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Management in Practice

How Does Chanel See the Global Luxury Business?

The global luxury goods market recovered quickly from the financial crisis due in large part to growth in emerging markets, especially China. Chanel CEO Maureen Chiquet YC ’85 discusses how she shepherds the quintessentially French company in a fast-moving global market that may be transcending national identity.

The luxury market is huge—$300 billion per year—and it’s growing. Roughly 330 million people bought a luxury good last year, triple the number from 20 years ago. An analysis by Bain & Company forecasts that the luxury goods space will continue its healthy run for the next two decades.

But underlying that growth is a geographical shift in the luxury market. Sales of high-end clothing, perfume, watches, wines, cosmetics, and even yachts would be flat if not for the Chinese and other emerging markets. Luxury consumption by the Chinese, in particular, has been voracious in recent years, accounting for nearly 30% of purchases last year, while the Asia-Pacific region as a whole is expected to continue its 16% average annual growth at least through next year. This at a time when Japanese—and European—spending is actually declining.

Any company that seeks to thrive as a global luxury brand will have to deal with these trends. Indeed, Maureen Chiquet YC ’85, the CEO of Chanel, says that her company breaks it down to an even finer level. “In a way,” she says, “we don’t really look at the [national] markets any more; we look at the clients. Clients in our business are travelling all the time. So you really have to look at clientele and not just the markets.”

This doesn’t mean that nationality is irrelevant. Companies have to design products to appeal to differing tastes around the globe, and they have to operate in many different countries at once. Chiquet points out that Chanel also has an appeal that is rooted in its national origin. “We have a French ethos and I think a French design sensitivity, and, I think, the chic that comes along with being a French brand is very, very important to Chanel.” At the same time, she says, “The way we run our business is quite international and global.” Being a global brand requires a “balancing act,” she says.

Chanel is privately owned, which, Chiquet says, allows her to think long-term, and that in turn frees the company up to focus on quality. “When you’re working in a luxury brand like Chanel, rarity and exclusivity are important, so sometimes I’m trying to sell, believe it or not, fewer handbags so we don’t banalize the product… Bottom line is important, don’t get me wrong, at a luxury brand like Chanel, but really our focus is on the quality of our products, on the beauty of our image, on the special designs that we have, on providing incredible customer service, and the way I look at it is, profit will come.”