Interview with Michel Chevalier

Today’s interview is with someone a few of you might be familiar with – the fantastic Michel Chevalier. Michel has a fascinating background – with stints at the Boston Consulting Group, Paco Rabanne, and Bluebell Asia Group (which manages brands like Moschino, Blumarine, and Carven internationally), he is a well known figure in the luxury goods industry. Michel has authored several of the key texts used by students of luxury management today, and has taught and continues to teach at INSEAD, ISML and HEC in Paris. Enjoy meeting Michel!

Who are you? What do you do, and where do you live?

My name is Michel Chevalier and I have been lucky enough to live in France, in Germany, in Spain, in the USA, in Latin America, in Japan, in Hong Kong and in China. I did not plan it that way but I had for example, the opportunity to go and study in the United States and I just took it.

I am now a consultant with EIM in Paris, an activity which is actually almost unrelated to the luxury field, but I also appear as speaker, keynote speaker or teacher in many part of the world and I write and publish books on luxury (Luxury Brand Management, Luxury Retail Management and Luxury China…and I am working on a new one), just for fun and because it is interesting.

You have had a very accomplished and diverse career in the luxury industry. Can you share how your career began and evolved?

I came to the luxury sector without realizing it. I was General Manager of Johnson Wax Venezuela in Caracas, and I wanted to come back to Paris. I was offered a job of General Manager of Paco Rabanne Parfums and I did not know there was a difference between creating and selling a fast moving consumer good (FMCG) and a perfume. I had to learn the hard way.

There basically are two differences:

1. For a FMCG, you can test so much that you are almost sure it will be a success : the risk of failure is much higher in the luxury field.

2. In a FMCG company, you sell your product in one country, or you have subsidiaries in many countries. These products test locally and sometimes come with different products (or at least different positioning) before they launch in different countries. In luxury you must launch the same product from one single country (France or Italy or the USA). Then, the same product must be found everywhere in the world, very often without using subsidiaries but distributors or retailers (who use their money to develop your brand).

Having worked all around the world, you must have witnessed some major shifts in the luxury market over the past decade. What have been some of the largest changes you’ve seen?

Major changes that have come in the last 10 years:

1. There has been a move away from wholesale activities and into directly operated retail stores (except for perfumes and wine and spirits)…for many reasons, but one of these reasons is that department stores grow much less than luxury brands.

2. A stronger marketing analysis and focus, at least a more sophisticated strategic thinking.

3. The luxury business is now completely worldwide, with a strong emphasis on Asia (50% of the volume for many brands) and there is now a need to organize local creative analysis, marketing studies and to set up wholesale and retail coordination in different parts of the world.

You lived in Hong Kong and Japan as part of your work with Bluebell Asia Group, managing brands like Blumarine, Moschino, Carven and more. Can you share a bit about your experience and why you chose to join Bluebell? 

Why did I work for Bluebell? Just by chance: the Bluebell distributor was one of my first clients when I was at Paco Rabanne, so I knew the owner quite well and one day he offered me to become EVP of the company. I then had to learn the retailing part and it gave me a good understanding of how should a brand be promoted and what the logical attitudes were of the distributors and the retailers.

I also understood better what was going to happen in Asia, for the luxury sector, and also in general. I believe Bluebell had 160 stores, plus a one to three salesforce for wholesale activities spread out among ten Asian countries. It was a strong challenge and a very interesting time in my life.

As luxury brands continue to produce higher quantities to meet  demand, there has been criticism that production in houses such as Prada, Gucci, etc have been outsourced – and quality has suffered as a result. Is this what you have observed?

You ask me what I think about the theory that brands are dropping in quality, because they continue to come up with cheaper entry products produced by cheaper sub-contractors. I know this is the theory of Dana Thomas. I love her book, it is well documented, easy to read and very good.

But the underlining story is wrong. I believe the contrary, that products sold today are of much better quality than they were 30 years ago. I remember in the late seventies you could find Dior and Saint Laurent polyester shirts all over Latin-America, and Dior plastic ties in Australia. I remember top brand plastic shoes in Brazil and many other horrible products in Russia. They have all disappeared. The new model has been to cancel the famous “entry pieces” and to concentrate on top quality products. When a strong French brand realizes that too many women are carrying their handbags, the first thing they do, is double the retail price to make the bag less accessible and reserved only for the most sophisticated ladies.

One thing is certain: today luxury products are all in all a much better quality than they were 30 years ago, and the luxury business does not develop through cheap entry prices. Actually, the average ticket of luxury retail stores has grown faster than inflation.

Where has much of the growth in the luxury industry come from? 

The key explanation for the growth of the luxury industry is the development of a new middle class, with yearly salaries ranging from $25,000 to $60,000 in different parts of the world . The members of this group start by buying a bottle of champagne or a Chanel lipstick of a Cartier watch for the first time in their life. This basic fact is well documented and has been explained by the theory of the “excursionist”: the man or the woman who buys a luxury product (and sometimes an expensive one) less than once every two years. This group represents a very large part of the business.

Now, what is difficult and fascinating in this industry, is that you have to find this new middle class. They are not in Western Europe or in North America.

What are some luxury brands that you view as doing a fantastic job with anticipating and meeting global trends and demands?

Luxury brands that impress me are those that were relatively weak ten years ago and that have already reached the one billion euros sales level or will soon reach it: Van Cleef & Arpels, Fendi and Bottega Veneta. I am also impressed by Jimmy Choo and La Maison du Chocolat. Brands that really do not impress me or did not impress me are Christian Lacroix or Etienne Aigner. Actually, there are many other brands that do not impress me at all, but I don’t want to mention them…

I am also impressed by the managers who have landed as head of a brand with no growth at all for a period of five to ten years and who, slowly and quietly, make them grow again. If you look carefully at what goes on in the industry, you can identify several of these very quiet and very effective managers.

What trends should managers of luxury brands be thinking about as they look towards the next decade?

1. I would say that brands must be 100% international, but also still think about the customer in Chile or in Vietnam – he or she is also buying a French, an Italian or a Spanish product. So, the international approach must be quite sophisticated, but the philosophy of the brand must remain very local and the national values have to be maintained. It seems obvious, but it not so much the case in large international groups: I could even give you good examples of that…

2. Also managers should be careful: yes, the direct retail activities are important, but the visibility can only be obtained in small, selective, independent multi-brand stores. The Louis Vuitton model of 100% retail is great for that brand. It does not work for medium size brands.

3. Customers are interested in luxury because there are many brands and because it is fun and different. The day when only 10 or 15 major brands take 95% of the volume, then the business becomes boring and customers become less interested. This  happened in Japan between 1995 and 2005. I hope it does not happen elsewhere in the future.

What would be your advice for somebody looking to start working in the luxury industry? Where can they start?

Wait a few months. I am in the process of creating an MBA in Global Luxury Brand Management in Paris, and I believe this is really the place to go.

Any final words of advice?

Luxury is probably the most creative, most international and most fascinating activities out there…but I entered there by chance, and today there are more candidates than jobs available. And this is a very demanding industry, in terms of travel and hours. But if you are well prepared, you can do very well and have a fascinating career.

 

I really enjoyed hearing Michel’s thoughts on the luxury goods industry, as well as his story as to how he entered it in the first place. It’s fascinating to hear his opinions alongside those of other industry observers like Dana Thomas and Michael Silverstein, and see where they meet and diverge. I also want to thank Michel for taking the time to do this interview – he is as you might be able to tell, very busy and he actually did this interview while abroad in Asia. For more of Michel, feel free to check out his books, and see his teachings in Paris!