Beauty Brands

Chanel to Open Personal Shops for Prime Purchasers as Gross sales Soar 50%

Chanel reported 2021 revenues that jumped 50 p.c year-on-year to $15.6 billion, rising 23 p.c over 2019′s pre-pandemic ranges. Working revenue almost tripled, surging 170 p.c to $5.5 billion.

Trend, watches and jewelry are driving momentum that has continued into the present 12 months, chief monetary officer Philippe Blondiaux stated in an interview, whereas efficiency in perfume and sweetness has been extra muted as a result of continued decline in journey retail.

Regardless of headwinds together with coronavirus lockdowns in China, Russia’s invasion of Ukraine and hovering inflation, Chanel stays “assured in with the ability to ship a stable efficiency and wholesome development this 12 months,” Blondiaux stated.

The assertion by the closely-held model (which generates the luxurious business’s second-highest revenues after LVMH’s flagship Louis Vuitton) confirmed a speedy rebound from the pandemic. 2020 gross sales fell by 18 p.c, a heavy hit, however bounced again shortly final 12 months as customers flocked to blue-chip luxurious manufacturers.

Chanel’s gross sales grew far quicker than the broader luxurious market, and roughly one-third slower than rival leather-based items powerhouse Hermès, which grew to 33 p.c over pre-pandemic ranges.

Progress was pushed by a “balanced” mixture of value will increase and better volumes, Blondiaux stated. For the reason that pandemic, Chanel has raised costs repeatedly, citing risky trade charges and the rising value of supplies and labour. A Maxi 2.55 flap purse now prices $10,000, in keeping with Hermès’ hand-stitched Birkin and Kelly kinds, versus lower than $7,000 in 2019.

Chanel spent a whopping $1.8 billion on advertising and marketing in 2021, up 32 p.c, underscoring how the model’s nearly-unrivalled scale and spending energy fuels its robust efficiency.

The corporate additionally deployed $758 million in capital investments together with the acquisition of a brand new constructing for its San Francisco flagship, a boutique in Miami’s Design District, and including as many as 50 stand-alone boutiques for its perfume and sweetness division.

These shops, in addition to on-line gross sales of cosmetics that grew 32 p.c final 12 months, might push Chanel’s traditionally wholesale-driven magnificence division to turn out to be majority direct-to-consumer inside just a few years.

“The route is towards extra of a direct-to-consumer [beauty] enterprise … although it depends upon the area,” Blondiaux stated. Whereas wholesalers like Sephora and Marrionnaud stay very related in Europe, the share of wholesale within the US (the place the pandemic accelerated the decline of shops) has dropped considerably.

Aside from entry-level luxuries like magnificence, fragrances and eyewear, Chanel famously stays the style business’s final e-commerce holdout, refusing to promote its core vogue and purses on-line. However it’s nonetheless invested in digital initiatives to “help buyer expertise,“ the corporate stated, together with rolling out instruments for reserving appointments, digital try-on and after-sales service.

“We aren’t, and won’t, promote vogue or watches on-line,” Blondiaux stated. Nonetheless, the corporate sees digital “as enjoying a key function in buyer interplay. We’re making a number of investments in digital instruments to attach with customers and provide companies on-line.”

General, Chanel has earmarked a further $1 billion in capital expenditures for 2022.

As gross sales proceed to surge, the corporate stays dedicated to sustaining a decent retailer community — it presently has solely 250 vogue boutiques, in contrast with roughly twice as many areas for Louis Vuitton or Gucci.

Blondiaux concedes that the mix has at instances led to congestion and lengthy waits in shops. The corporate plans to spice up customer support by hiring greater than 3,500 new workers, together with many gross sales associates, he stated.

Chanel additionally plans to open separate, personal boutiques devoted to serving top-spending purchasers, beginning with areas in key Asian cities by early 2023.

Whereas it’s unclear how that transfer will go over with first-time and occasional consumers who’re able to fork over $10,000 for a bag, Chanel received’t be the primary participant to open particular shops for high-spenders as luxurious manufacturers race to cater to their VICs (crucial clients). Brunello Cucinelli additionally opened a devoted retailer for personal purchasers in New York final December.

“Our largest preoccupation is to guard our clients and specifically our pre-existing clients,” Blondiaux stated. “We’re going to spend money on very protected boutiques to service purchasers in a really unique approach.”

Chanel’s assertion marked simply the fifth time the corporate has launched its annual revenues and revenue publicly, after regrouping its monetary and authorized operations in London. The shake-up, which the corporate stated was aimed toward reinforcing governance and transparency, in addition to the transfer to nominate a brand new chief government, Leena Nair, final December, have sparked hypothesis that the corporate is gearing up for a sale or IPO.

It’s a plot the corporate continues to disclaim: “It’s a agency ‘No’,” Blondiaux stated. “Our mannequin is so robust that why would we modify our path?”

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