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Chanel’s Year of Change

Bruno Pavlovsky, president of fashion and Chanel SAS, addresses the reshaping of the storied French house, from its ban on exotic skins to its curious new London headquarters, as well as the rumours that Phoebe Philo will succeed Karl Lagerfeld.
Chanel Boutique in Copenhagen | Photo: Shutterstock
By
  • Lauren Sherman
BoF PROFESSIONAL

NEW YORK, United States — It's been quite a week for Chanel, and it's only Wednesday.

On Monday afternoon, the Parisian fashion house announced it would halt its use of fur, following in the footsteps of luxury peers like Gucci and Burberry. But Chanel went a step further, saying it would stop manufacturing products made from exotic skins like crocodile and stingray.

Then, just a day later, the brand staged a multi-million-dollar fashion show in the famed Egyptian Wing of the Metropolitan Museum of Art in New York City. There, dozens of top clients joined editors and buyers for designer Karl Lagerfeld's annual Métiers d'Art spectacle, a high-wattage event that doubles as a tribute to 26 Chanel-owned ateliers that specialise in skills like embroidery, pleating and button-making.

And that was all over the course of just 48 hours. It's also been quite a year for the Chanel business. Earlier this year, the privately owned house, controlled by the secretive Wertheimer family, established a London-based holding company for its global operations and revealed its worldwide revenue for the first time in its 108-year history. In 2017, global sales hit $9.6 billion, a nearly 12 percent increase from a year earlier.

With the establishment of the London headquarters came changes to Chanel's management structure. For instance, Bruno Pavlovsky, president of Chanel fashion, is now also president of Chanel SAS.

Bruno Pavlovsky by Karl Lagerfeld | Photo: Courtesy of Chanel

In an interview on Tuesday morning in New York, Pavlovsky downplayed the significance of the London move, saying that Alain Wertheimer, who replaced longtime global CEO Maureen Chiquet, who exited the company in 2016, chose the city not because of any major changes to the way the company is being run, but because it's a good place for a holding company.

“We were a bit tired of the fake news about the brand, and the owners decided to communicate the figures, which I think was a good move," he said. "But [in moving to London] there’s nothing special, nothing to do with the brand and the business development. For us, it’s business as usual.”

As for the rumours swirling around London that the house is prepping for the arrival of former Céline designer Phoebe Philo — said by some to be waiting in the wings to replace Lagerfeld — Pavlovsky gave a dismissive shrug. "I hear the rumors [about Philo] and all that, and I find that quite funny," he said. "But it's nothing serious." (Sources within the Chanel universe have pegged longtime Lagerfeld deputy Virginie Viard as his successor.)

"I hear the rumors [about Philo] and all that, and I find that quite funny. But it's nothing serious.

There is also the question of succession on the business side. While the appointment of Alain Wertheimer — whose grandfather, Pierre Wertheimer, was an early business partner of Gabrielle "Coco" Chanel — to the role of chief executive in the wake of Chiquet's departure was supposed to be temporary, recent statements from the company indicate that he will remain in the role indefinitely. At the same time, fourth-generation heirs are taking more prominent roles in the business. (Arthur Heilbronn, the eldest son of Charles Heilbronn, half-brother to Alain and Gérard Wertheimer has spent time over the past year visiting many of Chanel’s subsidiaries, according to one source familiar with the business.)

Regardless of the outcome, it's clear that Chanel is in the midst of a transformation. "Sooner or later they will have a generational change," Mario Ortelli, managing partner of luxury advisors Ortelli & Co., told BoF in July. "But we will see if the pace of operational change at Chanel increases."

For today, Pavlovsky’s eyes are on the New York market, and by extension the US, where the company’s local-local strategy — targeting local customers shopping locally in order to compensate for unpredictable fluxes in tourism — is taking shape with the opening of its refreshed-and-expanded 57th Street flagship in November and now, the return of the Métiers d’Art collection, which hasn’t been shown in the city in a more than decade. “It’s a strong opportunity to reconnect our customer in the States with the Métiers d’Art,” he said.

