Rebirth of the Fashion King

The sun was shining brightly at 31 Cambon Street.

At nine o'clock in the morning in Paris, the creative studio was already up and running.

Chanel's headquarters building takes on a soft off-white hue in the morning light, mirroring the color scheme of its classic stores.

The boutique downstairs had just opened, and there were already staff members setting up displays, with black handbags on beige stands.

"Good morning, Rhine." Virginia came in, carrying a coffee.

Good morning, Ms. Virginia.

"What time did you arrive?"

"Around seven o'clock."

……

On Virginie Viard's desk were two documents: one was a year-end production and sales review report for the Himalaya series, and the other was a "Proposal for Reforming the Sales Model of Himalaya Handbags" drafted by the Marketing Center of the President's Department, which her secretary had just delivered.

"Maureen Hicks, at the 10 o'clock senior management meeting, a reform proposal will be formally submitted."

After she finished reading, she looked at Li Xun as he entered the room and smiled, this time she was actually coming directly for him.

Li Xun was completely confused after hearing this.

"Change what?"

"We will abolish the exclusive allocation system for the Himalaya series and adopt the traditional sales model of open display in stores, direct sales of full-payment in-stock items, and equal distribution to stores worldwide, in line with the 2.55 classic handbag." Virginie spoke very quickly and precisely extracted the core terms.

"Drafted by Vice President Blair, finalized and signed by Maureen, and will be voted on directly at the meeting."

Li Xun's lips parted slightly, looking somewhat incredulous.

"Are they crazy?"

  

Virginie nodded.

"It's not a frontline sales demand; it's that Maureen, after two years at the helm of Chanel, wants to tighten creative control and take back the decision-making power over the pricing and sales of top-tier leather goods."

When she took office in 2007, the division of responsibilities stipulated that the sales rights for the entire classic collection belonged to the president's department, while the sales rules for limited-edition haute couture leather goods and themed rare leather goods were entirely controlled by Karl. Your Himalaya design belonged to the latter.

"I know the boundaries of my authority and responsibility." Li Xun put down what he was holding and focused his gaze on the report data, precisely locking onto the core production and sales data from the company's listing in 2006 to the first quarter of 2009.

First release of the 2006 Fall/Winter Haute Couture collection: Himalaya Rh crocodile leather handbag.

The old master and Li Xun set up a tiered access and allocation rule: the top-of-the-line matte Nile crocodile model is exclusive to global VIC members, with an allocation ratio of 1:2.2; the regular original color crocodile model is for Black Card VIP members only, with an allocation ratio of 1:1.6; and the mini derivative model is available to high-end VIPs, with an allocation ratio of 1:1.

There are a total of 1127 registered Chanel VICs worldwide, including 186 in China, 149 in Japan and South Korea, and 792 in Europe and America.

The Himalaya top-of-the-line model has an average annual production of only 12 pieces, with an average of 210 orders submitted globally each year, resulting in a supply-demand ratio of 1:17. Currently, all spot and futures orders are locked in with specific customers for targeted circulation. The secondary market premium remains stable at 2.7 times the original price. It ranks first in the annual list of branded leather goods in terms of value retention, consistently outperforming Hermes' regular Birkin and Kelly...

"If supply and demand are out of balance, canceling the allocation is tantamount to destroying the scarcity value," Li Xun said with certainty.

What is the positioning of 2.55?

Launched in 1955, this classic Chanel design is a cornerstone of the brand. It is mass-produced, allows for easy replication, features standardized processes, and has controllable inventory. It caters to a wide range of high-end customers and does not require additional purchases.

What is Himalaya's positioning?

"I created Chanel's top-tier collectible leather goods, benchmarking against Hermès' three flagship leather goods, representing the pinnacle of the brand's leather goods line. The underlying logic of these two products is completely contradictory, and their sales models are forcibly assimilated, demonstrating a complete lack of understanding of the pricing logic at the top level of luxury goods."

"The core objective is not to increase revenue." Virginia's words directly revealed the CEO's true purpose.

"Maureen comes from a background in fast fashion retail, with experience managing GAP and Banana. She is accustomed to operating with a logic of low profit margins, high volume sales, and targeting lower-tier customers. She fundamentally does not agree that the pricing power of luxury brands should be higher than their revenue power."

