Gucci’s pricing policy irks consumers
This is the seventh in a series highlighting operations of foreign luxury brands in Korea. — ED.
Gucci has recently recovered its reputation in the leather goods market, after appointing Alessandro Michele as creative director in 2015. Its global sales rose 17 percent in the third quarter last year, while other luxury brands suffered under the long-term economic slowdown.
Taking advantage of its high popularity, however, the Italian fashion house is suspected of having discriminated against consumers in Korea in terms of pricing policy.
According to industry officials, Friday, the luxury brand cut the prices of its goods by up to 8 percent in Japan last September, while raising the prices of handbags and jewelry marketed in Korea last year by 6 percent and 12.2 percent, respectively.
“Considering multiple factors including tax, tariffs and transport cost, our global head office has set product prices appropriate for each country,” a Gucci Group Korea spokesman said.
But the explanation doesn’t seem persuasive enough for Korean consumers who are irritated by the inconsistent pricing policy. Against this backdrop, some resort to overseas direct purchases as a more reasonable choice for getting Gucci products.
Korea Consumer Agency data showed last year that Gucci was the most frequently purchased foreign luxury brand through overseas online shopping malls. Respondents preferred buying Gucci to Prada or Chanel, and said the online malls offer 27.4 percent lower prices on average than domestic outlets.
“Overseas direct purchases are merely consumer choice,” the spokesman said. “Mentioning the issue seems unrelated to us.”
Industry sources said prices of most luxury brands sold here are confidentially decided by global head offices. They said duty free shops or department stores accommodating the brands cannot influence the prices.
The headquarters-centered pricing policy has sometimes caused fallout.
In 2015, Gucci held a surprise discount event in Korea without properly notifying salesclerks in advance. The fashion house offered their products at half price. This confused consumers as Gucci was known to have a no-discount policy.
In particular, those who bought Gucci products just before the discount event complained.
Denying its fault, the Korean subsidiary at that time explained that only the global head office knows the exact dates of discount events if there are any.
Industry officials attributed Gucci’s stance to its ongoing popularity in Korea.
Last year, Lotte Group Chairman Shin Dong-bin, Shinsegae Department Store President Chung Yoo-kyung and other retail giants lined up to meet CEO Francois-Henri Pinault of Kering, a French luxury goods holding com- pany owning Gucci and several luxury brands, during his visit to Korea.
Gucci reportedly chalked up around 55 percent growth in sales last year at a department store in Korea, while the overall figure is uncertain.
“The head office prohibits local affiliates from disclosing their individual results,” the spokesman said. “The Korean unit transformed itself into a limited liability firm in 2014 to avoid confusion of our global investors.”
Some critics doubted that the local affiliate, which is led by President Karim Fettous, is seeking to hide the large sum of dividends to international shareholders and the small amount of donations to Korean society.
In response to the criticism, the spokesman said the company has continued to contribute to the country in various fields including education, environment, art and rights of women and children.
But the ratio of donations and dividends to operating profit still remains unknown, as the limited liability company does not have to disclose its financial statements to the public.
Founded in 1921 by Guccio Gucci in Florence, Italy, Gucci specializes in fashion and leather goods.