Gucci Porter Five Forces Analysis
Five Forces analysis of Gucci covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
Gucci caters to a very niche market and has high brand equity. Gucci makes exclusive products that are sold at their stores. This high-end fashion house has very low threat of new entrants. The company was established in 1921 by Guccio Gucci, and over the years, it has built a great legacy. It was one of the pioneers in the evolution of modern-day fashion. The logo, an interlaced double G, has become a status symbol and is very difficult to replicate. Getting into this industry, especially in the luxury category, is an arduous task as Gucci is a famous brand worldwide. Being an exclusive brand, it sells its perfumes in malls to increase visibility while the other high-end products are only found at their stores. Its products are not scalable due to their exclusivity and premium nature. This brand also has the advantage of high differentiation, making it difficult for new entrants to establish a brand worth competing Gucci. The capital required to set up and run a brand for a new entrant would be high as it requires renowned designers.
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This concludes the threat of new entrants in the Gucci Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Gucci:
Gucci mainly faces substitution from renowned brands like Prada, Chanel, Christian Dior, Louis Vuitton, and Armani in the luxury segment. The brand faces substitutes from cheap and fake knock-offs where the logo of Gucci is added to the item with a bit of tweak to the logo design.
Since people buy its products as a status symbol, it becomes difficult to spot the fake ones from the original ones, especially for a layman. But people who have an eye for fashion or have been in close contact with the world of fashion can immediately distinguish between them. But this threat is very low since the difference between a premium and non-premium product is very eye-catching. Another threat of substitutes for Gucci would be luxury brands more expensive than Gucci like Hermès, Balenciaga, Michael Kors, and Yves Saint Laurent. People belonging to the affluent section of society would prefer purchasing products from these super-premium brands.
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Bargaining Power of Customers:
In the Gucci Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The customers of this elite house are very concentrated and spread worldwide. While the company is a luxury brand, many brands are at the same level as Gucci, thereby making the cost of switching very low among these concentrated customer bases. The products in this industry are pretty fixed; thereby, the customers' negotiation power is very low. Seasonal Gucci products that are exclusive and short-lived have inventory still left in the factory; those items are slashed and destroyed. The company does not hold stock clearance at a discount. This is done to prevent the product from reaching the masses. The company produces many items which are of pure leather.
The younger generation of the affluent society has become environmentally conscious, are great animal lovers, and want to jump onto any recent trends.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Gucci:
Majority of Gucci manufacturers are based in Italy. These suppliers and manufacturers are trusted and have been loyal to the House for a very long time. They have to comply with all the standards and guidelines to maintain the international standards of Gucci. The suppliers have high bargaining powers as they could quickly increase their production or labor price. Being located at the same location, they also are influenced by the same political laws and could protest in a union if they're dissatisfied with the wages or salaries. At the same time, if the world went into a lockdown, like the Covid-19 pandemic, then the entire supplier side of the supply chain system would go for a toss. Forward integration of the raw materials, though possible, might still not match the same elite status of Gucci. The designers also play a crucial role as other companies have a chance of recruiting them.
Competitive Rivalry:
The impact of key competitors in the Gucci Porter Five Forces Analysis is as follows:
Gucci sells handbags, shoes, ready-to-wear, accessories, kid's wear, jewelry, watches, makeup, perfume, and home decors. In the handbag segment, companies like Hermès, Chanel, Fendi, Louis Vuitton, Marc Jacobs, and Yves Saint Laurent are serious competitors for Gucci. Jimmy Choo, Givenchy, Yves Saint Laurent, Prada, and Dolce Gabbana are the main competitors in the shoe section. Some of the brands are Prada, Yves Saint Laurent, Louis Vuitton, and Tom Ford in the accessories segment. Cartier, Tiffany & Co, Bvlgari, and Chopard are some of the luxury jewelry competitors in the jewelry segment. Rolex, Patek Philippe, Audemars Piguet, and A.Lange & Söhne are the leading competitors in this range in the watches section.
There are competitors like Chanel Beauty, Tom Ford, Charlotte Tilbury, Armani Beauty, Yves Saint Laurent, and NARS in the makeup segment.
To conclude, the above Gucci Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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