Chanel Brand Extension

MENSWEAR

BRAND EXTENSION REPORT International fashion marketing S01000319 Elizaveta Plastinina

Contents Executive Summary Introduction

Target Customer

Company Summary

Demographic Segmentation

Overview

Lifestyle / Psychographic Customer Profile Mood-board

Current Positioning In The Market Current Placement All channels for distribution Sales volume distribution Current Promotional Activities Market Analysis Size Of The Market Key Players Competitive Landscape Analysis

4ps Of Strategy For Proposed Extension Pricing Strategy Placement Strategy Promotion Strategy Product Strategy Conclusion Conclusion Bibliography

I. Executive Summary

Expanding the number of product offerings and lines is a sustainably growing trend among fashion brands in the industry. The majority of well-established luxury brands that have been traditionally focusing on either the shoemaking sector or womenswear have undergone a diversification process by increasing the range of apparel offerings. Diversification is possible on various levels, from extending the primary line to capsules, to expanding the product level by including menswear, kids-wear, with finally expanding to other industries such as hospitality, beauty, interior design.

Among brands within the luxury segment, there are many of those that have started from a narrow specification such as leather goods and luggage, for example, Gucci, Louis Vuitton, Prada, and that have successfully expanded their lines over time gaining the market share within the segments of accessories, footwear, jewellery, womenswear, menswear. The latter, menswear, is exceptionally competitive. However, Chanel has a great potential to gain success due to its rich history, brand identity and values, and by applying signature strategies.

Even though the market of luxury goods is characterised by homogeneity, which imposes difficulties on product differentiation, Chanel has a definite competitive advantage in strong customer base, well-established brand identity and unique brand positioning. Chanel is a global brand with product lines in fashion, jewellery, beauty and fragrance, which are selling in more than 120 boutiques worldwide. Such establishment has allowed gaining a base of the loyal international audience, which has been further boosted by the rise of e-commerce and social media, another tool of globalisation that has brought Chanel almost 40 million followers on Instagram. The brand relays on introducing new-age style with a daring and fearless collection that always embody traditional elements that have been within the brand identity since it has been founded in 1883, such as two tonal shoes, signature shaped bags, tweed apparel pieces. The clarity in the brand identity shapes expectations of the customers and builds trust within the market. Brand positioning always embodies the idea of innovation in the fashion industry by keeping the iconic elements relevant. Chanel has a definite position on the market of premium goods and is seen not only as a clothing brand but a lifestyle brand, as it can be associated with non-fashion brands as well.

Chanel menswear line would seek to be placed in high-end pricing, which allows eliminating the competition at lower-end. Brand positioning and high consumer loyalty allow customers expectations to seek for iconic items in the collections, such as fabrics and materials, hardware. Moreover, Chanel would offer a chance for a broader audience, by becoming more inclusive, to enjoy the exceptional quality of their products. The selling point for Chanel for men, who aspire to join the world of Chanel consumers, could be personal selling which is a well established in the marketing strategy of the brand and is one of the critical techniques to engage with the premium market.

One of the critical threats to the expansion of product offerings for Chanel is the growing uncertainty on the market that significantly impacts that affluent and high-earning consumers. Economic and political instability and upheaval threats of an impending recession are leading to even more postpone in purchases. As Chanel has a strong customer base in China, the economic downturn, trade wars and escalation of a global pandemic could hurt those brands relying on Asian markets as a growth engine. Although in times of economic crisis people become more conscious about the value of their purchases, the following aspect could be formulated and brought to consumers by Chanel in the prism of brand’s identity and positioning, creating more value for the consumers by offering authentic, timeless pieces of exceptional quality and unique design.

II. Company overview Description of the brand History timeline Mission Statement Current Products and Service Current Ownership Structure and Organisation Current Revenue Environmental Factors Future Growth Plans Proposed Potential Brand Extension

Description of the brand Chanel is a high-end luxury French brand which was established by Gabrielle Chanel in the early 1900s. The brand's main office is located in Paris, France. the fashion house is currently holding seventy ninth place on the Forbes list of The World's most valuable brands, with a value of about 9 billion US dollars. Chanel is also considered to be one of the most successful luxury fashion houses of the century, with the primary focus on high-end fashion, such as Haute-couture and luxury leather goods. The brand also offers a variety of ready to wear pieces and accessories such as bags shoes, jewellery and and costumes pins and clips.

