Chanel Has a Very High Degree Of Exclusivity

Last month, Chanel, which has always been hidden, has published its financial report for the first time in its 108-year history. Part of the reason is also to smash the rumors that it will be acquired. According to its disclosed Lightinthebox Discount Code financial data, the French luxury goods giant's sales last year reached 9.6 billion US dollars, only slightly lower than the sales of Louis Vuitton, the "cash cow" brand of LVMH.

 

But Chanel still has great appeal to consumers, which is no secret. In fact, our consumer survey shows that Chanel is the world's most popular luxury fashion brand, and its high degree of exclusivity makes Chanel more popular.

 

But at the same time, it is paradoxical that Chanel is also one of the easiest luxury brands to buy. Some of the entry-level products offered by Chanel are not really expensive, such as beauty products. Through Chanel's cosmetics and fragrances, the middle class can also feel the lifestyle of buying Chanel's high-end clothing and high-end ready-to-wear people.

 

Indeed, Chanel is indeed a master class in terms of category isolation: strictly limit the brand's iconic core categories to high-end price ranges, while cleverly restricting other categories (such as lipstick) to lower price ranges, catering to the desire to own luxury goods. Customer demand.

 

This ingenious category isolation keeps Chanel highly exclusive. This strategy sounds simple, but the fashion house is relying on this to become the largest major luxury brand in the retail industry, with sales reported only slightly lower than Louis Vuitton.

Chanel's leading position in the beauty industry is also the key to this success, and the beauty category relies heavily on multi-brand distribution models. Despite the disadvantages of low profit margins and weak control of the shopping experience, the clever use of wholesale channels means that Chanel has a relatively compact retail network. In 2017, Chanel had a total of 338 independent stores, nearly 30% less than Louis Vuitton.

 

On the category isolation, Chanel is indeed a master level. In terms of profitability, Chanel announced an EBIT of 28%, compared to 40% for LouisVuitton. From Chanel’s large corporate scale and thriving beauty business, Chanel has a lot of profit. Rate increases space. The brand's spending in marketing support and public relations communications seems to far exceed its peers, strengthening its image in traditional media and social media.

 

All of the above factors, combined with traditional emphasis on organic growth rather than corporate acquisitions, mean that the Chanel Group's return on capital (ROIC) is close to Hermès. Although Chanel's sales, general expenses and administrative expenses are almost half of Chanel's sales, Hermès only accounts for about one-third of its sales. But this again shows that Chanel Peggybuy Promo Code still has room for further upswing.

Chanel said in a financial statement last month that the financial report was issued to clarify market rumors that the brand will be sold. Although Chanel's current scale, only a very large and ambitious company can finally acquire it, but if Chanel decides to open the door to bidding in the future, it will not rule out potential competitors to join the acquisition war.

 

We believe that Chanel will be a good complement to Lu Wei Xuan Group because the brand's beauty and distribution business will provide significant synergy. If Richemont is willing, the acquisition of Chanel will also be one of the scarcity opportunities to push the group into the multi-category luxury giants league. But what interests Chanel may not be from the luxury sector. Chanel is also a powerful weapon for major home care and personal care companies in the high-end beauty battlefield. In any case, the huge temptation of the Chanel Group is very much in line with its brand image.

Disclosure of Interest: Luca Solca is the head of the luxury division of BNP Exane Paribas.