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                  Inside Chanel’s digital strategy | Vogue Business

                  by Editor
                  February 22, 2021
                  in Business
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                  Inside Chanel’s digital strategy | Vogue Business
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                  You can buy Chanel fragrance, cosmetics, skincare and sunglasses online, but fashion is a no-go — and a change in strategy looks unlikely any time soon.

                  For the rest of the luxury sector, that makes Chanel endlessly fascinating. Its approach might be instructively compared to Bottega Veneta, which abruptly deleted all its social media accounts in January. The question on everyone’s minds: in an age of all things digital, can luxury brands afford to sit apart from the pack?

                  Chanel will not publish 2020 annual results until June. But analysts say the brand was not penalised by declining to sell fashion online during the pandemic. “I suspect that Chanel, like Louis Vuitton and Hermès, will have proven to be the most resilient of companies,” says Erwan Rambourg, HSBC managing director and global head of consumer and retail equity research. “The reason for that is the disconnect between demand and supply on certain products. Also, like Hermès, the price point of Chanel is significantly higher so you are looking at consumers who are resilient in tough times.”

                  Differentiation in luxury

                  As a privately held company, Chanel has the luxury of independence and time. It can deprioritise sales growth and margins and maintain a laser-like focus on brand desirability. “Our products require more,” Bruno Pavlovsky, president of Chanel Fashion and Chanel SAS, told Vogue Business in October. “Today, e-commerce is a few clicks and products that are flat on a screen. There’s no experience. No matter how hard we work, no matter how much we look at what we can do, the experience is not at the level of what we want to offer our clients.”

                  “We aren’t stubborn,” he insisted. “During the lockdown, we developed a lot of [online] content for our teams in the boutiques to engage with clients but the experience always ends up in stores. It’s something we are very vigilant about and that has been working rather well. There are alternatives to e-commerce. Pure e-commerce is not an end per se. Service is much more important.”

                  Asked directly whether Chanel will sell online if the technology significantly evolves, Pavlovsky replied: “I don’t know. As long as we can do what we want to do: to offer the most significant experience to our clients.”

                  Chanel stands almost alone. Even Hermès, a luxury house that values its traditional in-store retail expertise, sells a part of its offer online. Others are more open like Gucci, which started selling in December on China’s largest e-tail platform Tmall’s Luxury Pavilion.

                  So why is Chanel so adamant about sidestepping online fashion? “Very few brands have the luxury of ignoring e-commerce… but [Chanel’s] view is that you should have differentiation in the luxury space,” says Rambourg, comparing it to Bottega Veneta’s move away from social media. “Since Bottega Veneta announced that move, the buzz on the brand has never been so high. They would rather approach the market with different means. It enables them to push the idea that they are not in the pack.”

                  Chanel is always testing digital. In recent years, that has included a partnership with Farfetch, in which it took a minority stake in 2018, to develop digital initiatives to improve customer experiences in stores; a pop-up shop for fine jewellery line Coco Crush on Net-a-Porter in 2015; a digital Style Talk with Sofia Coppola for its top clients during the pandemic; a five-star concierge service offering home delivery; and an ongoing social media push that includes Chinese social media such as Little Red Book (Red), WeChat and Weibo.

                  Fragrance and beauty is vastly different. Representing 36 per cent of Chanel total revenue in 2019 according to Morgan Stanley estimates, products are widely distributed including on China’s Tmall. Chanel beauty’s first app, Lipscanner, launches today combining visual recognition, virtual try-on technology and ecommerce. Developed internally it will feature some 400 products by the end of 2021. “The main innovation is the ability to bridge inspiration and product discovery,” says Cédric Begon, director of Chanel fragrances and beauty’s Connected Experience Lab. “One click you like this picture, you upload the photo, second click you see yourself with the lipstick on your face… There’s value in going fast.” The Connected Experience Lab has “exchange sessions” with Chanel fashion, Begon says but “at the moment this is a pure beauty experience”.

