INSIGHTS: A turning point for Chanel

Before we dive into Chanel, we need to zoom out on the overall fashion and luxury goods industry worldwide. Business of Fashion revealed that high end handbag prices have been rising faster than luxury jewellery despite the cost of gold increasing faster than leather. This is seen in the below chart where we see the price of the Chanel flag-bag accelerate at a much faster pace than the Cartier Love bracelet.

Globally, the total leather goods market is seeing a decline (-3% at current exchange rate) in sales while jewellery is up (+2%) according to Bain & Co. This indicates luxury consumers are choosing jewellery over leather goods in a slowing economic climate worldwide with large variances by country.

At the same time, Artistic Director Virginie Viard abruptly left Chanel last year. Viard worked alongside the late visionary Karl Lagerfeld for 30 years, therefore, she was the natural choice for his successor upon his passing.  During her time, she achieved incredible business success in the role, doubling the fashion business as reported in Vogue Business. 

However, Viard received criticism from the fashion industry on not modernising Chanel and bringing the same avant-garde approach that Lagerfeld did for decades prior. Audiences took to Tik Tok and Instagram to vocalise their disappointment.

With an empty seat of Artistic Director for half of 2024, a decline of 4.3% in global Chanel sales isn’t exactly shocking and on the other hand, it’s almost impressive that they maintained only a slight decline considering the state of the luxury goods market at large. (Bain & Co). In Australia, after years of accelerated growth, Chanel saw an even deeper decline of -16% in 2024 results with profitability being heavily impacted (-87% compared to -30% globally) as reported in the Australian.

With a headline of “Sales and profits for French fashion house Chanel dive” in The Australian, it sounds like alarm bells are ringing. Are we alarmed by the state of Chanel’s 2024 figures worldwide and in Australia? Honestly…not really, especially when the announcement landed of the new Artistic Director Matthieu Blazy being named. Blazy is

widely regarded as one of the most talented designers of today and credited with transforming Bottega Veneta. The fashion industry is waiting with bated breath for the reveal of Chanel under Blazy’s vision.

What does this mean for Chanel in Australia?

When zooming in on Australia, last year was a challenging year for many luxury brands. With the Chanel flapbag reaching over 17k Australian dollars, psychologically, it may feel like a tough pill to swallow when going for that purchase and 2024 might be the year that the Australian luxury consumer holds off. Did Chanel go a tad aggressive with pricing increases? Yes, but it’s only a matter of time until this becomes the new normal. Luckily, Chanel is in it for the long game.

In 2024, it’s clear that Chanel heavily invested in Australia which will in turn impact their profitability. From a very pragmatic point of view, some years take more investment than others to secure the future. With a heritage, privately-owned Maison, that is something that an organisation may decide to take on with a long-term vision in mind. A declining year in both sales and profitability doesn’t dictate the years to come, noting there is a positive outlook of +3.6% CAGR predicted for the luxury goods market in Australia for 2025 - 2034 (Expert Market Research).

Chanel is not letting the weight of 2024 steer them off course of their vision in Australia. From recent activity in the market, it looks like the Maison is ready to seize more market share across not only fashion, but also jewellery and watches with more investment in this segment. This year, on top of a High Jewellery event for VIP clients in Sydney, Chanel has recently opened a new boutique with a dedicated fine jewellery and watches area.

Frederic Grangie, president of Chanel watches and fine jewellery, is quoted in the Australian sharing that Chanel’s activity in this category will only continue and expand further in the coming years.

SKALE’s take:

After a few years of criticism from the fashion world of Chanel's designs plus a year in decline, the reveal of the new collection by Matthieu Blazy likely will automatically bolster sales worldwide and in Australia – granted the designs are modernised. On top of this, if Chanel accelerates their fine jewellery and watch activity, their success can be twofold considering this segment is where consumers are choosing to purchase in the current climate.

What matters the most is the “how.” 

How will Chanel leverage the new designs from Blazy to make the most of this key moment that will define Chanel’s future?  How will Chanel drive visibility and credibility in fine jewellery and watches to recruit more clients into these segments? We have some ideas, but for now, we all have to wait for the moment that Blazy will take the stage in October at Paris Fashion Week and watch as a new era of Chanel unfolds. 

One last word:

"Sometimes the business is flying, sometimes the business is more difficult. And we have to be ready to stay consistent with who you are in any condition. And that's something which is super important." says Bruno Pavlovsky - President of Fashion at Chanel, for the Australian.

We love the above quote as we are true believers that for long-term branding of heritage Maisons such as Chanel, it is important to not be rattled under economic pressure.  Evolution in strategy is of course key in the fast-moving luxury landscape, while also remaining true to the DNA of Chanel for short and long-term success.  A Maison like Chanel is carried by an army of stewards who are simply here to drive the legacy forward.