Why Chanel Is Opening Private Boutiques

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Background:

As traffic to stores soars, Chanel’s chief financial officer Philippe Blondiaux said the brand plans to open dedicated boutiques for top-spending clients starting in key Asian cities. It’s a strategy that emphasises the importance of big spenders to the in-demand French luxury brand’s future amid whispers of an impending recession — but one that risks alienating first-time and occasional shoppers who are still dropping upwards of $10,000 for bags.

“Brands like Chanel, they’ve lived through lots of cycles of boom and bust in the economy … When there’s an economic crisis, they need to be ready to have a real focus on repeat business,” said BoF’s luxury editor Robert Williams.

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Key Insights:

  • Chanel sells many items in-store only, and limits locations to the most luxurious places in the world’s most luxurious cities — operating just around 250 stores compared with Louis Vuitton’s over 400 doors.
  • Chanel is not the first brand to open special stores for private clients; Brunello Cucinelli deployed a similar concept last December. Other brands like Zegna have dedicated spaces in-store for special items.
  • In 2021, the company’s profits have tripled and revenue jumped 50 percent year over year.
  • The brand’s growth in fashion, watches and jewellery last year was driven by its decision to raise prices and a flood of new clients and first-time buyers to luxury.
  • In addition to focusing on its physical footprint, Chanel is pushing its beauty business, which has been historically driven by department stores and beauty retailers like Sephora and Marionnaud, toward majority direct-to-consumer.
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Additional Resources:

  • Chanel to Open Private Stores for Top Clients as Sales Soar 50%: The French luxury giant said 2021 revenues rose 23 percent over pre-pandemic levels to $15 billion. The brand now plans to open dedicated boutiques for top-spending clients as rapid growth risks overcrowding its stores, CFO Philippe Blondiaux revealed.
  • How Luxury Brands Court the 1 Percent: With luxury experiencing a post-Covid boom, brands have put VIP experiences into overdrive, courting wealthy shoppers in the US with sumptuous dinners and exotic trips.



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