LUX ONLINE & LV IN

CHINA
GRISELDA LOPEZ AND BETZY MATITICO

RISKS AND
BENEFITS OF
SELLING LUXURY
GOODS ONLINE

- A Chanel Story

FASHION IS NOT SOMETHING THAT EXISTS IN DRESSES

ONLY. FASHION IS IN THE SKY, IN THE STREET FASHION HAS
TO DO WITH IDEAS, THE WAY WE LIVE, WHAT IS HAPPENING
COCO CHANEL

WHO IS CHANEL?

Leader in the Luxury

Industry
Despite economic
turndown, demand for its
products have remained
strong in Western and
emerging markets
Expanding activities for 3
decades w/ focus on
emerging Asian markets
Most sought after in China
(next to Louis Vuitton)

CHANELS HISTORY

Founded in 1909
Inspired by founder Coco
Chanel
Stands for modern yet timeless
fashion
Coco revolutionized womens
fashion, through creation of
clothes allowing women to
move (hence Chanel Suit) 1921
Chanel N5 (the year
afterwards)
Came back early 1950s new
look period

CHANELS HISTORY CONT

Death of Coco Chanel 1971

Alan Wertheimer CEO 1974
Strategy to create scarcity
Perfumes removed from drugstores,
sales dropped by a third

Karl Lagerfield= chief designer in

1983

1980s kept strategy to create

exclusive feeling

310 stores , as of September 2010

http://inside.chanel.com/en/paris-byLess stores than competitors chanel/video

E-LUXURY GAME CHANGERS

Since the early 2000s the potential success of online luxury

stores have been debated

Eg: Yoox and Net-A Porter ,2000

When Oscar de la Renta offered e-boutique, one of the

customers had a $80,000 purchase (journey from New
Hampshire to NY = too bothersome)

Rather than accessories as predicted, more expensive

outfits outsold more

In 2008 1/3 of
178 luxury
firms sold
online

In 2010 of
178 luxury
firms sold
online

E-LUXURY GAME CHANGERS

CONT..

Luxury brands struggled to embrace digitial era

and selling online
Prada just opened up their website in 2007
Northern American story brands = more open
Traditional European History Brands= have been
extremely conservative
Reselling preowned luxury goods -> counterfeiting
debates

CHANELS RESISTANCE

As of September 2013, one of leading luxury

brands not to offer goods online
..no hurry to expand in China, because it
wanted to remain exclusive Maureen
Chiquet, Chanels global CEO , 2013
Prefer to cater to fewer stores in the most
prestigious locations worldwide

CHANGE IN THE LUXURY

MARKET

Integration of pop-up stores

create niche local and
seasonal demand
Reach demanding clientele
Traveling around the world
Populating the most remote
places for short period of
time
Reaching more customers
and preserving intimacy of
customer service

https://www.youtube.com/watch?v=
SBRq6Gzao8o

DEFINING LUXURY BRAND

IDENTITIES (KAPFERER 2012)

History Brand
Offers consumers
heritage and history
of craftsmen
Timeless products
Examples include:
Burberry, Hermes,
Gucci, Chanel

Story Brand
Offer a designer
lifestyle applied to
different domains
Usually feature the life
of a designer as a role
model
Examples Included
Ralph Lauren, Armani,
Shanghai Tang

THE DIRECTION OF LUXURY

E-COMMERCE

In 2011, luxury online sales = 6.2 billion

Euro - McKinsey and Company, Digital
luxury experience 2012 report
.. But thats only 3.2% of sales
2016 15 Billion euros= online sales
70% of luxury consumers searched online at
least 1/month, KPMG 2013

E-SUCCESS OF CHANELS
COMPETITORS

Gucci (history brand)

Started online store in 2002

3,000 via website in 27

countries

Emporio Armani (story brand)

Most direct competitor

Online since 2007

Focused on US market
expanded to 55 coutnries

Compensates for low # of

stores in US

Online boutique; virtual

second life

Shanghai Tang(story brand)

First asian luxury story brand

Compensated for low # of

stores

E-SUCCESS OF CHANELS
COMPETITORS CONT

Ralph Lauren(story brand)

Entire product range available
online
6 e-commerce sites , including
black and purple labels
Louis Vuitton(history brand)
Among 1st to have website &
introduce e-retail through eLuxury.com 2002 (US) & 2005
for EUR market
Burberry(history brand)
2006 &2007 = offer full range
of products online
Pioneer of e-retail
Offers in store pick up for
online ordering(one of first)
Hermes(history brand)
Brand image= similar to
Chanel
Initially resisted e-retail ;
website=> online catalogue

A SURE BET OR A SURE LOSS

Risks

Benefi ts

Difference in brand display through

computer or tablet screen

Lack of opportunity to try on clothes

Risk of being talked about online..

Negatively

Lack of control over clientele; brand

hijacking

Lowering brand image

Additional impulse buys

Ubiquity: being every where;

omnipresence

Chanel conflicts

Convenience for customers,

ie: delivery, monitoring stocks

Stores perceiving breach of trust

Accentuating the feeling of

scarcity

https://www.youtube.com/watch?v
=2WDnukuUc84

Reaching more customers

Helping consumer learn about

the brand

Driving in store traffic

Collection of important
consumer information

https://www.youtube.com/watch?v=
krQG2Hceov4

CHALLENGE OF STORE
IMAGE AND STORE
EXPERIENCE

Recreating the opulent and exclusive atmosphere and

offering the same quality of store image online

Type and quality of

products offered

The way the goods

are promoted

The advice and

attention paid to
the customer

What it feels like

being in that store

The other
customers present
in store

How is the brand

portrayed and
perceived in the
store

Store layout

Is the store
conveniently
located for the
customer

How does the store

handle post
purchase matters

CHANELS DIGITAL
STRATEGY

Developing an online presence to attract customers to

physical store
Fashion is about clothing you need to see, feel, to
understand- Bruno Pavlovksy, the brands fashion
president
Present on social networks: FB, Instagram, Twitter
Chanel = Reluctant to sell online
Our clothes are quite sophisticated and one of our
strengths is alterations- Bruno Pavlovsky (during an
interview with vogue)
In 2008-2009 it held access to e-boutique via VIP code
(stopped soon afterwards)

