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Gucci's Home Away From Rome

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Just what are the limits of a boutique brand like Gucci? That's the question observers are asking as the company puts the finishing touches on a new, enormous flagship store in Tokyo's fashionable Ginza district. The facility features "three handbag departments, two jewelry departments, men's and women's clothing departments, a cafe with Gucci chocolates on the menu, an art gallery and an event space," according to Financial Times writer Vanessa Friedman.

"It is the latest step in the evolution of retail," Friedman quotes Jacques-Franck Dossin, luxury goods analyst at Goldman Sachs, as saying. "Fifteen years ago, luxury brands moved away from third-party retail in multi-brand formats such as department stores to their own store. They then started creating architecturally eye-catching flagships. And now they are looking at adding new dimensions to the shopping experience, to increase the brand's statement, by making the brand contemporary."

Friedman then quotes the CEO of Gucci's parent company asserting that, "We think it is the second stage of globalization. First all stores looked the same, now they are tailored to their local markets."

Later in the article, a retail analyst doubts the strategy. If everyone in Tokyo tramps through the Gucci store, he asks, will the brand retain its air of exclusivity and elegance? This is no small question, given that Gucci derives nearly a quarter of its revenue from Japan, where luxury brands have been potent for the past 20 years. To fight off the idea that the store welcomes all comers, Gucci has placed luxury goods on the first floor and cheaper bags elsewhere. It also offers fancy robes in the changing room, and a successful shopping spree is capped off with some sort of small celebration called "the selling ceremony," Friedman reports. (You can read her article via the LA Times website, at this link.)

I think the questions raised by Gucci's new store are interesting and especially relevant to entrepreneurs. Most small businesses build themselve by offering a superior experience to a small group of customers. As a business grows, however, high standards of quality are difficult to maintain. As the tension between growth and quality builds, a company can find its brand becoming a victim of its own success. Do you think Gucci is straying into that territory? Can a boutique brand succeed when its store becomes a mainstream attraction? If the department store is as dead as most people think it is, why develop one—even if it boasts a fancy name and logo on the door, won't the same laws of retail gravity apply? Or do you think that the idea of building a substantial "temple to commerce" in an important market is clever? Brands are identified with places after all, and one could argue that Gucci's Xanadu will distinguish it in Tokyo in a way that few of its competitors will be able to copy. What do you think?

Last updated: Nov 13, 2006




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