Gucci: Brand History, Acquisitions, and Retail Strategy

A Brief History of Gucci

Gucci was founded in 1921 by Guccio Gucci. An immigrant who had worked in high-end hotels in London and Paris, Guccio became enamored with the fine luggage he regularly encountered. He returned to Florence, Italy — his birthplace — and in 1920 opened a shop selling fine leather goods (Forden, 2000). The company was officially founded the following year. The workrooms were organized for industrial production, yet handcrafting was retained. Soon, additional shops opened throughout Florence, as well as in Rome and Milan (Bianchino et al., 1987).

The leather goods sold well due to their fine craftsmanship, but during World War II leather was exchanged for canvas and cotton because of material shortages (Bianchino et al., 1987). The bags were marked with a signature Gucci logo. In 1953, offices were established in New York City. Jet-setters and film stars took notice of the brand and transformed its offerings into an international symbol of status (Forden, 2000).

In 1947, bamboo was introduced for handles, and waterproof satin and canvas were used for evening bags (Forden, 2000). The 1960s brought purses with shoulder straps and decorative elements, and a lush butterfly pattern popular in the Gucci line was created in 1964. Gucci's loafers were also redesigned in the 1960s to remain current with changing fashion. Beginning in 1970, the company offered a "Rolls-Royce" luggage set. Eyewear, jewelry, ties, and watches also became part of Gucci's product line (Forden, 2000).

The 1980s brought serious difficulties. The original founder had died and his son managed the company poorly. In 1988, the company was sold to Investcorp of Bahrain, and any remaining family-held stock was disposed of in 1993 (Forden, 2000). By the early 2000s, Gucci had become one of the most copied designs in the world, with many companies producing knockoffs of its products.

Gucci went public in 1995. In 1997, the company acquired a watch licensee called Severin-Montres, which was subsequently renamed Gucci Timepieces (Steele, 2003). Despite this, the company continued to struggle. In the mid-1990s, designer Tom Ford took creative control and sought to steer Gucci in a new direction (Horyn, 2004).

Merger and Acquisition Activity

Early in 1999, LVMH — a luxury goods conglomerate — increased its share of Gucci and moved toward a full takeover. To prevent this, Gucci issued additional shares, diluting LVMH's ownership percentage. That action stopped the takeover, but Gucci remained unsatisfied with its position. The company then reached out to a French firm called Pinault-Printemps-Redoute (PPR) to form a strategic alliance. PPR's founder ultimately purchased a stake equivalent to 40% of Gucci, diluting LVMH's share to 20% and triggering a legal battle that Gucci and PPR ultimately won (Steele, 2003).

In September 2001, a deal and settlement was reached among Gucci, PPR, and LVMH (Steele, 2003). Credit Lyonnais also held an 11% stake in Gucci. Tom Ford eventually departed the company, and Gucci Group acquired three designers to sustain the company's momentum (Horyn, 2004). Rather than aggressively seeking acquisitions or mergers, Gucci's strategy was focused on protecting itself from hostile takeovers and ensuring long-term stability. In 2006, a new creative director was named, and the CEO was replaced in 2009. Since then, Gucci has maintained a period of stable leadership without major management turnover, and has neither been acquired nor moved to acquire other companies.

Gucci's flagship stores are in Florence, Milan, and Rome, but the company has expanded to include stores in many areas of the world, including throughout the United States (Steele, 2003). Every major U.S. city has at least one Gucci store, as larger cities can support retail outlets selling items that are expensive relative to comparable goods. Some smaller cities also carry Gucci stores where sufficient consumer demand exists. However, companies selling high-end designer products must be selective about store placement — establishing locations in markets where the economy cannot support them risks financial losses and eventual store closures. It is worth noting that many Gucci customers are affluent enough that broader economic conditions have limited impact on their purchasing habits.

Finding a Gucci store is straightforward, as an online locator allows customers to identify stores within a specific radius of their location. Online shopping has further broadened access, effectively making the entire world a potential marketplace for anyone with internet access. This has helped strengthen Gucci in recent years after the difficulties of the 1980s and 1990s (Forden, 2000). Customers in smaller or more rural areas may not have a nearby Gucci store, but they can travel to a larger city or shop online to browse current offerings. Overall, the company continues to move forward with strong leadership and newly integrated designers who keep the brand fashion-forward.

For Gucci, image is very important (Forden, 2000). The company is deeply concerned with how it is perceived and what customers think of its products. Gucci stores are designed as high-end retail environments that make clear the accessories, shoes, handbags, luggage, and other items offered are not inexpensive. That said, Gucci's identity is not solely defined by price. Its offerings are expensive because they are also of exceptional quality — the Gucci name is not placed on anything that is not top-of-the-line or that will not hold up over time (Forden, 2000).