Ch. 7 - Business Marketing

Chanel, S.A. is a privately-held fashion house based in Neuilly-sur-Seine, France. Founded by Gabrielle "Coco" Chanel in 1909, Chanel, S.A. is an established name in haute couture and Chanel revenues are generated from its specializing in luxury goods, ready-to-wear clothing, handbags, perfumery, and cosmetics. The company manufactures and retails its own products through department stores and specialty stores, as well as online. Chanel S.A. has headquartered in Neuilly sur Seine, France with additional offices in Piscataway, New Jersey.  Chanel, S.A. has operations spread across the United States, United Kingdom, Asia, Australia, and New Zealand.  Chanel also generates significant high-margin revenue licensing the Chanel brand to third parties for accessories, sunglasses, fragrances, and other consumer products.  The company is owned by the Wertheimer family. In 2005, Chanel, S.A.'s division, Paraffection acquired Goossens, a manufacturer of women's jewelry, perfume, clothes and accessories. Thanks to the efforts of Alain Wertheimer (the owner of the company) in the 1980s and 1990s, Chanel’s performance improved remarkably. Not only was Chanel the global leader in the fragrance industry, it was also considered the top innovator in fragrance advertising and marketing in the 1990s. Chanel continued to invest more money on advertising than any other perfume company and attained the highest profit margins in the industry. Such success helped further develop the product lines that included watches, shoes, high-end clothing, cosmetics and accessories.

The trend toward vertical integration – control from the raw material to the shop shelf – gives luxury brands a competitive advantage, raises barriers to entry and helps them defend the high-quality image they want associated with their products. Chanel has been buying up partners to guarantee long-term supplies and control quality, from plant growers for its Chanel No.5 perfume to embroiderers such as Lesage for its couture collections. Bodin-Joyeux is the first tannery Chanel acquired, employing 100 people in central France. It is one of its main suppliers of supple lamb leather, known for its silky feel and used to make the brand’s popular 1,500-euro quilt leather bags. Bruno Pavlovsky, chairman of Chanel’s fashion business, said the brand had been working with the tannery for 30 years and would continue to supply rivals as other Chanel suppliers already do. Chanel, which started buying up partners in the late 1980s, today owns several niche fashion suppliers including Lesage, the feather specialist Lemarie, the hat maker Maison Michel and the glove-maker Causse. Last year, it acquired the Scottish cashmere company Barrie Knitwear. Chanel builds strong relationships with consumers, and are extremely accommodating to the needs of customer's by keeping up with their personal requests. This may be another factor in why the company has been so successful for over a century with, a estimated amount of $3 billion yearly.