Chanel SWOT Analysis

Comprehensive SWOT Analysis

Reputation Management

Elodi Bodamer

Strengths

1. Well-Established Brand Portfolio: Founded in 1910, Chanel is well-established in the luxury industry and has heavily invested in building a strong brand portfolio which is useful when expanding into new product categories and markets.

2. Brand Value: In 2020, Chanel was rated #52 in Forbes’s yearly ranking of the World’s Most Valuable Brands.

3. Style: Consumers know Chanel as a brand that boasts classic and timeless designs that are also comfortable and functional.

4. Large and Diverse Workforce: Chanel has over 20,000 employees, with different geographical, racial, cultural, and educational backgrounds that bring different, diverse ideas to the workplace.

5. Perfume Pioneer: Chanel No. 5 revolutionized the perfume industry, created 90 years ago and worn by names as big as Marilyn Monroe.

6. Worldwide Presence: Chanel operates from more than 310 places around the world, but its products are still produced only in Europe.

7. Market Leader: Chanel acts as a leader in the premium lifestyle and retail segment, with other brands following their lead from new product launches to price increases.

8. Wide Product Portfolio: Chanel offers a wide range of products including apparel, perfumes, jewelry, skincare products, makeup, ladies’ handbags, shoes, and more unique product offerings not provided by competitors.

9. Customer Satisfaction: Chanel’s products are meant to last and be worn for many decades, so they are made with the highest quality materials by the best craftsmen in Europe only. The brand has a history of consistent customer satisfaction.

10. Recognition: Coco Chanel is the only fashion designer who got listed on Time magazine among the 100 most influential personalities of the 20th century. In 2021, the brand was ranked #223 on Forbe’s World’s Best Employers and #445 in 2019.

11. Brand Loyalty: When it comes to luxury brands, loyalty is more often tied to the brand name than the designer behind it.

12. Social Media: Chanel has 47 million Instagram followers, and a presence on LinkedIn, Twitter, and Facebook.

13. Exclusive: Chanel uses selective sales distribution techniques to remain exclusive and popular.

Weaknesses

1. Market Growth: Because the premium segment is highly saturated and Chanel is forced to compete with many other similar and also successful brands, there is little room for expansion or growth in the market.

2. No Regular Supply of New/Innovative Products: Unlike others in the luxury fashion industry, Chanel sticks to its same core identity that is reflected in its slow-to-change product line style.

3. Poor Product Demand Forecasting: Failure to predict new styles and trends results in a multitude of missed market opportunities for Chanel that are picked up by more innovative competitors

4. Limited Success Outside Core Market:

5. Research and Development: Chanel spends less money than its competitors on efforts contributing to research and development, which is perhaps why the brand lacks behind in innovation and technology.

6. Quality Control: In recent years, consumers have complained that the quality of Chanel’s bags, among other products, has diminished compared to the brand’s vintage items.

7. E-Commerce: Currently, Chanel is not sold online, as the brand believes it would deprive the final consumer of a central aspect in the purchase process: the experience.

Opportunities

1. Brand Value: When the Chanel bag first hit shelves in 1955, it sold for only $220 dollars. In 1990, the bag sold for $1,150, and today, its value is priceless — or $8,500. In 2020, Chanel raised its prices by $300, and it’s likely the prices, and Chanel’s brand value, will continue to rise.

2. E-Commerce: If more of Chanel’s products were available to purchase online, Chanel would be better equipped to target a wider audience that is either unable or unwilling to commute to in-person retail locations.

3. Investments: During COVID-19, Chanel invested $1.1 billion in client-facing retail, creative collections, and complete store revamps. This strategy will only further increase Chanel’s brand value.

4. New Products and Services: As Chanel has already branched out from bags and perfume, the brand has the opportunity to venture into new spaces from athleisure to interior design.

5. Sustainability: Chanel launched Mission 1.5° in March 2020, demonstrating the brand’s commitment to tackle climate change. Chanel can gain brand recognition by promoting this mission and employing others in the industry to follow suit.

6. Employee Satisfaction: At #223 on Forbes World’s Best Employers in 2021, Chanel has the opportunity to move up on the list — and avoid falling off it again like in 2019.

7. New Audiences: Very few luxury fashion brands offer plus-size clothing, meaning there is still time for Chanel to pioneer this by becoming a more inclusive brand, and in turn, increasing the size of its clientele and its revenue.

Threats

1. Competition: Increasing competition and new players in the luxury fashion industry stand as a threat to Chanel’s level of brand loyalty, profitability, and overall sales.

2. Counterfeits: There is a large market and heavy demand for counterfeit products, and Chanel in particular. The sale of counterfeit products hinders the brand’s sales and diminishes its established perception of exclusivity.

3. Copies/Price Wars: As an industry leader, many brands attempt to copy Chanel’s trademarked style and elegance and sell them at more affordable prices, damaging Chanel’s sales and reputation of being different.

4. Revenue Loss: In 2020, Chanel posted a revenue of $10.1 billion, an 18% decline from 2019. Operating profit in 2020 was $2.05 billion, down 41% compared to 2019 — no doubt due to the COVID-19 pandemic.

5. Economic Slowdown/Downturn: There is a downturn in customer spending, after the recession and the COVID-19 pandemic, with more people prioritizing their large purchases.

https://www.elle.com/fashion/g38452109/chanels-metiers-d-art-2022-show/

References

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Forbes Magazine. (n.d.). Chanel (CCO). Forbes. Retrieved October 28, 2021, from https://www.forbes.com/companies/chanel/?sh=23a8a6e71ca2.

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