Chanel’s Digital Strategy: Old Habits Die Hard

If the global pandemic taught us anything about physical retail, it’s that its expendable. In the months following the global lockdown, companies that heavily relied on foot-traffic experienced dramatic challenges. Meanwhile, firms like Amazon and Lululemon, whose online sales regularly account for a significant portion of total revenues, were better positioned to withstand the halt on physical retail. Across the industry, brands that had an established e-commerce presence before the COVID-19 crisis fared better than the ones that didn’t. 

So, what does the pandemic-induced catalyst towards e-commerce mean for a brand like Chanel, who until now, remains adamant on its refusal to sell core-fashion products through digital channels? The result may not be as life-threatening as we think. 

The brand strategy

To understand Chanel’s reluctance on e-commerce, we have to understand the strategy that garnered the brand its $100-billion-dollar valuation in 2019. 

In the 1980s, Chanel systematized a structure under which haute couture, ready-to-wear and other core fashion-products would be categorized under strikingly high price points. These price points – not uncommonly in the hundreds of thousands for the most elaborate couture pieces, created a halo effect of luxury for the brand. As a result, Chanel was able to significantly mark-up its entry-level fragrance and beauty products. While haute couture and ready-to-wear are were out of reach for the luxury-aspirants, Chanel’s chief revenue drivers – fragrance and beauty, were sold at lower price-points when compared to that of its luxury-industry peers. 

The effective paradox of price-segmenting has allowed Chanel to generate and maintain its exclusive-luxury façade, all the while generating mountains of revenue each year. The reason being: for a brand whose client-base is composed not of mass-fashion and economy consumers, but of society’s minted ‘elite’ who pride themselves on brand exclusivity, the idea is not to make Chanel accessible to everyone. Rather, Chanel needs to be just accessible enough so as not to deter attention from up-and-coming luxury-aspirants. 

The digital strategy

If Chanel’s brand strategy thrives on exclusivity, then its position on e-commerce and digitization reflects that. 

While Chanel’s luxury peers – Dior, Gucci, and Louis Vuitton were busy capitalizing on the business of e-commerce, Chanel was occupied with improving its boutique experience. In 2018, the brand partnered with Farfetch, a leading global technology platform for high-fashion brands. Ironically, the purpose of the deal did not have the end of e-commerce entry in mind – rather, the partnership with Farfetch was aimed at physical retail augmentation. 

In 2019, Chanel unveiled its ‘boutique of tomorrow’ concept in Paris; showcasing a digital-physical retail experience where clients were presented with a high-tech, personalized retail interaction. The pilot boutique – augmented with a virtual showroom, technology-enabled mirrors, machine-based product suggestions, contactless payments, and not one – but multiple ‘Fashion Advisors,’ was a roaring success for Chanel, attracting both long-time clients and tourists from around the globe. 

When asked about the partnership in an early 2020 interview with Vogue, President of Chanel – Bruno Pavlovsky replies: “Our position on e-commerce remains the same.” 

For now, it seems that Chanel – confident in its understanding of client expectations, has no intention of making its core-fashion products available online. “Come into the boutique, try things on, decide what you like – that’s part of the experience. And the people who don’t want that? They don’t come to Chanel,” said Bruno Pavlovsky, in response to concerns about the brand’s e-commerce strategy. 

Similar to its “less is more” approach to e-commerce, Chanel remains unmoving in its use of Instagram. While other brands regularly exploit all available Instagram tools to boost interaction with customers – from IG stories to Photo Ads – Chanel could not be less concerned.  

The brand follows two accounts: its beauty segment and its atelier in Paris. Beyond that, you’ll hardly – if ever, see the illustrious fashion-house replying to comments, streaming live feeds, or advertising itself through stories. Instead, you get a carefully curated library of in-season haute couture and ready-to-wear designs – everything the average customer can see, but typically can’t touch. 

The facts

And it all seems to be working. 

A Google Trends search reveals consistent global interest in Chanel. The brand boasts 40.4 million followers on Instagram, by far the most for any luxury retail company – with Louis Vuitton at 38 million, Dior at 31 million, and the far more exposed Gucci just a hair under, at 40.2 million. 

In 2018, the powerhouse made its earnings available to the public for the first time, revealing strong cash positions and $10 billion dollars in revenue for 2017, just slightly under competitor Louis Vuitton. In 2018, Chanel announced $11.1 billion in revenues and in 2019, $12.3 billion; thus, signaling maintained revenue growth despite its lack of e-commerce presence. 

So, while Chanel doesn’t exploit its potential for revenues through e-commerce and social media channels, perhaps it doesn’t really need to do. For the century-old brand, the “less is more” approach seems to be working; and what cloaks itself as a traditional approach to retail might actually be the branding strategy that preserves Chanel’s revenue-driving luxury profile for years to come.