I AM A FASHION PERSON, AND FASHION IS NOT ONLY

ABOUT CLOTHES ITS ABOUT ALL KINDS OF CHANGE
KARL LAGERFIELD, CREATIVE DIRECTOR OF CHANEL

CHOOSE A COMPANY AND DECIDE IF YOU

WOULD OPEN AN ONLINE BOUTIQUE. WHY?
HOW?

FLASHING FORWARD..
https://www.youtube.com/watch?v=
emkZ5rVIv7Q
http://www.net-a-porter.com/Shop/D
esigners/Chanel_Fine_Jewelry?cm_sp
=Homepage-_-Takeover-_-Chanel-_15-04-15
http://www.chanel.com/en_GB/

in China

LOUIS VUITTON
Known as Louis Vuitton Malletier
o French fashion house founded by
Louis Vuitton in 1854
World renowned luxury label
o product range includes: leather
goods, ready-to-wear clothing for
men and women, shoes, watches,
jewelry, accessories, sunglasses
and books
Products are sold through its
exclusive outlets, boutiques, highend department store and its own
website
Known for its ionic monogrammed
handbags and accessories

A STATUS SYMBOL
https://www.youtube.com/watch?v=3o3tSc1hQIM

Question:
Do you see a handbag defining ones
social status?

MAKING INROADS INTO THE CHINESE LUXURY

MARKET
Louis Vuittons sales sparked in 2010 due
to Chinas massive growth in the luxury
segment
o becoming the most sought after luxury
brand
Driven by the middle class
https://www.youtube.com/watch?v=XIfKEJqON-k

LUXURY MARKET IN CHINA

Increased eleven times from 5
million(renmimbi) in 1998 to
55 billion in 2008
o growing at 20% per year
World Luxury Association
stated that China was the
second biggest luxury goods
market in 2011 and its market
share was 27%
o United States market share
is 14%/ Europe is at 18%
The market for luxury goods in
China was said to touch 44%
of global demand by 2020

THE CHINESE CONSUMER

Urbanization =
higher disposable
income
o Annual income of
wealthy consumers
were increasing
15%
Estimated increase of
38% by 2010-2015

https://www.youtube.com/watch
?v=u0fvKGIdMv4

GIFT-GIVING CULTURE
Possessing luxury goods was
considered as status
symbols
Gift giving is an essential
part of Chinese culture. The
money spent on gifting,
especially at Chinese New
Year, is staggaring
compared to the WestChairman of Hurun
Women are becoming more
financially independent

MARKETING STRATEGIES
Strategies adopted by luxury
goods manufacturers were
tailor made and specific to
China
Brand building and promotion
was done through print and
television advertisements
Louis Vuitton offered charm
accessories for Chinese laterns
on its new store inauguration in
Beijing, China

https://www.youtube
.com/watch?v=WIotD4
vAUts

BUILDING BRAND IN CHINA

Louis Vuitton had started a

differential strategy to lure its
Chinese consumers
o

segment its customer groups into

aspirational buyers, and continue to
give away gifts

The opportunities for

Louis Vuitton were
many,

but the global luxury

brand also faced many
challenges.

ISSUES & CHALLENGES

More and more Chinese
luxury consumers are
shopping abroad
Elite in China travel
overseas to shop for the
luxury products
o

50% of Chinese prefer to travel

overseas with shopping worth
$1,359 per trip

ISSUES & CHALLENGES

Luxury purchases abroad had
resulted in a decrease growth of
sales in China
LVMH Chief Financial Officer JeanJacques Guinoy said, There has
been a shift in the business from
Asia to Europe

CHINA POSES CHALLENGES FOR

THEIR CONSUMERS
Chinese switch their
shopping because of heavy
taxes on the products
In China we have taxes on
luxury brands, and
sometimes fakes are so good
they are sold in real shops,
so here it can be cheaper,
and we dont worry about
fakes. Its worth the flight to
come here and shop and
cheaper than going to Paris.

LOUIS VUITTON EXCLUSIVITY

Due to the higher luxury tax limits on Louis Vuitton
products, they are becoming more popular on the grey
market
For instance, Louis Vuitton handbags being sold on
websites like eBay
Having a large volume of sales of Louis Vuitton
handbags can spoil their brand exclusivity
o lead to brand dilution
The elite not wanting to purchase Louis Vuitton
handbags because all the middle class people are able
to afford it
o A wealthy female of Beijing stated, Louis Vuitton has
become too ordinary. Everyone has it. I prefer Chanel
or Bottega Veneta now. They are more exclusive.
https://www.youtube.com/watch?v=lyIn60WfQJg

QUESTION...

How do you grow as a company

without diluting your image?

CONCLUSION
Its crucial for luxury brands to be
consistent and authentic. They become
cultural reference points as the world
shifts. Its not that they dont take account
for cultural forces, but they cant react.
They have to be beacons of a certain point
of view We talk a lot about roots and
wings, we need roots, a back story, but also
need wings to stretch forward into the
future.