Why Is Chanel Worth So Much?
Business
Chanel Brand History
Overview
Chanel (belongs to the packaged goods industry), founded in 1910 in London, United Kingdom, is a privately held company now owned by Alain and Gerard Wertheimer; however, Coco Chanel started the House of Chanel. Products in Chanel cover clothes, fragrances, handbags and watches. “little black dress”, the Chanel No. 5 perfume and the Chanel Suit are the brand’s most well-known products. Karl Lagerfeld joined Chanel as its creative director in 1983 and continued in the role until his death in February. China is the second biggest market, after the U.S., for Chanel’s beauty business. The U.S., China and France represent one-third of Chanel’s sales, in 2022, Chanel has over 20000 employees. Details
1910-1918
Gabrielle Coco Chanel opened her first hat shop in 1910 under the name “Chanel Mode”. All of her designs challenged traditional womenswear pieces, in 1918, she opened her first couture house in Paris.
1921-1926
Moreover, CHANEL N°5 was created as a legend over centuries. In 1926, the debut of the iconic little black dress revolutionized women’s fashion. This dress became a stand out style because its simplicity allowed women to look elegant without breaking the bank.
LVMH Analysis : A Look Behind European Luxury Powerhouse LVMH
1931-1939
CHANEL Meets Hollywood in 1931, and in 1939, as World War II broke out, Chanel closed all its boutiques except one that sold perfumes and accessories.
1955-1957
Gabrielle Chanel staged a grand re-opening with a prevalent fashion show when she was 71. In 1956, the iconic 2.55 bag was brought to life, which combines leather with a gold chain, and it revolutionized women’s handbags by allowing a woman’s hand to remain free. In 1957, another groundbreaking creation, the two-tone pumps, were born.
1960s
Chanel reached the peak, and many celebrities started to wear this brand. From actress Romy Schneider, model Dorothea McGowan to the former first lady of the United States Jackie Kennedy, moreover, CHANEL truly became a household name.
1971
On 10 January 1971, Mademoiselle Chanel passed away at the Hotel Ritz in Paris. 1983-1990s
Karl Lagerfeld took the reins in 1983, becoming the second most influential figure in CHANEL’s history. He introduced the “CC” monogram. In 1983, Ines de La Fressange became the first model to sign an exclusive contract with CHANEL. She was Karl Lagerfeld’s main muse for over a decade due to her remarkable resemblance to Coco Chanel. Over the decade, CHANEL witnessed a series of well-received campaigns, many of which were photographed by Karl Lagerfeld himself.
2012-2019
As an homage to the iconic La Petite Robe Noire (little black dress), The Little Black Jacket book and exhibition were introduced in 2012. On February 19, 2019, fashion legend, Karl Lagerfeld, passed away. It is said that he had been working tirelessly, close up until his death. Virginie Viard, formerly known as Lagerfeld’s right hand, was appointed as the new artistic director of CHANEL.
Business Strategy
1）Balanced exposure and scarcity marketing strategy of Chanel
In 1974, Chanel No. 5 was not selling well, CEO Alain Wertheimer reduced its retailing from 18,000 to 12,000 stores in the US and heavily invested in advertising for the products. Scarcity marketing protects brand exposure by instigating the fear of losing choice in the customer. The brand has since made this strategy integral to its business across products and advertising.
2) Values-based marketing strategy of Chanel through content
Chanel has built confidence between the brand and its customers. From social media followers numbers, we notice that the house of Chanel has 43.6 million followers on Instagram (the highest for any luxury brand). On YouTube, which it primarily uses to connect with customers, it has 1.79 million followers. Among its competitors, Dior, Hermes and Louis Vuitton, Chanel probably has the most engaging content because for every advertisement, it does not mainly advertise its products, but it focuses more on telling stories. In fact, audiences like advertisements to be in this way.
3) BCG Metrics
Chanel clearly recognizes its ‘stars’ as its perfume and watch divisions. Therefore, it invests the most in advertising for these in fashion magazines such as Vogue and Elle which cater to its target audience. Invented by Boston Consulting Group, the growth share matrix is used to make decisions in companies that have a diverse offering of products. Furthermore, lines are divided into stars, cash cows, question marks and dogs, based on relative market shares and growth rates.
4) Innovation in Technology
Chanel recently launched a free virtual lip scanner app. The app lets you choose a color from your surroundings, find a match from the Chanel catalog and try it on virtually. In addition, this step is one of many taken by the brand to engage its newly independent Gen Z customer base.
Tiffany & Co. : A Case Study
Competitor analysis
CHANEL competitors include LVMH, Gucci, L’Oréal USA, in addition, Harry Winston and Burberry. Furthermore, below is the ranking of these 6 different companies through different perspectives.
In addition to all of the ranking list above, CHANEL ranks 1st in CEO Score on Comparably vs its competitors.
Future Trend
Chanel reported revenue of $15.6 billion for the year ending on December 31 – up 49.6 percent compared to 2020 and 22.9 percent compared to 2019.
In conclusion, in the future, Chanel will seemingly continue to observe a system of purchase limits, as it looks to crack down on the quantities of its offerings that consumers can snap up from its stores each year. “We sometimes have to limit the number of items a single client can buy,” Blondiaux told Reuters, following reports that it will put a strict allowance of two Classic Flaps per consumer per year in place in certain markets.
What Made Gucci Famous? An Analysis of the Gucci Brand
As a result, the purpose of this action becomes aimed at “protecting customers and curbing bulk buying.”
Moreover, the latter of which often sees professional shoppers/resellers buying up and then offloading new Chanel bags to consumers at inflated prices via the secondary market. Furthermore, depleting store stock in the process, while also placing these products in chains of distribution in connection which Chanel lacks control over pricing, sales conditions, terms, etc.
Overall, we can see that every year, Chanel has an increase in its revenue. Lastly, with increasing prices in single items and adopting limit purchase policy, Chanel’s revenue will continue to increase. Furthermore, Chanel will gain more control on their price.
Written by Katherine (Nuqian) Tang
References
https://www.forbes.com/companies/chanel/?sh=7d2d4eb41ca2
