000 per square meter annually, up from just over €30,000 in 2017, the company believes. Gucci also plans to triple sales made on its e-commerce sites to 10 percent of revenue with the rollout of new shopping platforms.