Why is Gucci so Expensive?

Gucci is one of the world’s most popular and recognizable luxury fashion brands — the dual “G” logo that represents it is a universal symbol of wealth, status, and power. Red carpets and high-price galas all over the globe feature their styles.

In this piece, we will first give you the brand’s history. We want to communicate the luxury context in which the company operates.

After that, we will explore all of the possibilities behind why Gucci is so expensive. Finally, we will provide our analysis for which ones have the most impact.

History of the Gucci Brand

Fashionistas everywhere deeply admire Gucci’s products for their beauty and elegance.

But all that respect comes with extremely high prices, which is understandably frustrating for fashion lovers on a budget. Does it cost that much to make? Why is Gucci so expensive?

There are many different potential explanations for this question. Some of these are true on the surface (they use high-quality materials and require high-skill labor), while others are slightly more controversial.

Guccio Giovanbattista Giacinto Dario Maria Gucci, the founder of the storied brand, was born in 1881 in Florence.

At 16, he began exploring the world, motivated by a thirst for adventure. He first cultivated his innate fashion taste in a job he took with the Savoy Hotel in London.

As he worked with the luggage belonging to the hotel’s high-income (and thus high-fashion) clientele, he learned more and more about style, taste, and the beauty of high-end clothing.

As time went on, he bounced between different jobs, sticking with a theme of high-end travelers, from an opulent rail travel company to a luxury luggage one.

At the age of 40, he moved back to Florence and opened his shop selling luggage made of leather.

Though he started as merely a merchant – selling imported goods he did not manufacture himself – he soon became dissatisfied with that business model.

At that point, Gucci established a workshop to create new works for his store. That workshop grew and grew, and by 1935 he had to expand to a larger space to fit in his 60 different leatherworkers and craftsmen.

In that year, Benito Mussolini invaded Ethiopia. That decision caused Italy to suffer several trade embargoes on leather – but Guccio Gucci would not allow the store to hurt the same way.

Instead, he innovated. His workshop began to work with creating products from other materials like wicker, wood, and jute.

He also created new signature tanning techniques and fabric motifs that would remain a part of Gucci’s brand for decades to come.

Two years later, they launched what would one day become one of their most renowned products: the Gucci handbag.

That started a chain of successful events – Aldo Gucci (Guccio’s son) worked to open a second storefront based in Rome and create new accessories like wallets, belts, keychains, and gloves.

World War II soon came along, and Gucci began to produce boots for use in the Italian military.

This period was also the point of origin for the famous Gucci symbol – the double G.

That first appeared on the canvas handbags they began to make during the war (leather shortages were widespread due both to trade interruptions and material redirection towards the war effort).

After the War: The Leadership of the Gucci Children

Once the war ended, the brand’s patriarch split the company’s shares between his three sons: Vasco, Rodolfo, and Aldo.

Shortly thereafter, Guccio Gucci passed away in Milan, leaving the operational leadership solidly in the hands of his children.

This era saw the rise of Gucci’s prominence as a truly global fashion brand. The same year that Guccio Gucci died – 1953 – the brand opened its first New York City storefront.

When the 1960s rolled around, they established stores in Palm Beach, London, Hollywood, and Paris.

By the end of the decade, they operated ten stores in the United States, leading President John F. Kennedy to informally call Gucci scion Aldo Gucci one of the first ambassadors from Italy to the US.

In the 1970s, the brand got more experimental. It launched stores in Tokyo and Hong Kong. Gucci even partnered with the American Motors Corporation to create some luxury cars.

It explored producing perfumes and watches, and it even added a private art gallery to the Beverly Hills location. Only the store’s most respected clients had access to the gallery.

The Contemporary Era

Tragically, as anyone who has won the lottery will tell you, strife follows success. In the 1980s, the Gucci family began to feud.

Guccio Gucci’s decision to split up the company equally among his three sons had plowed fertile ground for such feuding. After a contentious decade, the company landed outside the family’s hands entirely.

