Luxury Outlook | Gucci cuts back production capacity

MILAN, Italy - Take a walk into a Gucci store these days and one cannot help but notice the preponderance of logos and icons on almost every Gucci product in sight, especially the brand's leather goods, shoes and accessories. Horsebits, double G's, and Gucci crests abound. But, it seems the conspicuous logos are failing to resonate with consumers in these recessionary times.

Rumours are circulating in Italy that Gucci has dramatically cut production orders to make up for waning demand for the Italian luxury brand's core leather goods offering. If the reports are accurate, it speaks volumes about the worsening climate for luxury goods players in general, but particularly for brands like Gucci which have chosen to follow an explicit "accessible luxury" strategy.

According to sources, the bulk of Gucci's production is concentrated in the hands of  a group of close partners that account for about 75% of total production. In addition to these partners, Gucci has more than 80 other leather goods suppliers who provide the flexibility to increase and decrease production capacity (and output) as necessary. It is these secondary partners who appear to be suffering from the rumoured production cut. At one factory, production has been cut right down to zero beginning in February 2009.

Ironically, the new CEO of Gucci, Patrizio di Marco, comes from another Gucci Group brand with a much more discrete approach. Di Marco joined Gucci from ultra-luxe and wildly successful Bottega Veneta after Mark Lee abruptly resigned from his post as CEO of Gucci earlier this year.

Perhaps this is a sign that we'll see a more discrete approach from Gucci in seasons to come?

Photo courtesy of Gucci.