Why Chanel's prices might keep rising and its focus on the 'ultimate luxury'

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Bruno Pavlovsky, president of fashion at Chanel, has many reasons to be cheerful these days. The French brand has bounced back nicely from a tough pandemic-hit 2020, reflecting the resilience of the luxury sector at a time of global economic uncertainty.

Like other brands that offer timeless designs and "investment pieces" such as Herm├Ęs, Cartier and Rolex, Chanel has benefited from consumers' desire to buy less but better.

"Product has always been at the heart of our brand," says Pavlovsky in a video interview. "You can forget about the images and just focus on the product."

In normal times, we would be meeting Pavlovsky in Paris, where the brand is about to show its Metiers d'Art 2021/22 collection at Le 19m, a new space housing some of the suppliers that Chanel has acquired over the years, such as embroiderer Lesage and feather-maker Lemarie.

Along with its rarefied haute couture collections, the Metiers d'Art range - which in the past has been shown in locations such as Dallas, Edinburgh and Rome - is the pinnacle of Chanel's commitment to what Pavlovsky calls "ultimate luxury".

"There's something very strong and authentic about our product and that makes a big difference in the way we engage our customers," he says.

"Why is the Metiers d'Art collection always so successful? It's because our customers feel the connection to the collection and to the know-how."

That connection, however, comes with an increasingly hefty price tag. In recent months, Chanel has made headlines for gradual price increases for some of its most coveted pieces such as the 2.55 bag, and has even limited the number of bags customers can buy in key markets such as South Korea.

Pavlovsky attributes these hikes to the disruptions that have affected global supply chains due to the pandemic.

"Raw materials are more and more expensive and costs are increasing, and we are affected by that and have no choice," he says.

"If we want to stay as the ultimate luxury brand we have to make sure to offer the best to our customers, and the best is more and more expensive.

"I think that the increases will continue to happen not because of Chanel but the global situation. We want to offer the best creations to our customers so yes, it's expensive."

He adds that Chanel has been acquiring suppliers in France and Italy to guarantee the highest quality and to control the entire production process.

Even at the height of the pandemic the brand continued to deliver many of its collections, not only to fulfil its customers but also to make sure that its key suppliers would survive amid cancellations of orders from other brands.

The pandemic has made Chanel even more exclusive but Pavlovsky does not believe this is necessarily a bad thing.

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He connects Chanel's increased focus on the upper echelon of luxury to its commitment to sustainability, to which it takes a different approach to many other brands.

"Sometimes there's a feeling of scarcity at our boutiques," he says. "But it's because we sell everything and don't produce too much. Every product has a role to play in the Chanel assortment and image of the brand - every product makes sense. We're quite demanding.

"The question for the next 10 years is to combine growth and sustainability. It's impossible to decrease the size of the business but you have to monitor growth."

Chanel also keeps distribution tight and sell-through rates high with its strong position against selling its ready-to-wear and leather goods online. This became an issue at the beginning of the pandemic as many of its boutiques around the world had to close for weeks on end.

"We know you can [sell more] with clicks but that's not the point; it's the experience and the storytelling about the product and the experts in our stores who do that," Pavlovsky says.

"We engage our clients on all digital platforms but the product needs to have this specific Chanel touch, which is this relationship with the customers in the boutique."

Chanel has become an outlier when it comes to resales in that it has raised concerns about its products being available on resale platforms, a viewpoint once shared widely across the luxury industry.

More recently, however, labels such as Gucci and Louis Vuitton have become more comfortable with the idea of their products having a new lease of life in the second-hand market.

"It's not our job to promote second-hand but to offer the best experience to our customers," Pavlovsky says.

He adds that the brand has a new programme, called Chanel & Moi, where it will repair bags passed down to customers by their mothers or grandmothers for free, and is testament to the value of "transmission" at Chanel.

Building loyalty that borders on the obsessive - you only had to look at the lines outside Chanel stores in Hong Kong and China when the last Metiers d'Art collection dropped in May - has been Pavlovsky's main focus post-pandemic, even more so in tourist-driven markets like Hong Kong.

"Before 2019 the business in Hong Kong was split between locals and mainland Chinese, but since the Chinese stopped travelling because of travel bans we have seen a huge growth in local customers," he says.

"With fewer people but stronger engagement we have been able to create surprise. An example is what we have done at the Peninsula hotel, where we have created one of the most luxurious Chanel boutiques in the world. It's a way to show that Hong Kong is very important to Chanel."

As the global head of Chanel's fashion division, Pavlovsky says that it has been hard for him not to be able to travel to Asia for two years, especially when cultural differences are becoming much harder to navigate for Western brands.

"Nobody from Paris can know everything about the world, which is going so fast with so many new trends and social media being such an accelerator," he says.

"Our job [as the global team] is to nourish and feed the brand, but our local teams are there to take care of the different situations of every single country.

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"So for us it's important to have great local teams because they know more than us in Paris the mindsets of our customers and social media."

Social media can indeed be a minefield. With great success, after all, comes great scrutiny.

The day this interview took place, Chanel apologised for releasing a US$825 advent calendar that only featured five actual beauty products, and mostly items of little value, after being targeted on TikTok.

Add to that the pressure from new competitors like Apple and Nike that are increasingly releasing expensive status-symbol products - and have very deep pockets and loyal followings - and it's clear even Chanel can't rest on its laurels in spite of its position as a market leader.

"There's so much noise in the world that it's impossible to be everywhere and I don't believe that the brand can address all kinds of topics," Pavlovsky says.

"We focus on what we know - fashion, beauty, jewellery - and we have a lot to do within these parameters, and the goal is to offer the best of everything to our customers. We offer them a dream and whether they take it or not is up to them."

While "business is booming" - in the first half of 2021 Chanel grew revenues by double digits over 2019 levels, according to reports from trade publications - Pavlovsky sounds a note of caution when looking ahead.

"Just because we have good results it's not easy," he says. "[Due to] our success there's a misconception between what people see and the reality of what we're doing. It's a lot of work and we have to take care of everything, and it's not an easy period."

This article was first published in South China Morning Post.