| Name | Chanel |
| Industry | Fashion, Lifestyle, and Retail |
| Founded | 1909-1910 |
| Headquarters | Neuilly-sur-Seine, France |
| CEO | Alain Wertheimer |
| Revenues | $10.1 billion (2020) |
| Profit | $2.05 billion (2020) |
| Competitors | Hermès, Dior, Gucci, Louis Vuitton, Estee Lauder, Rolex, Prada, Burberry, Armani |
Company Overview:
Coco Chanel started in 1910 what is now known as one of the most luxurious brands with the maxim that “luxury must be comfortable, otherwise it’s not luxury”. She opened her first shop in Paris selling hats. She later added several stores and expanded her products to clothes and perfumes. Her first perfume, Chanel No. 5, became the world’s best-selling perfume. Chanel is famous for its timeless designs, trademark suits, and little black dresses (Biography, 2014). Today, Chanel is a powerhouse fashion brand, with 310 boutiques worldwide, over 20,000 employees, high-profile clients, and a variety of products including clothes, eyewear, fragrance, beauty, jewelry, and watch accessories (Apperly, 2021). Chanel’s FY 2020 revenue is $10.1 billion, an 18 percent decrease from the previous year. The operating profit is $2.05 billion, down 41.4 percent compared to 2019. The highest revenue comes from the Asia Pacific with $5.25 billion, then Europe with $2.88 billion, and the Americas with $1.96 billion (GCI Magazine, 2021).
Table of Contents
Chanel Strengths 2021:
- Strong brand value.
Chanel is a popular lifestyle brand. Its brand value had a positive trajectory in the past 5 years. In 2020, its worldwide brand value amounted to approximately $13.7 billion and slightly decreased to $13.2 highly because of the COVID-19 pandemic. The biggest growth was in 2019 when its value went from $5.9 billion (2018) to %11.4 billion (Statista, 2021). It was ranked 52nd in the Forbes’ list of World’s Most Valuable Brands 2020 (Forbes, 2020) - Sustainability plans.
Chanel takes sustainability seriously. In 2020, they launched Chanel Mission 1.5° that focuses on sustainable action plans to reduce carbon footprint in their operations by 50% and in their supply chain by 40% per unit sold by 2030. They commit to 100% renewable electricity by 2025. They plan to reach 97% renewable electricity by the end of 2021 (GCI Magazine, 2021). - Product line.
Chanel has a wide variety of products. They sell haute couture or expensive and fashionable clothes, jewelry, watches, eyewear, makeup, fragrance, and skincare. Every year, they add new Chanel creations or collections, typically introduced during their fashion shows. They produce six women’s fashion collections a year: prefall, spring-summer ready to wear, spring-summer haute couture, autumn-winter ready to wear, autumn-winter haute couture, and the resort collection (Canoa, 2020). - Growing audience base.
Luxe Digital published a list of the top luxury brands online ordered by popularity. Chanel took the second spot after Gucci. It is the luxury brand with the highest number of social media followers with a total of 81.4 million across Instagram, YouTube, Facebook, and Twitter (Beauloye, 2021).
Chanel Weaknesses 2021:
- Covid-19 impact on buying behavior.
The global health crisis has affected the financial and mental aspects of a consumer. While some have lost their jobs, others fear the unknown future. Some consumers now think twice when shopping, prioritizing needs over wants and practical over expensive goods. Luxury brands will need a new approach to attract shoppers. - Pandemic hits.
In 2020, when the Covid-19 pandemic started, Chanel had to adapt to the situation by stopping all factory production and closing all stores worldwide. This, and considering they don’t deal with e-commerce, resulted in low sales volume, recording a 98% loss in just one week. Chanel is optimistic that in 2022 when borders are open again and tourists are able to travel again, they can recover (Bottoni, 2021). They also had to change some strategies to digital. Beauty, sunglasses, and fragrances are sold well through digital platforms. However, they struggled at first when selling fashion as they were used to showcasing it in person.
