Of all the luxury fashion brands in the world, Chanel is perhaps the most famous, as well as the most secretive. Indeed, even inside the fashion industry, few have heard of its only shareholders, the discreet Wertheimer family, descendents of Pierre Wertheimer, an early business partner of Coco Chanel herself.
In contrast, other luxury megabrands like Louis Vuitton, Gucci and Cartier are part of publicly-traded, multi-billion dollar luxury conglomerates — LVMH, PPR and Richemont, respectively — which have high-profile chief executives and principal shareholders who must regularly engage with the investment community, explain their business strategies, appear at industry conferences and attend fashion shows, not to mention publicly report their performance figures.
But privately held Chanel is different. Nobody outside the company knows exactly how big the Chanel business is. The fragrance and beauty business alone has been estimated to turn over more than $1 billion a year, powered by the world’s first and most famous modern fragrance, Chanel No. 5. There is also a growing jewellery business and the company’s crown jewel, the ready-to-wear and haute-couture businesses on which the codes of the house are based. All told, Chanel could very well be doing over $3 billion in sales revenue per year.
What’s more, Chanel is able to strike a powerful balance between the past and the present — something which eludes many luxury competitors — working with punky, of-the-moment models like Alice Dellal while simultaneously maintaining a timeless, prim and proper image.
I sat down with Bruno Pavlovsky who leads Chanel’s global fashion business, in London for the opening of the brand’s Little Black Jacket exhibit, to learn more about the workings of this most successful yet secretive of brands, how it maintains impeccable consistency across all of its activities, and why Chanel still doesn’t sell its fashion online — at least for now.
BoF: Chanel has an incredibly rich heritage, but somehow still feels very modern and contemporary. Some luxury brands can be weighed down by their history, while others don’t know how to retain it as they grow. How do you manage this balance?
BP: It’s about creativity. And the beginning of creativity is the codes of the brand. These codes are now quite iconic because eight times a year — for two haute couture and six ready-to-wear collections — we ask Mr Lagerfeld and his studio to come up with new interpretations. These incredible creative people, collection after collection, start the story again.
Today, Chanel is perhaps one of the most successful business models based on creativity. We let these creative people go to the next step in designing the collection. And, on the other hand, we maximise the impact of the collection at every point of sale.
A few weeks ago in Paris we had a collection that was quite energetic. The challenge is to be able, 6 months from now, to recreate that and to keep this same energy and to align all our people — from China, to Brazil, to Canada, etc — on this creative energy. For that, first, we need to support creativity and we need to respect creativity. For me, that’s one of the keys.
[Mr Lagerfeld and his studio] give us a lot of good things through the collection and after that it’s about how we play all of these good points, good things, good energies to recreate something special at the boutique level. This is the base of this business model.
BoF: But it’s not just about the collection. The show becomes a focal point around which a lot of communication happens: the advertising campaign, the visual merchandising, the store, etc.
BP: The show is the starting point for all of our stories — for everything. All of our creative people focus their energy on being able to create this event, from the décor to the music to the collection. The collection is the most important for us because at the end of the day, what you find in the boutique is this product.
Once we have the show, we have this energy and the same team is in charge of creating all the tools: the advertising, the visual merchandising, the windows. Because we have the same people working on everything, we can keep this consistency between the show and our communication in every single region. Everything is centralised in the same hands.
BoF: You’ve also been acquiring all these small houses, including Lesage, Michel, Lemarié, Desrues and others. How important a part of the strategy has this been in terms of preserving the heritage and special nature of Chanel?
BP: Back to the creativity of the product. Back to these eight collections. For that, we need the people who are able to make the product come alive. Karl is sketching and we have some people working around him. They have the ideas. And we have these people who bring the collection to life. We need to get them all around us. If they are not available, if they are based 2000 or 3000 kilometres away, forget it!
A collection is a 6 week cycle. To be able to do this development in such a short time, we need to have the people available and ready. Quite often it’s a long partnership, a long relationship. What we have done is to give them the chance to focus on the creative aspect of what they are doing. And, they are not only working for Chanel. They are also working for a lot of other brands.
Each of them have a specific role, specific knowledge; they have a specific story, a specific archive. And it’s quite interesting for us to fulfil the studio with all of these competencies. For us, at Chanel, it’s a guarantee that this creativity can continue to exist for the next 50 years.
What we have done is to give them the resources to be able to work with new talents and to train people. And now, what I appreciate the most is when you visit all these ateliers you see a lot of young people. So in fact, you can find people.
BoF: We’ve been focusing on fashion because you run Chanel’s fashion business. But Chanel is not just about fashion. Chanel is also about fragrance, beauty, jewellery, watches. Across all these product lines, the articulation of the Chanel brand is incredibly consistent. And it’s consistent globally. How do you do it?
BP: First, the story of Chanel and its codes is a good starting point for everyone. The last fine jewellery collection, which was based on 1932, is the perfect example of what the codes have been able to bring to the brand.
We also try to keep what we call the ‘Chanel angle’ to ensure that we are consistent with the vision that we have of the brand, taking our time to share our vision — and our vision is about fashion and luxury.