                  Fine lines between on and offline

                  On the fashion side, the ongoing collaboration with Farfetch demonstrates that Chanel Fashion is willing to experiment. It includes connected displays for the Rue Cambon flagship, a consumer app and a Shop Floor app for sales advisors. “The whole approach is a sort of trial and error of how to improve service in a store, how to make the experience more lively and more fun,” Rambourg says.

                  But when Paris department store Galeries Lafayette, currently closed during the Covid-19 pandemic, launched live shopping sessions with leading luxury brands including Dior, Prada and Celine, Chanel Fashion chose not to participate (although Chanel Beauty did).

                  Analysts suspect Chanel’s stance may soften in future. The elements that define 2020s’ e-commerce blur the lines between online and offline. Chanel wants its fashion sales to include human interaction and a personal touch. But that much-valued interaction between client and salesperson can, arguably, take place on Zoom or live stream. “The frontier will fall between traditional distance selling and e-commerce as sales people access new tools,” says Olivier Abtan, senior managing director at Publicis Sapient. “Luxury brands will further develop distance selling that becomes more professional thanks to new apps and platforms.”

                  More fluid thinking may be in order. “I don’t believe that digital distribution must necessarily damage brand equity,” says Bernstein analyst Luca Solca. “As usual, there is a good way and a bad way of doing things. Uncontrolled presence on multiple websites with inconsistent pricing and poor presentation is certainly bad. On the other hand, direct-to-consumer digital distribution, benefiting from consistent price execution in line with physical directly operated stores and supported by high-quality consumer service can improve — rather than reduce — the positive emotional connection between consumer and brands.” Solca notes that concierge service works well for Chanel: “It’s a very clever bridge linking physical distribution and digital distribution.”

                  A change of attitude on the part of the luxury consumer may also prompt a rethink at Chanel. “My bet is that they will sell online sooner or later to provide a service that the luxury consumer appreciates and looks for,” says Mario Ortelli, managing partner of luxury advisors firm Ortelli & Co. “If I want to buy a Chanel piece only from my comfortable sofa on a rainy evening while having a glass of wine with my wife after having watched the video of their amazing runway show, that’s a real brand experience. For many luxury consumers, that’s service.”

                  “Digital can have a huge traction, but we don’t want it to occur at the expense of real contact with the physical product,” says Chanel’s Begon. “For a luxury house like us, it’s really key to make sure that the way we present the product and create customer journeys favours the ability to have the real product in hands at some point. In our view, nothing can replace the physical try-on and the sensory benefit.”

                  Assessing Chanel in the pandemic

                  Chanel might have felt obliged to loosen its resistance to online fashion sales sooner were it not for its ongoing resilience in the APAC region. “Chanel continues to be a byword for luxury and the most recognised brand by global luxury consumers, also mirrored by its popularity on social media,” noted the 2020 Vogue Business Index. “The brand’s large exposure to the APAC region has, in part, shielded it from its lack of e-commerce offering.”

                  Chanel was second only to Dior as the most viewed brand on Vogue Runway between January and September 2020. The brand had a 30 per cent reduction in the number of unique views (in line with the Index average of 29 per cent). But Dior was down only 16 per cent and close competitors Gucci and Louis Vuitton held steady.

                  No doubt Chanel might have sold more fashion during the pandemic if it had taken the e-commerce route. Analysts point to how Louis Vuitton, the world’s largest luxury brand, generated an estimated 12 per cent of sales online in 2020, up from 6 per cent in 2019.

                  But Chanel is playing the long game and has always done things at its own pace. “It’s very likely that they will continue to enforce a policy of selling fashion face-to-face,” says Rambourg of HSBC. “If they didn’t sell online when the entire world was shut, they’re not going to start when the world reopens.”

                  More from this author:

                  Pinault reveals Gucci turnaround plans amid slowdown

                  Skincare, luxury cosmetics fuel L’Oréal’s rebound

                  Fenty fashion faltered, but LVMH sees growth for lingerie and beauty



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