Analysis Of The Micro And Macro Environment Of Gucci Company In Vietnamese Market

The Microenvironment

Suppliers

All of Gucci’s products are labelled “Made in Italy”, which is an attraction point for customers to pay premium rates. Most of Gucci goods, mainly wearables, are made in the Tuscan town of Prato, which is outside of Florence, Italy. The area is popular for being the center of leather-goods production of luxury brands, including Gucci. As of 2017, 75% of leather goods are supplied from independent suppliers.

However, the figure is planned to cut down to 40% as the company is establishing new laboratories that research and develop leather grown under lab condition, which is a radical innovation in the materials used in fashion. Gucci also recently bought out 10 local leather suppliers in the process of shifting from external suppliers to internal production, which reduces the lead time and create an advantage over its competitors (White, 2018).

Due to the nature of products, Gucci has close and direct relationship with its suppliers, the craftsman’s laboratories, to ensure that the standards and premium quality are maintained. Gucci also applies the Just-In-Time management system in order to reduce the storage costs.

Marketing intermediaries

Gucci’s presence in Vietnam since 2007 has been through a local franchisee. As the customer base of the brand in Vietnam is growing rapidly, in 2015, an official Gucci store is set up in Ho Chi Minh city in order for the company to directly manage its distribution in the Vietnamese market. In 2019, this store remains to be the only retail store for Gucci products in Vietnam.

The most common distribution of Gucci goods is through independent and unauthorized resellers, who often claim the products from China and transport to Vietnam. The fact that Vietnam’s demand for luxury fashion brands is considerably lower than that of more developed country explains why Gucci has not developed a comprehensive promoting, selling and distributing system in Vietnam yet.

Competitors

The first high-end fashion brand to enter Vietnamese market was Louis Vuittion, followed by Hermes, Dior, Burberry, Kering and some other brands operated under franchise system. Gucci’s presence is considerably late compared to competitors, which explains the lack of its market share in Vietnam.

The biggest competitor in the market is Louis Vuittion, holding approximately 25% of all luxury fashion products in Vietnam.[3] Gucci is forced to develop innovative marketing strategies that specified for Vietnamese market in order to increase the brand awareness and gain strategic advantages again competitors’ offering.

Customers

Of all 5 different types of customer market, Gucci focuses the most on consumer markets, which consists of individuals that buy goods for personal consumption. The targeted customers include celebrities, the wealthy, fashionistas, and the upper class. However, in Vietnam, reseller market for luxury brands is also expanding rapidly due to the lack of official distribution systems.

The Macroenvironment

Demographic

Like many other countries, the new Generation Z, which implies the young people born after 2000, have great influence in the Vietnamese market of luxury fashion. Furthermore, due to the Vietnam’s 2-child policy, children in Vietnamese household are offered with great financial care from their parents. They are also familiar with digital technology, as more than half of teenagers prefer shopping online for beauty products such as clothes, shoes and fashion accessories.

A recent survey also concluded that Vietnam ranks third in the world in terms of fondness for branded goods, only surpassed by China and India. Vietnam is a huge potential market for luxury fashion brands as many Vietnamese tend to prefer unique design over functionality (“Luxury Fashion – Vietnam”, n.d.)

Economic

Vietnam has fastest growing population of persons with a net worth of more than US$30 million. The number of these ultra-high net worth individuals is expected to double by 2024. For middle-class households, which are accounting for 23% of the total in the country, they have suitable disposable income for purchasing mid-range items with fashionable design and reasonable quality (Breininger, 2015). Despite the tight budget compared to other Asian countries, this customer group highly prefers affordable luxuries to show off their social status (Chu, 2017).

Natural

The environmental concerns in fashion industry are considerably higher than any other industries. Customers are now more aware of the sources the clothes and the accessories they wear, or the environmentally responsibility in all. To response, Gucci recently established a collaboration with Greenpeace, an organization fights for greener and healthier world, and was the first to achieve official certification in the field of luxury goods for the supply chain of its leather goods and jewelry. Gucci’s dedication to sustainability is still limited in some product collections and processes but the company aims to spread the idea throughout the business (Gabardi, 2014).

Technological

Technological factor is one of the most important considerations for Gucci. By applying the new technologies in advertisement, such as online marketing campaigns through social media, Gucci can strong brand image and loyalty upon the consumers in the market. As customers also expect more personalized buying experience, the use of modern e-commerce technological advancement like augmented reality, virtual reality and real-time product interaction are also necessary as they allow customers to freely customize the Gucci products with smartphones.

Political

Vietnam has many government regulations for foreign brands, especially the ones regarding tax and import activities. Tax evasion has always been the most severe problem in Vietnam, due to the lack of transparency in financial accounting. Hence, Gucci is required to strictly follow the regulations and conduct a thorough investigation into the restrictions in Vietnam.