How to decouple revenue from sales
In a recent interview with Financial Times, Chanel CEO Leena Nair, addressed — and dispelled — rumors that Chanel is going public. Instead, she outlined her vision for Chanel’s next 100 years: invest in innovation, sustainability, and decouple revenue from sales volume through making people buying less and paying more for Chanel products but also for its auxiliary services and experiences.
This is the strategy of decommercialization. For those who can afford it, decommercialization is a unique competitive advantage, brand equity builder, and revenue protector. In the modern economy, everything has become a commodity: art, content, luxury, experiences, heritage, places and people. True brand and business differentiation is in offering the opposite, and building a viable, feasible, and sustainable business model around it. Decomercialization as a business model is based on delivering superior brand value versus just product volume.
De-commercialization playbook revolves around four work streams:
Create collectibles. The role of collectible items within a seasonal collection is to manage brand desirability and create a new revenue stream. They renew the brand aura. Collectibles can span categories, and include ready-to-wear, jewelry, accessories, books, stationary, board games, suitcases and haute couture. All collectibles are limited edition, rare and unique and priced higher than other product categories.They are made in small quantities and their distribution is limited. When featured in the store and on the website, they need to evoke the exclusive feel.
Create digital luxury assets and digital twins. Digital luxury assets are a potential testing ground for new designs and product ideas, which detects demand early and accordingly tailors supply, avoiding overproduction. Digital twins combine physical and digital benefits: for example, a Louis Vuitton jacket has both use value and exchange value thanks to being associated with a digital collectible.
Monetize IP. Archives can become a new revenue stream through direct monetization of a luxury brand’s intellectual property. Archival collections and pieces can be re-issued in the physical and/or in the digital format.
Service de-commercializes products, by creating a product-service system. In addition to services like quick product authentication and proof of ownership, there is RFID and NFC tagging that powers traceability and circularity. Customer- centric services that come with product ownership include membership programs, hyper-personalization, and granular customer segmentation.
Alternative retail options can also be operationalized as exclusive, member-only services. For example, a brand can offer to auction items by its most valuable customers’ and/or celebrity clients’. Who is selling is often more important than what they are selling, and items owned by notable cultural influencers can reach high demand and high prices, especially if the auction is handled by the house itself. By their very format, auctions sell unique items, and are a way to create an additional revenue stream and increase brand halo.
Or, a brand can offer exclusive, invite-only resale services to selected clients. Selected clients can resell their own vintage items, powered by “product passports” (product authentication and proof of ownership data). Resale saves on raw materials, labor, and production costs.
Read the rest of this analysis on The Sociology of Business.