This reform aims to dilute the exclusive scarcity of Himalaya products, lower the premium in the secondary market, and quickly increase sales volume to boost leather goods revenue in fiscal year 2009.

Secondly, it's a test to seize power. Once Himalaya's restructuring is approved, all subsequent creative limited-edition leather goods will have their sales rules determined by the president's department, effectively stripping Karl of his category control.

Before his rebirth, Li Xun was already aware of the core actions taken during Maureen's presidency from 2007 to 2016.

By gradually weakening the creative voice and strengthening the management power on the operational side, the company is eroding the brand tone decision-making power that Karl Lagerfeld had held for many years. In 2016, Lagerfeld finally resigned due to a complete break with the Wertheimer brothers (Chanel's owners) and Karl Lagerfeld's creative team. This restructuring is likely a formal attempt to seize power.

"Is Mr. Alan aware of this?" Li asked the most crucial question.

"Mr. Alan received a copy of the proposal but has not yet commented, remaining neutral and observing," Virginia said with a smile.

"This is the consistent strategy of the family holding company: not to actively intervene in creative and operational infighting, but only to look at the final profit and loss revenue. If revenue increases, the favor will go to the president's department."

The brand's image has been damaged, favoring the design department. Representatives from the Wertheimer family will be present at this meeting, holding the final veto power. Mr. Alan probably just wants to watch the show and won't agree to the restructuring.

"What did Mr. Carl say?"

"We've already left the mansion and will arrive at headquarters around 9:40." Virginia tapped her fingertips on the table.

"My stance, Karl's stance, and your stance will be completely aligned."

The reform was rejected, and Himalaya retained its complete set of distribution and access rules. The creative team maintained firm control over the sales, grading, and limited editions of top-tier leather goods. Meanwhile, many members of the president's department, including sales, marketing, finance, and the Asia-Pacific regional head, sided with Maureen. With an equal number of people on both sides, the family representative's vote decided the outcome.

Li Xun spoke with a smile.

"Maureen may have overestimated the sales figures and underestimated the vital value of creative pricing to top luxury brands. Her decision to apply mass retail logic to high-end leather goods was an amateurish one."

"Think of your speech for the meeting." Virginia didn't talk to Li Xun about emotions, only about practical matters.

"Blair will use several sets of financial data to prove the benefits of the reform: global luxury goods consumption declined in the first quarter of 2009, the aftermath of the subprime mortgage crisis in Europe and the United States had not yet subsided, consumption growth in the Asia-Pacific region slowed down, and the liberalization of spot sales quickly digested inventory, increased single-store sales, and reduced VIP maintenance costs for stores. These three operational benefits are very convincing."

"I'll handle it," Li Xun said decisively.

"Mr. Carl, there's no need for you to waste your breath or mediate. I'll handle all the sales, finance, and regional executives, all the professional negotiations. Are these people out of their minds to be bringing this on me?"

Virginia looked at the young man in front of her with great satisfaction.

……

At 9:38, footsteps could be heard at the entrance of the office area.

Karl Lagerfeld, dressed in a bespoke black suit and carrying a leather meeting folder, walked calmly into the office area, getting straight to the point without any pleasantries.

"I am aware of the situation. From the moment Maureen joined Chanel, she always wanted to transform Chanel into a mass-market, accessible luxury brand. This is the fundamental difference between us."

Virginia spoke up: "Karl, the voting rules for the meeting remain unchanged. The ownership charter for creative categories was revised in 2008, and the rules limiting collectible leather goods require the creative director's signature to take effect."

"The articles of association are useless; operating revenue can force us to amend them," the old lady said bluntly.

"The Wertheimer family only looks at long-term value. Short-term revenue cannot build a century-old brand barrier. Rhine, you will be the main speaker at the meeting. Virginie and I will support you."

Li Xun nodded: "Understood."

"No need to hold back." Karl Lagerfeld raised his eyes, his tone clearly biased.

"Those people in the sales department don't understand top-quality leather goods. They're laymen interfering with the creative process. You can directly refute them without worrying about the management's feelings. I will take full responsibility."