Chanel Opportunities 2021:
- Market growth.
According to a Business Wire report, the Global Luxury Goods Market valued at $258.12 billion in 2020 is expected to grow and reach $429.81 billion in 2026, growing at a compound annual growth rate of 9.22 percent. The demand for luxury goods increased worldwide most likely due to various social, economic, and cultural changes across the globe (Business Wire, 2021). It is a good opportunity for Chanel to prepare to dominate the market in 2026. - Online conversation.
Even before the pandemic, e-commerce has already been taking over the traditional shopping of consumers. The new normal, post-pandemic suggests that most consumers would want to shop online due to safety and convenience. Chanel should strengthen their online presence and tap affluent consumers and influencers to advertise its products. The digital transformation is accelerating and relevancy is the new legacy (Beauloye, 2021).
Chanel Threats 2021:
- Counterfeits.
Being a popular but expensive brand, a lot of consumers resort to selling or buying counterfeits or imitations. To show how much they take this concern seriously, Chanel dedicates considerable financial and human resources to monitor especially those selling on social network websites and e-commerce marketplace. In 2018, Chanel files a lawsuit against RealReal, an online consignment store for luxury products, after they have uncovered at least seven counterfeit Chanel bags listed on their website (Easterling, 2021). - Intense competition.
The globalization of the entertainment industry through television and social networks changed the consumer preference toward luxury goods. The luxury brands take the necessary steps such as mergers and acquisitions, store expansions, new products launches, and adopting other strategic options to remain competitive (Business Wire, 2020). The top competitors of Chanel are Gucci, Louis Vuitton, Hermès, Dior, and Rolex.
Chanel SWOT Analysis Conclusion:
Chanel is a classic brand adapting to the modern world. Chanel’s wide variety of timeless designs providing luxury and comfort makes it one of the most popular brands in the luxury brands market. Although its simplicity can be easily imitated, one can tell the difference from its overall look and material. As with any other brand, Chanel has also been impacted by the global pandemic. They are more accustomed to boutiques, fashion shows, and showrooms that when travel restrictions and physical distancing were implemented, they struggled and experienced financial loss. But as always, Chanel transcends time. They are adapting to the digital initiatives well. They are preparing for what might come in the coming years, especially in the hyper-competitive market of luxury brands. It looks like Chanel has no plans to take a step back as the leading luxury brand.
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References:
- Biography, (2014). Coco Chanel Biography (1883-1971). [online]. Biography.
- Statista, (2021). Revenue of Chanel worldwide from 2016 to 2020. [online]. Statista.
- Statista, (2021). Brand value of Chanel worldwide from 2017 to 2021. [online]. Statista.
- Apperly, E. (2021). All about Chanel: The making of a fashion powerhouse. [online]. Thames & Hudson.
- GCI Magazine, (2021). Chanel Fiscal Year 2020 Results. [online]. Global Cosmetic Industry.
- Forbes, (2020). The World’s Most Valuable Brands. [online]. Forbes.
- Canoa, N. (2020). A CHANEL KEEPS ITS CALENDAR OF 6 COLLECTIONS PER YEAR. [online]. Highxtar.
- Easterling, C. (2021). Chanel, Inc. v. The RealReal, Inc.: The Firsthand Problems of the Secondhand Market. [online]. The Wake Forest Law Review.
- Beauloye, F. (2021). The 15 Most Popular Luxury Brands Online In 2021. [online]. Luxe Digital.
- Business Wire, (2020). Global Luxury Goods Markets, Competition, Forecast and Opportunities, 2021-2026: Focus on Jewelry & Watches, Clothing & Footwear, Bags & Accessories and Cosmetics & Fragrances – ResearchAndMarkets.com. [online]. Business Wire.
- Bottoni, C. and Roncato, S. (2021). Chanel’s Challenge. [online]. MF Fashion.
