How Chanel is strengthening its supply chain

PARIS – Chanel is perhaps most closely associated with her hometown of glitzy Rue Cambon and the nearby Ritz Hotel where founder Coco lived. But for the 20th edition of its annual “Métiers d’Art” show, dedicated to showcasing high-end suppliers that the brand has continued to acquire since the 1980s, the luxury mega-brand has invited guests to the northern limit of Paris, where it is, is expected to inaugurate a 25,000 square meter craft center early next year.

Baptized on 19M, the campus brings together 11 of Chanel’s most remarkable subsidiaries, including the embroiderer Lesage, the feather and flower specialist Lemarié and the hat maker Maison Michel (which has become a brand in its own right). Six hundred employees are moving to the new facility with plans to hire an additional 100 per year, Chanel said.

Their work was rolled out in designer Virginie Viard’s latest Métiers d’Art collection, which featured graffiti motifs embroidered with colorful beads and multicolored ostrich feathers woven to resemble the brand’s signature tweeds. If haute couture craftsmanship was from another era, most silhouettes were decidedly today, with relaxed tweed trench coats layered over nude tops and wide, flowing pants.

“Virginie is a woman of products and style,” said Bruno Pavlovsky, fashion president of Chanel. “She wants to create collections for women today.

But producing these models at the scale of a $ 12 billion a year brand is no small feat, as the company juggles growing demand and increased pressure on the fashion industry to scale back its environmental impact and guarantee better working conditions.

The fact that many of the artisans on which Chanel depends are reaching retirement age and may prove difficult to replace has added another dimension to the challenge. Brands like Hermès, Louis Vuitton and Prada have also added sparkling manufacturing facilities in recent years to attract younger employees and increase in-house production.

“Our industry is undergoing a complete transformation,” Pavlovsky said. “It’s not just about using the best quality materials, but also about the provenance, traceability and conditions under which they are produced.

Chanel’s Métiers d’Art program is essential in helping the brand navigate change, as it accelerates the pace of supplier acquisitions and directs its attention further upstream.

What started with an emphasis on image-generating embellishments – the company used to acquire mainly prestigious suppliers who could bring their expertise to visible details, like intricate lace, or provide accessories like brass jewelry, gloves and hats to complete a look – has become a more strategic game as the brand aims to control more elements of its supply chain. Chanel has acquired seven manufacturers in the past two years, including the Vimar line, the Gaiera tannery and the Paima knitwear factory.

Chanel’s supply chain acquisitions now total 41, down from just a dozen ten years ago, and employ 6,600 people. While these suppliers play a key role in helping Chanel develop her catwalk craftsmanship, they are also playing an increasingly important role in the production of commercial products.

About a third of Chanel’s manufacturing now takes place in-house, Pavlovsky said. That’s higher than most Italian luxury brands, which rely heavily on the country’s dense network of thousands of subcontractors, but lower than that of its high-end competitor Hermès, which said it produces 85% of the products in the country. its own French workshops.

Sustain the supply chain

Increasing the share of products manufactured in-house is not an objective in itself, but rather the result of a series of actions aimed at sustaining the brand’s supply chain. Having your own tanneries and outlets not only ensures Chanel’s supply of materials, but also provides a laboratory for innovation both on products and on processes to improve sustainability, Pavlovsky said. .

“If Chanel wants to exist in 10 or 15 years, all the players in our supply chain must transform,” he added.

Yet even though the brand exercises greater control over its production, Chanel does not trade in raw materials, which limits its visibility on the most important factor of its environmental impact. Traceability “is the top priority” for Chanel’s supply chain, Pavlovsky said, but it remains elusive.

“It will take us a few more months – I wouldn’t say years – to be able to guarantee that,” he said. “It’s a change of mindset for houses like Chanel, and for all the players upstream.

President of Fashion Activities at Chanel Bruno Pavlovsky.

Communicating the sustainability and ethics of traditional heritage, craftsmanship, and creativity credentials that luxury brands communicate can help justify higher prices.

Chanel has raised the prices of key items three times this year in addition to the sharp increases in the previous year, attributing those increases to rising material costs and fluctuations in exchange rates.

“Chanel embodies the ultimate in luxury,” Pavlovsky explained. “It means sourcing the best materials, and it is the reality that the production of these items has become more expensive in recent years. Covid has undoubtedly accelerated this increase. “

He said customers understand why Chanel products are so expensive. Still, rising prices raise the stakes for Chanel to offer good value for money, making it more vulnerable to public stigma when it slips. A slew of viral TikTok videos leading the brand to include trinkets like fridge magnets in its $ 825 Advent calendar shed light on this risk.

Pavlovksy called the incident a “regrettable misunderstanding,” saying some customers expected higher-value items in the Advent calendar, while he saw value in the box itself. “The calendar was the best example of eco-design, which we wanted to offer at an affordable price,” he said.

Aside from price hikes and backlash on social media, consumers still flock to the brand. Chanel has been hit hard by the pandemic, which slashed annual revenues by 18% to $ 10.1 billion last year as the retail collapse punished its beauty division and its choice not to not selling fashion and accessories online damaged sales. But in the first half of this year, the brand rebounded, increasing revenue to double digits from 2019 levels.

Viard’s designs play a key role in this rebound, according to Pavlovsky. “We have never sold so much ready-to-wear as in the past two years,” he said. “This is the iconic category where customers really connect with the brand.

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