Price changes curbing grey market, says Chanel

Luxury brand Chanel says its efforts to curb the grey market have been successful - and are helping boost revenue in China.

Havana - Chanel, the world's second largest luxury brand, said on Monday its efforts to curb the grey market have been successful and are helping boost revenue in China despite weaker overall demand for luxury goods.

The company narrowed its price gaps between the United States, Europe and Asia last year to prevent smugglers buying goods in one region to re-sell to another in the grey market.

“We reduced quite a lot the parallel market, mainly in Asia, and we have double-digit growth in our boutiques in mainland China,” Bruno Pavlovsky, Chanel's president of fashion, said in an interview in Havana.

Chanel unveiled its latest Cruise collection in Havana on Tuesday, in Cuba's first major fashion show since the 1959 revolution and another sign of warming relations between the Communist-ruled island and the West. The United States and Cuba formally agreed to restore diplomatic relations last July.

Despite the success in curbing grey market sales, the privately owned company expects slower sales growth this year, Pavlovsky told Reuters in Havana's landmark Teatro Marti. He declined to disclose figures.

He noted that Chanel has an entire team, including external lawyers, that monitors the secondary market.

The luxury goods industry been plagued in the last few months as a drop in global tourist traffic due to recent terrorist attacks, slower economic growth in China, and record low oil prices have dented the purchasing power of important luxury buyers from Russia and the Middle East.

In April, industry leader LVMH said its fashion and leather goods sales were flat while Hermes said revenue growth slowed in the first quarter.

Pavlovsky said fewer Russians were travelling due to the weak rouble, and Brazil's recession has curbed demand there.

But Chanel was seeing solid growth in the United States, some parts of Europe such as Britain, Russia, China, Japan and Korea, he said. Chinese and Russians not travelling abroad as much were buying more at home.

“There is a slowdown but not such a big slowdown,” he said.

Pavlovsky said Chanel was presenting its latest inter-seasonal Cruise line in Cuba because the country had inspired Karl Lagerfeld, the company's chief designer and creative director. Chanel, which began as a millinery store in 1909 in Paris, was also returning to its roots, he added.

Founder Coco Chanel designed early collections for wealthy and glamorous Americans holidaying on yachts and cruises in the Caribbean. Cruises to Cuba had been forbidden during the country's standoff with the United States.

Earlier on Monday, the first US cruise ship to sail to the island in more than 50 years docked in Havana.

Chanel, which has fewer than 200 boutiques worldwide, will not be setting up shop in Cuba any time soon, Pavlovsky said.

“Why not, one day,” he said. “But not in the coming years.”

REUTERS