Luxury is for us to be at the top. And fashion is the way to illustrate creativity. But luxury is true for jewellery, for watches; it’s true for fragrance and beauty — and there is no limit. Every time we do something, we are doing our best because we want to keep this luxury part of Chanel quite alive. [As a company] we are working closely together, so any time we have a project, we share it to ensure that all the projects fit the brand and bring something to the brand. That is key.
BoF: Apart from the words luxury and fashion, how would you summarise what the Chanel brand stands for?
BP: Creativity, audacity, surprise — a lot of surprise, you want to be surprised about what Chanel is doing. Femininity, we are a very feminine brand. Even if we are very strong in fragrance for men, the idea is more feminine. Agility, I think that you have to be ready to adapt yourself to every situation, because as you know the world is moving very fast, what you see today is not true to tomorrow, so you have to adapt all the time, in every single country.
Today what is happening in Japan is not the same as what is happening in China or Europe. So you have to be very consistent with your vision and you have to also be able to adapt this vision to what is happening locally. It’s a kind of mindset — if you are quite open to the specific mood, trend or event that has happened somewhere, I think that you can find a solution.
BoF: Speaking of adaptation, I’ve been watching Chanel’s evolution in the digital world. The website, the Chanel News blog, the new Coco Chanel website, one million followers on Twitter, 7 million fans on Facebook. And there’s a lot of digital content being created. How does digital fit in your overall communication strategy?
BP: It’s a good example and good illustration of what I explained before. Chanel has to adapt. Five years ago, we were doing one advertising campaign per collection. Now we are doing a lot of different content and are obliged to change our mindset. We are in a new world and everything is moving very fast. I’m talking about Chanel News; I’m talking about our booklet, Chanel 31 Rue Cambon; all these tools.
Finding the right way of creating this content took us a while, but now we are asking a lot of people that we respect to give us their vision of the brand. We call them contributors to the brand. They are part of the company, friends of the company, who can create content and give us their vision of the brand. It’s what we are doing on Chanel News, it’s what we are doing on Facebook.
The most important thing is that people can talk about the brand. Two years ago we were not able to tweet. Now we tweet more or less every week. But we need have something to say. We do not tweet just to tweet.
BoF: One thing that you’re not doing is selling clothing online. In fact, Chanel is one of the few luxury brands that doesn’t sell clothing online. Can you tell me why?
BP: We sell a lot of clothes. Our clothes are quite sophisticated and one of our strengths is alterations. To be able to wear Chanel clothes, you need to try them on. You need to be in the fitting room. You need to have a tailor who alters the clothes to fit exactly to your body. I think it’s part of Chanel. It’s more than just our service. It’s part of our differentiation to have ready-to-wear that is perfect for our customers.
What we want today — and the way we use digital — is to have more and more people come to the boutique to see the product, to touch the product, but also to try the product. And that, for me, is the most important part.
But perhaps two years, three years, five years from now, we will start to sell [clothing] online. We are already selling fragrance and beauty online.
BoF: What about accessories? You could easily sell the Chanel 2.55 bag online. That doesn’t need to be altered.
BP: Because the focus of the brand is about ready-to-wear, it’s about fashion. We prefer to sell our bags to people who are coming to the boutique. We want to expose our customers to the brand and so we want them to come to the boutique.
It’s a strategic choice. It’s a choice to say, ‘Guys, you can see whatever you want on the internet, but we want you to come to the boutique, because we feel that in the boutique we can give you the right understanding of the brand.’ So, yes we could sell handbags on the internet. But my feeling is that it’s not qualitative enough and it’s not the kind of service that we want to give to our customers — at the moment.
Now, we have some good ideas of how we can do that in the next five years, but it’s quite huge. I strongly believe in e-service. It’s something we talk about a lot. At the moment we are working on a huge e-service project and next year we will launch a new Chanel.com for fashion which will be an introduction to this e-service; how to link your customers with your boutique.
But whatever we do, at the end of the day, our goal is to make people come to the boutique: to touch, see and try on the clothes and be exposed to our accessories. Or we can go to their home. We are doing that as part of our VIP service. We can come to them with the product, but we want the people to be exposed to the collection. We feel it’s one of our key differences.
BoF: I have one last question. Chanel is a privately held company and doesn’t have to report quarterly results to shareholders. It feels like having private shareholders enables Chanel to think longer term. What are the differences for a manager working in a fashion business which is privately owned versus a fashion business that has to answer to the stock market?
BP: The most important in both cases — and I know what it is like in both situations — is that we are investing in creativity. That’s a decision you can make in a private or public company.
After that, there are some obligations that you don’t have when you’re in a private company, it’s true. But at the end of the day, we need to generate the same level of results. Perhaps the results aren’t just about the profit or dividends. Perhaps the results are also about the value of the brand and we have some other indicators which are also quite important to the value of the company.
At Chanel, we strongly believe that because we are family-owned and we are [thinking] long-term, we are also able to deliver in the short term. As a manager you have to adapt yourself to every situation. I feel that I have the same pressure, because our shareholders are also quite demanding in terms of the results we have to deliver. But when I say results, these results are not automatically money-driven. They can be image driven or something else.
So it’s a question of what kind of shareholders you have and what they want from you and from the company. You have to adapt yourself. You can adapt yourself and your organisation to any kind of situation.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed