Volv Concierge Issue #40

👛 Chanel's f*cking up, it might become the next Gucci

Hey everyone, Shannon here. I'm back with some of the most interesting stories you missed last week. Later, I'm doing a deep dive into Chanel's potential downfall—the luxury brand wants to be Hermès, but it could end up being the next Gucci instead.

📰 Articles I found interesting:

  1. The US is getting a NEW stock exchange (the old one's glitchin')

  2. The 'Charli XCX-ification' of pop is here; everyone's copying her

  3. YouTube's #1 star got there by actively avoiding having a personality

  4. Content creators are going back to their 9-to-5 jobs

  5. 'Girthmasters' are not born — they are made using penis-fillers

👛 Chanel might become the next Gucci

Virginie Viard's departure from Chanel as creative director has caused quite a stir in the fashion industry. While changing of the guard is common in fashion, Chanel's turnover specifically stands out. It's evident that Chanel aims to achieve the iconic status of Hermès, but recent moves suggest it might become the next Gucci instead.

The luxury landscape:

LVMH leads the luxury sector with $45.8 billion in 2023 sales, granted this is the culmination of 14 brands. It is followed by Chanel with $19.7 billion and Hermès with $14.5 billion. It's not financial standing that sets Hermès apart—the brand has achieved iconic status in luxury by prioritizing quality over short-term rapid growth.

Chanel has been making rapid changes since 2019 to match Hermès:

  • Inflation in prices: 

Chanel started inflating bag prices in October 2020. A medium classic quilted bag has seen a 104% increase in price in the past five years and is now $11,850.

The brand attributes this increase to rising production costs, but it is doing this to cater to the top 2%

It is not only increasing revenue by price increases instead of sales; it is also boosting the fixed costs of the organization excessively.

  • Retail Stores 

Chanel has increased the number of retail stores to 600 while investing heavily in flagship stores. It paid $402 million, 30% more than the asking price, for its London store. In contrast, Hermès has quietly reduced its number of retail stores to 294.

While Hermès and Chanel both employ scarcity tactics at their retail stores, it's important to note that to maintain luxury, you need to control distribution.

  • Growth: 

Chanel's sales growth rate declined over five years, with a compound annual growth rate (CAGR) of 10% compared to Hermès' 14.3%. In 2019, Chanel was 1.6x larger than Hermès — $12.3 billion compared to Hermès at $7.5 billion. In 2023, it was just 1.35x larger.

If current trends continue, Hermès will be just about level with Chanel by the end of this decade.

What's actually happening: Chanel is, unfortunately, mirroring Gucci's past strategy:

  • Shifting from a younger price-sensitive aspirational luxury customer to focus on the top 2% of the luxury market

  • Expanding retail presence to 584 stores by 2023.

  • Investing in high-value properties like Fifth Avenue for $963 million

  • Parting ways with Creative Director Alessandro Michele in 2022.

Leading to declining growth with a 4.2% CAGR compared to the luxury market's 5.2%.

Last year, Gucci accounted for half of its parent company Kering's $21.2 billion revenue. Kering is known for prioritizing short-term results, pushing each brand to its limits to maximize revenue, and relying heavily on Gucci as its primary cash cow. And the ultra-wealthy aren’t buying Gucci anymore.

A cautionary tale for Chanel

Gucci's recent history is a cautionary tale about the dangers of prioritizing rapid growth and short-term gains over long-term brand sustainability. As Chanel navigates this critical juncture, it must balance expansion with the need to maintain its luxury status and exclusive appeal, ensuring it does not repeat the missteps of its competitors.

✨ Vibes of the week

Just one vibe this week as I’ve been slammed with work, and writing this essay has been no joke (it involved hours and hours of research).

The Skinny Confidential roller - I’ve been using this ice roller for months! And if you have sensitive skin, it’s been a lifesaver. 

I'd love to hear from you! Leave your feedback here.

This newsletter was edited by Ishita Sen.