During the feud, Gucci had shifted towards a business strategy oriented towards mass production, but by the time its ownership shifted out of the family, the company decided this was not going to work well moving forward.

Gucci hired Dawn Mello at the tail end of 1989 to regain the feeling of exclusivity for the brand, and she succeeded.

She closed 820 Gucci stores globally, reducing the total number to 180, while also closing sales on 15,000 products, reducing the total number of Gucci items sold to 7,000.

At the same time, Domenico De Sole worked to ramp up Gucci’s advertising budget significantly, increasing it by nearly 1200% from $6 million to $70 million between 1993 and 1997.

The final pillar that defined the contemporary era of Gucci was Tom Ford’s work as creative director.

He fused a reintroduction of Gucci classics like the Jackie bag with a bold new direction of design philosophy predicated on hedonism and heightened eroticism.

It was the work of these three Gucci leaders that created the Gucci we know and love today – high prices and all.

And the whole of the company’s history contributes to those high prices, both because the length of its history has garnered respect and specifically because these decisions have created a high-cost environment.

So Why is Gucci so Expensive?

Here we have listed some of the reasons Gucci handbags and other products are so expensive.

They Use High-Quality Materials (Supply Chain Markets)

One of the clearest reasons for Gucci’s high prices is the wildly high quality of the materials they use in all the items they produce.

When you’re a luxury brand, people expect a certain kind of quality in the materials that make up your products.

The trouble is this: high-quality materials cost high amounts of money. When you need to pay high prices for materials, the prices you charge your customers must then be high to make up for your costs.

You can tell how high-quality the materials are generally by the fact that Gucci (along with other high-end fashion designers) was recently busted for using exotic leathers of questionable legality.

That means the company is willing to go to any extent necessary to find the best possible materials for their clothes.

They Require High Skill Labor (Labor Markets)

Not just anyone can create a Gucci purse. That’s not just because of copyright laws around branding and style, it’s also because it takes a high amount of skill and trade knowledge to make the hand-crafted products Gucci sells.

If you want to be trusted in making products that are both reliable for the long term and attractive in the short term, you cannot have average designers and craftspeople as your primary employees.

Successful Branding

One of the primary reasons Gucci has the power of luxury in its products is how successful they have been at branding their products.

As we have seen throughout their history described above, they have taken every chance to effectively connect the quality of their products to the simple fact of their being Gucci-made.

Perhaps more than any other high fashion company in the world, Gucci has taken the chance to make its designs distinctively their own at every turn.

This trend likely started with Guccio Gucci’s revolutionary decision to invest in new materials like jute amid leather shortages, but since then they have doubled down on that kind of innovation at every turn, whether in new patterns, logos, or anything else.

Further, the company has leveraged celebrity relationships to vast extents throughout its existence.

One of the first and most effective partnerships they managed was with Grace Kelly, the 1950s and 60s US movie star who famously loved Gucci products.

They partnered with her regularly, ensuring that she was seen in public frequently sporting the Gucci brand.

In another exceptionally successful bid from that time, Gucci partnered heavily with Jacqueline “Jackie” Kennedy Onassis, the prominent model who married John F. Kennedy in 1953.

Gucci’s partnership with Jackie was so significant that they even made a bag specifically for her called the Jackie bag in 1961.

Recently, Gucci’s influence can be seen all over the celebrity world, from gender-bending icons like Harry Styles and Jared Leto to Korean pop stars like KAI and Sunmi.

They Can Get Away With It

Due to the respect, Gucci has gained through both its storied history and successful branding work, the company can now get away with wildly high prices.

People love Gucci, not just because they like the way their clothes look, but also because the brand name brings a great deal of respect and trust.

The discipline of economics frequently uses a concept known as the willingness to pay when analyzing markets and pricing decisions.

In short, willingness to pay (or WTP) refers to the amount of money a consumer is willing and able to pay for a given product.

This concept is then used as the foundation of consumer surplus and producer surplus – fancy terms that refer to how much the consumer or the producer is being shafted in a given transaction.