Mission Statement Chanel mission statement is to remain faithful to the difference between its heritage and its founder - Coco Chanel and to move successfully towards the future, the upcoming innovations and trends. As Coco Chanel once said: "To be the Ultimate House of Luxury, defining style and creating desire, now and forever." Their Hautecouture and Ready-to-Wear collections have always depicted elegance and style, with a touch of grace and class from the very beginning of the brand formation up to the current date. Chanel sees fashion not only as an item of luxury and style, but also seeks to maintain functionality in their designs. From the early days the brand was shaped in a way that clothes should be comfortable and stylish. Coco Chanel was against uncomfortable gowns and was fighting for women to wear not only what fashion at the time was stating as trends, but also what does not cause discomfort. After almost a century of existence, Chanel continues to inspire women worldwide with its timeless fashion pieces. "Fashion fades, but style remains" - Coco Chanel.

History Timeline In 1913, first Chanel boutiques opened in France, where the designer presented her first collection of sports clothing for women.

Chanel features a female suite in 1925, a small black dress and tweed inspired by trips to Scotland in 1924.

In 1924, Coco Chanel introduce d her first line of jewellery

In the 1980s, more than 40 Chanel boutiques were opened worldwide

In 1945, another Chanel store opened on the Rue Cambogne in Paris, located right in front of the Ritz Hotel.

Flannel blades, straight skirts, and famous tweed jackets were sold there

In the 1990s, the company became a leader in production and marketing.

Huge investments have significantly increased income

Chanel No. 5 perfume was created in 1986 by the perfumer of the Fashion House Jacques Poland

In 2018, Chanel announced that it would be moving its headquarters to London, later on that year the fashion brand has banned fur and exotic skins from their collections

In 2000 Chanel has launched their first unisex watch - the J12

Current Products and service Chanel has been creating a continuous value to its customer, developing through services tailored to customer's interest. It provides its clients with various goods and services available such as leather goods, womenswear, accessories, jewellery and cosmetics. The brand also provides personalised client service and experiences in retail boutiques, such as creating a personalised fragrance by Chanel or tailored leather and apparel goods, all over the world, making the interaction with clients a vital service. As it is vital now, Chanel also provides e-service offering together with customisation of goods and maintenance of goods that were previously acquired. In addition to this – for loyal VIP customers, Chanel provides fashion show invitations, gala dinner events and art exhibitions.

Current ownership, structure and organisation Chanel has always constructed its brand strategy in the frame of brand values and services, which created a competitive advantage over the other players in the market. The ownership of Chanel goes back to the 1920s together with the Wertheimer family, who initially funded Chanel in Paris, France. Today it belongs to two brothers, who have inherited the direction of Chanel. It is a private company with a Chairman - Alain Wertheimer, who is initially one of the grandsons of Pierre Wertheimer. Chanel SA's subsidiary companies include the Chanel Inc. (US), Chanel K.K. (Japan), Chanel Hong Kong, Eres and many other affiliates worldwide with approximately 310 locations, employing more than 20 thousand people. For many years Chanel has kept its figures in big secrecy, leaving it to analysts minds as to where the luxury brand is ranked among the fashion elite.

Nowadays, society is aware that Chanel is considered to be one of the most valuable brands in the world.

Current Revenue Over time Chanel's products have extreme value increases, at the brand is increasing its brand value.

The same products are gaining value through years – the statistics show that since 1955 the price of handbags has multiplied by 50 times. Chanel has always been a private company; however this changed in 2018 when the business restructured into a London-listed company -Chanel Limited and published its financial reports for the first time—providing the world with the revenue figures of $9.8 billion, which has put the company right in the industry's leading position, being very competitive, innovative and ambitious. The company's products are sold worldwide, which generates 40% of sales in Europe, 33% in Asia and the Pacific region, and 20% in the America. As of the financial performance of 2018, the company has provided data, where the number of sales rates equalises to $11.1 billion, which indicates a growth of 10.5 % in comparison to 2017. This growth is originating from across all product lines and regions.

Environmental factors affecting the brand Due to recent environmental protection expectations caused by the rise of the global warming issue, the consumers are now more knowledgeable about the complexity and consequences of this situation. They, therefore, preference their purchasing choice to brands that are more ethically aware and environmentally conscious. Chanel, being a part of the textile industry, faces various environmental issues. Due to global warming, the weather conditions are changing, and for example, winter apparel has now less percentage in the market where the winter season’s climate has become warmer. Moreover, the global fluctuations in climate may considerably affect Chanel’s distribution of finished product and purchasing material. Additionally, this may even be more problematic due to the recent outbreak of the COVID-19 pandemic, which inevitably is delaying any operations. The risk of utilising materials that are considered not environmentally friendly will tarnish Chanel’s image from receiving counteraction from the public. Furthermore, Chanel’s production may be penalised if there is a substantial amount of waste generated, thus impacting Chanel’s financial performance. Lastly, the current movement towards renewable energy will also affect Chanel’s operating expenses, however taking a step forward towards environmental friendliness may be supported by the customers, who will be willing to purchase their goods at a more premium price.