While the collection doesn’t arrive in stores until May, Pavlovsky said that clients would be crumb-fed new information throughout the wait, reflecting a multi-speed communications strategy that is punctuated by grand spectacles like last night’s runway show, which cost millions of dollars to produce but is all-but guaranteed to create valuable social media buzz.

According to research conducted for BoF in 2017 by digital solutions agency Preen.me, the greatest spike in online conversation about Chanel happens during its runway shows, not at the drop of a new campaign. But while yesterday’s runway show serves as the initial spark, the brand is hoping that in-store workshops and other events will keep local consumers engaged.

“We think it’s important to be able to show our creativity through Mr. Lagerfeld’s shows, but also to show the value of the product through the craftsmanship,” he said.

At the same time, Chanel is making changes in terms of the materials it uses. It is perhaps no surprise that the brand is banning fur, given the online activism driving similar proclaiments across the industry, but banning high-margin exotic skins is a bold move for a luxury player. Pavlovsky said that, in the past few years, it has become increasingly difficult to source exotic skins ethically.

He also said that the exotics business “wasn’t that important” to the company’s bottom line, and that buying farms was out of the question. In the past, the brand may have earned a press bump when it debuted a limited-edition or one-off exotic-skinned item, but the shock value of high-priced items is waning. Instead, Chanel has chosen to focus on “novelties and craftsmanship,” telling more nuanced stories. The company treats the handbag collection, which is refreshed six times a year, more like ready-to-wear: the specialness — and the price tag — will be determined by design and innovation techniques instead of the rarity of the raw material.

But while Chanel’s unprecedented move may cast the company in a hipper light than its exotics-reliant competitors, under the hood Chanel remains a highly traditional player in many respects. For instance, there are no plans to add more e-commerce categories in key markets, despite the online launch of eyewear in the UK this past summer. “Never say never,” is Pavlovsky’s typical retort, but there are no immediate plans to expand e-commerce. Even for handbags. “You cannot have the kind of product we have at Chanel — such a sophistication, such an assortment — and just click on the net,” he said. “I see a paradox between the quality and the sophistication of the design of the product and the idea of selling them at the same level as any other product.”

Of course, the success other luxury brands — as well multi-brand, multi-billion players like Net-a-Porter and Farfetch — have had online could prove Pavlovsky wrong. Online sales of luxury goods will reach €74 billion by 2025, up from €20 billion this year, according McKinsey & Co.

We are not trying to build a group or whatever. We have enough to do.

However, right now for Chanel, it seems the risk of brand dilution is not worth the potential uptick in sales. Instead, the brand is using digital as a communication tool and to better serve the consumer in the store. (The fruits of its partnership with Farfetch to bring digital elements to the in-store experience are slated to materialise some time next year at its 31 Rue Cambon flagship.)

“Digital is a perfect tool to improve the relationship, but it will never replace a fitting with a fashion advisor,” he said. “Customers in New York and London are the two cities in the world where people are most advanced, and probably where we need to accelerate e-service.”

Chanel also made a strategic acquisition in September with Orlebar Brown, the London-based men's swimming trunks label. While not a purely direct-to-consumer brand, 60 percent of Orlebar Brown's sales are made online. That's in stark contrast to the other Chanel-owned swimwear brand, Eres, which only takes 10 percent of its revenue from digital. Pavlovsky said that the company had been in talks with Orlebar Brown for some five years, and that its yin-yang fit with Eres was the main driver of the acquisition.

The company certainly has something to learn from Orlebar Brown’s digital success, although Pavlovsky said it is not actively looking to acquire any more brands, despite the fact that deal-making in the fashion-and-luxury space reached a fever pitch this year.

“We are not trying to build a group or whatever,” he said. “We have enough to do.”

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