Producer surplus is what we’ll focus on here, and that’s determined by the difference between how much it costs to produce a product and how high the consumer’s WTP is for it.

When it comes to luxury goods like Gucci clothing and/or accessories, consumers tend to be willing to pay a great deal.

That allows for an immense amount of producer surplus in the transactions– Gucci can get away with marketing products to consumers simply because they are Gucci products, so consumers are willing to pay much more than the product cost to make.

Some People Like It Expensive

On a related note, some people may be willing to pay such high prices because they enjoy spending that much money.

When you go out on the town carrying around a $5,000 Gucci clutch, you send a signal of your wealth to people around you.

Having that clutch means that you either have the power to pay $5,000 on a handbag or have the power to convince someone else to pay that money for you.

Either way, carrying a wildly expensive item showcases how powerful you are. But that power is only possible if the clutch costs $5,000 – if it cost a more reasonable amount, it wouldn’t demonstrate the power of the wearer as significantly.

That’s likely why people tend to consider it “tacky” to carry around faux luxury products and act as though they’re genuine.

When a person does so, they are clinging to an unearned symbol of their power – they are trying to communicate power that they don’t have.

Greed

Whenever you ask why something is the way that it is, you are asking why is it happening this way as opposed to a different way.

So while all the above reasons are certainly plausible, many critics would also wonder why Gucci seems to charge as much as they possibly can in any case.

Sure, people will pay good money for materials and craftsmanship that costs a great deal – but surely the profit margins (the difference between the cost to produce an item and the revenue derived from selling it) on those items are quite substantial nonetheless!

Just because they can get away with charging such high prices, why do they?

Given that, greed may play a significant role here as well. That shouldn’t come as a surprise to any student of history – greed has nearly always played a central role in economies.

Whether that looks like feudal lords taking nearly everything their peasants grow or agricultural plantation owners making their money off the backs of slaves, greed is a constant throughline throughout historical economies.

In this case, it looks like wildly wealthy people heading up these companies. The estimated net worth of Gucci executives tells a convincing tale here: Gucci’s CEO Marco Bizzarro rakes in $8 million a year and has a net worth of $60 million.

Creative Director Alessandro Michele has a yearly salary of $1 million and a net worth of $10 million.

Those are significant numbers, and may well indicate that greed is at the core of these high prices.

Gucci Executives Enjoy It

We’ve talked a lot so far about Dawn Mello’s decision to close 80% of Gucci’s stores worldwide in the early 1990s, but there’s one more interesting angle to examine that through.

Gucci’s strategy of mass production was working financially – the company’s products garnered a staggering $227 million in revenue in 1990 alone.

So why did Maurizio Gucci feel the need to task Mello with the goal of re-discovering the brand’s exclusivity? Why would that exclusivity still be necessary, given the financial success of mass production?

One answer to that is financial strategy – this may have been a decision made following the longtime Gucci motto that “quality is remembered long after the price has been forgotten.”

Gucci leadership may have thought that it would be more financially wise to press into the brand’s reputation as a purveyor of high quality than of reasonable price.

But there’s another potential answer here. It may be the case that Gucci’s leadership simply enjoys leading an exclusive brand, regardless of what that means for them financially.

Final Fords on Why Is Gucci so Expensive

At the end of the day, it’s impossible to tell which of these factors plays the biggest role in why Gucci is so expensive.

Some of them are true on the surface – the high price of materials and labor, the success Gucci has had in branding, things like that.

Others are more confusing, like greed and the extent to which consumers like expensive products.

The truth is also that prices are never decided by one unified individual or group – they’re determined by the decisions of all the different actors at play, from Gucci employees to an undecided shopper in one of its New York City stores.

That makes it especially hard to nail down the reasons that impact the prices most.

One of the major takeaways from this analysis is that there’s nothing wrong with buying a faux version of luxury clothing/accessories like those made by Gucci.

As long as you aren’t trying to pass it off as genuinely Gucci, you can easily just take the luxury attractiveness that a lookalike maintains without the luxury prices entailed by the logo.