Sustainable use of resources Chanel has been trying to secure the value of the brand by continually identifying the social and environmental values to operate its business responsibly. In order to maintain the global supply of resources, such as raw materials, Chanel has been persistently investing into various manufacturing units, which are mainly used for the production of their beauty goods. In particular, the local production in Costa Rica of green coffee, that has been a crucial component in the company’s beauty products, as Chanel’s research analysis has demonstrated that due to the decrease in the price of green coffee from other various producers, the demand for Costa Rican production has significantly fallen. Thus, it resulted in shut down of numerous local manufacturers as a consequence of tremendous losses and a vast number of an unsold product. Consequently, to extend the local coffee production in Costa Rica, Chanel has decided to contribute to the diminishment of this issue. These donations have played a vital part in decreasing production waste and therefore in an increase in profitability. Additionally, to support Chanel’s sustainability policies, the brand uses various strategies such as traceability, remediation and observation of audits. Traceability is used to establish the ethicality of the materials and where they come from.

Remediation is utilised to reduce the local impacts of social and environmental aspects. Lastly, Chanel makes sure to identify and limit any potential risks that the product may cause towards people, wildlife and the environment.

Future growth plans Chanel is famous for being the worldwide top-selling brand in the luxury sector with their timeless designs, outrunning their rivals Gucci. However, due to the recent passing of the house’s creative director Karl Lagerfeld, Chanel was left with a significant void in the state of uncertainty in the world’s luxury sector. Karl Lagerfeld has remarkably transformed the brand since 1983, saving the brand from the financial crisis and later over the years developing the brand to a strong business in the market. Chanel’s financial performance for 2018 has shown a tremendous increase of nearly 11% in revenue compared to 2017. The growth rates of the product demand across all regions, especially in Asia, have multiplied due to their decision to harmonise prices. Despite the PostLagerfeld era that began in early 2019, Chanel is continuing to see this growth trend rising by maintaining a strong face to face interaction between the consumer and the brand. The House of Chanel remains with their unwillingness to sell apparel through online platforms, compared to their main competitors, who are moving towards e-commerce. The desire to remain traditional, thus differentiating themselves from the competitors, creates an even stronger perception of the product exclusivity.

Brand extension proposal Chanel Menswear

The brand can step into selling the menswear segment, into impacting their sales and expand the targeted audience. Many famous male figures are forced to purchase womenswear produced by Chanel, as the brand does not produce apparel and accessories for them. Implementing male collections will benefit the brand in all possible ways, will expand their range and make them highly competitive among competitors on the market

Current positioning in relation to the main competitors

Current Placement

Chanel has many boutiques for their ready to wear, haute-couture and accessories collections. The brand operates 310 boutiques all over the world, with 94 in Asia, 70 in Europe, 10 in the Middle East, and 6 in Oceania. Moreover, customers can buy makeup, body care and perfumes online or through various retailers and buyers.

Current Marketing techniques Chanel uses promotional features in prestigious magazines and actively establishes its position on social media platforms. Moreover, the brand takes up billboards in metropolises and strongly marketise its collections through celebrities and brand ambassadors. Furthermore, Chanel transmits its fashion shows online and hold an active presence on various social media platforms.Â

III. Market Analysis Range in the Market for proposed extension PEST Analysis SWOT Analysis Main competencies and advantage in competition Key Players Competitive country analysis

Range in the Market for proposed extension

Chanel is known for concentrating on the female demographic, with occasional items made for the male demographic; however, the brand could benefit from expanding their current male range to include apparel and accessories for the male customers. The proposed extension of items includes luxury sportswear, and accessories range comprising of belts, rucksacks and eyewear. Additionally, expand their range to shoes and suits, to compete with their main rivals Louis Vuitton and Gucci. Louis Vuitton, for instance, targets both demographics and the company’s performance in menswear is exceptional, reflecting in the brand’s overall value of $ 47 billion. By fully expanding into a new segment of the luxury market, Chanel will have the ability to be the market leader not just in womenswear, but in menswear.

PEST ANALYSIS Political factors are the powers that bring change to the infrastructure of the country and usually are enforced by the government. These involve environmental regulations, tariffs, employment laws, tax policies, trade restrictions, political stability and reforms. In the current situation of the worldwide pandemic, Chanel may struggle in sales returns, as their fashion shows had lower audience outreach and overall exports of the products in most countries are shut, due to the limitations of flights between countries Economic factors include interest and inflation rates, development of the global economy and exchange and wage rates. Combining these factors, it lasts more significant and inevitable impact on the organisation. Looking at these factors, and the current economic situation, Chanel will have to work around the current situation. Selling online and providing deals for loyal customers is the way that they are working through currently. This helps to maintain some of the sales rates and to keep loyal customers attracted.

