2. In the grip of the crisis: the example of Chanel
Chanel is one of these brands you do not need to introduce
anymore. Owned by the Wertheimer family at 100% since 1954, it is a French
haute couture house with a yearly turnover of nearly one billion Euros. Its
sophisticated and classic style are world famous in the luxury sector and
enabled the company to gain international renown.
Like many other actors in the industry, Chanel was hit hard by
the crisis. It was quite unexpected for such a well-established brand to be
affected since it is one of the biggest haute couture house in the world.
Nevertheless, Chanel saw its sales starting declining in the end of 2008 and
beginning of 2009. The group decided to end all temporary contracts from
December 2008: 200 fixed-term and temporary contracts, which represented about
10% of the production workforce. These job cuts were due to a sharp decrease in
Chanel's activity which growth rate was close to zero that year according to
the CGT. This reduction particularly affected 16 employees of the brand's
mythical store rue Cambon, in Paris.
In addition, Chanel had to cancel its `Mobile Art Tour', a
mobile art gallery tour across the world. The group preferred to give up this
`image campaign' given the context in order to focus on more `strategic
investments'.
3. Different economic consequences according to
locations
For several years now, the significant growth in the luxury
sector has been supported by the dynamic demand in emerging countries or BRICS
(Brazil, Russia, India, China and South Africa) in addition to `traditional'
consumers in developed countries (mainly the USA, Europe and Japan). The
economic and financial crisis that began in the US in 2007 hit those regions
differently and created a gap in luxury goods consumption between them.
Luxury is European. Customers' idea of luxury from countries
such as Russia, China or Brazil is indeed shaped by European brands. Gucci,
Louis Vuitton, Chanel, Rolex, Mercedes, Dior or Armani are quoted spontaneously
as luxury symbols. In these countries, Europe embodies quality and modernity.
That is why, in addition to their high disposable income, consumers in emerging
countries are the driving force behind sales of luxury goods.
Developed countries were experiencing the worst crisis for
decades that was cutting their incomes and purchasing power. The Japanese
market was especially affected because the country had entered a recession.
LVMH's sales dropped by 7% in the first nine months of 2009 and the group had
to reduce prices to face the crisis and also to adapt them to the fluctuation
of the Euro that had depreciated against the yen. In this context, the luxury
leader was also forced to give up the opening of one of its world biggest Louis
Vuitton store in Tokyo.
The major actors which saved the luxury sector in 2009 are
emerging countries. They have been the only driving force at the time when,
anywhere else, the decrease was really substantial in historic luxury
countries. As a concrete example, the consulting firm Bain & Co. announced
that after a sharp decrease in 2008, the luxury market had picked up by 3% in
Europe in 2009 whereas unsurprisingly it had recovered by 15% in China.
From this crisis we should remember that luxury is not immune.
Yet it has strong recovery capacities, significant disparities and most of all
a great driving force: emerging countries.
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