Chanel’s luxury dream is turning to dust

The world of luxury branding is one of great paradox. It is a place where tradition and creativity collide. Where ancient founders and youthful models meet and make magic together. Where impoverished artisans rise to become emperors of incredible fortunes.

For marketers, the world of luxury holds a special place because it represents the origin of brand management. The modern discipline of brand management is officially accredited to Procter&Gamble and a memo written in 1931 by Neil McElroy. But long before McElroy was born, and even before P&G was founded, the business of brand management was being practiced and perfected by the founders of the great luxury brands.

Among those great names, few shine brighter than Gabrielle “Coco” Chanel. Chanel did more than create products, she redefined the whole nature of the categories she worked in. The little black dress, No 5 perfume, the tweed suit, the total look, costume jewellery, the cashmere cardigan. All Chanel’s inventions, and all now part of fashion legend.

As a lover of brands and someone who has worked for a decade for some of the biggest luxury houses as a consultant, I always gain inspiration from a local Church of Chanel. But in recent months, I must confess a growing sense of disappointment at the state of the brand.

Its shop windows lack inspiration, the new collections are a little too derivative and the clientele looks older to me on each visit. Whisper very softly, but I think Chanel is getting dusty.

Of all the criticisms you can level at a luxury brand, dusty is perhaps the most devilish. The great luxury brands are unusual in that they are much older than the clients they currently target. For each to survive must practice the art of constant brand revitalisation – a delicate process in which centuries of heritage is carefully balanced with contemporary rule breaking. Should a luxury brand ever slow down in the latter category, it rapidly becomes dusty.

And to accuse Chanel, of all the luxury brands, of being dusty is tantamount to betrayal. Even the most fierce fashion critic or the biggest competitor of Chanel would instantly tell me I am a fool to even counter such an accusation. Of all the great houses, luxury purists believe Chanel is the one that never puts its immaculately presented foot in the wrong direction. And yet my branding bones rarely let me down. I think I am right on this one.

Of all the criticisms you can level at a luxury brand, dusty is perhaps the most devilish

The film industry has certainly not helped. First Audrey Tautou was “Coco before Chanel”. Then Anna Mouglalis and Mads Mikkelsen were “Coco Chanel and Igor Stravinsky”. Neither film was the kind of publicity that the house of Chanel would have asked for because both only focused on the past and thus increased the gathering dust descending on the brand.

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If my subjective impressions of a few windows and a couple of recent movies aren’t evidence enough of Chanel’s plight there is also the recent data from Millward Brown’s empirically based Brandz valuation. According to the company’s 2010 estimates the top three luxury brands – Louis Vuitton, Hermes and Gucci – all enjoyed significant increases in brand equity. But Chanel, at number four, lost 11% of its brand value over the past 12 months. It’s a rare glimpse into the actual state of Chanel’s brand health, which is usually preciously guarded and almost never discussed with outsiders.

Much of Chanel’s lost brand value can perhaps be explained by the company’s reluctance to enter China. While brands like Omega and Armani focused heavily and early on the new empire rising in the east, Chanel held back. As global chief executive Maureen Chiquet admitted five years ago when the topic of China first emerged: “We’re going to let our competitors make the first mistakes in China before we move in.”

That’s looking increasingly like a mistake as China’s love of luxury and economic growth continues to surprise even the most ardent admirer of the east.

Questions of Chanel’s predominance have also emerged closer to home. Two weeks ago, the brand paid a record cash fee to secure a flagship store on Bond Street in London. The business press took this as evidence of London’s continued success in spite of the current recession.

What they did not mention is that the store is directly opposite the amazing new Louis Vuitton flagship store that recently opened to much fanfare.

In an earlier era Chanel would have been pioneering the retail landscape of London. Now it seems Chanel is playing catch up. And that’s a game that ill befits a luxury brand.

Almost a century ago Coco declared: “Fashion passes, style remains.” She will be hoping from her perch up above that the same sentiment now applies to the wonderful house she built all those years ago.

Mark Ritson is an associate professor of marketing, an award-winning columnist and a consultant to some of the world’s biggest brands

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