The culture of the social factors on individual businesses varies worldwide.

The factors include diverse demographics, population growth rates and cultural viewpoints. Chanel's top clients are mostly based in Asia and Eastern Europe, where the brand holds most of its store locations. European and Western cultures are less keen on spending large sums of money on their apparel; thus, Chanel tries to expand its business outside of those regions.

Considering Technological factors is essential in order to maintain competition status in the fashion retail market. The growing use of mobile devices, online shopping and social media trends, has forced many businesses to make their products and services available online. Chanel is keeping its technological aspects up to date. The brand has an online website, where clients are able to see the product range, alongside with the prices. Furthermore, store assistants often send out pictures of the new collections to their loyal VIP clients.

INTERNAL FACTORS

SWOT ANALYSIS

Strengths Luxury product quality Loyal audience Innovation, elegance, style Strong Brand Portfolio Innovative in developing new products • Level of consumer satisfaction remains high, due to the policy of the brand for the sales. assistants to be as friendly as they can, consequently building clientbrand relationship, leading to an increase in numbers of loyal customers • Highly skilled workforce - as Chanel provides training sessions for their employees • • • • •

EXTERNAL FACTORS Weaknesses

• Weak e-commerce participation - Chanel is ought to invest more into innovative technologies, as the brand expands largely among all generations, and in order to keep up with the younger generations use of IT is vital • Chanel is not very strong in forecasting the demand for the future stock, therefore many of their products remain unsold and are stored as Chanel does not have sales (only for VIP clients) • Chanel has a product range gap, the company is lacking in multiple segments, which their competitors have, which consequently may switch customers off the brand towards the competitors

Opportunities • New style implementation of Chanel from more classical one to more street style will attract younger generations and people with different style preferences • Lower inflation rate should bring more stability in the marketplace, consequently attracting more customers • Global markets growth • Outsourcing production • Franchises

Threats • Cheaper competitor products • Fast fashion influence

Key players and competitive landscape analysis of a proposed extension for Chanel - Menswear Price

Quality

Chanel brand has an extensive and exclusive heritage and legacy for more than a century, which has helped to form brand loyalty and trust among clients worldwide.

Exceptional quality and design will tackle or maybe even drop down the positions of the key competitors in the menswear segment if Chanel steps into that market.

IV. Target Customer Pen portrait Customer profile mood board

Age: 22-29 Gender: Male

Occupation: Famous singer/blogger/actor

Annual income: $100.000+

Status: single

Shops at: Flagship stores

Accommodation: Penthouse in one of the major cities

Drives: Sport cars

Hobbies: Jet setter, expensive dinners, auctions, Casino, Sports events

V. 4Ps. Strategy for Chanel Menswear Product - Collection design strategy Pricing Strategy Placement Strategy Promotional Strategy

Product ideas

Sneakers Backpacks

Hoodies/ Sportswear

Accessories

Pricing Strategy

Price

Product

Leather Goods

$2000-$30000

Clothes

$450-$5000

Accessories

$200-$3000

Shoes

$500-$4000

Primarily Chanel Menswear should be presented in the flagship stores and famous Shopping Centres in the major cities. Shopping venues like Harrods or Dubai Mall will help raise awareness of the new line when flagships in major cities like London, Milan, New York and Hong Kong will attract the attention of the celebrities and VIPs

Promotional Strategy

Chanel should present the collection on the fashion show, inviting celebrities and influencers, which will attract their audience to the event by streaming the show online. Furthermore, the brand itself should do a lifestream in order to get higher numbers of viewers. Lastly, Chanel should organise a pop-up store in one of the famous Shopping Malls Harrods would be a suitable venue. This will attract tourists attention, as thousands of people visit the store every day.

Conclusion Strategic brand management plays a huge part in the sustainable growth of the brand. Therefore it is vital to maintain the development of the brand, which will maintain or even improve the positioning of the company in the market. Opening up new horizons to enlarge the client base and increase income rates will notably benefit the overall performance of the brand.

Stating the fashion trends for women for more than a century, Chanel has made many iconic pieces, which have been noted to the list of everlasting classical items which are also considered to be must-haves among women worldwide. Little black dress, tweed jackets and two coloured shoes hold a warm place in every wardrobe of celebrity or fashionista woman.

It is time to impact the menswear segment, to bring new trends and to spread the legacy of the prestigious and exclusive brand among all genders. Chanel has always maintained an exceptional reputation. Its style, quality and design have never fallen under concern. Therefore, launching men’s apparel will benefit not only the company as a whole but also potential clients. Chanel will be able to sustain competition and even get the advantage over some of the most prestigious brands for luxury menswear.

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