Chanel’s Strategic Avoidance of the Outlet Market and Its

Implications for Brand Prestige

Sitong Gu

Shanghai Foreign Language School International Division, Shanghai, China

Keywords: Chanel, Prada, Outlet Market.

Abstract: The strategic decision of luxury brands to avoid discount markets, particularly exemplified by Chanel’s

avoidance of outlet markets, offers a unique perspective on the relationship between brand uniqueness and

value. This study explores Chanel’s deliberate choice to steer clear of outlet stores, analyzing how this strategy

impacts the brand’s prestige and luxury value. Drawing on case studies, including Prada’s experience in

entering the outlet market, the research highlights the risks and challenges associated with such a move. The

findings reveal that entering the outlet market can lead to brand image dilution, reduced consumer loyalty,

and a decline in secondary market prices, as seen in Prada’s case. In contrast, Chanel’s avoidance of outlets

has allowed the brand to maintain its high-end positioning, preserve its exclusivity, and strengthen consumer

identity and loyalty. The study underscores the importance of strategic channel selection for luxury brands,

emphasizing the need to balance commercial interests with brand image maintenance. The research concludes

that Chanel’s strategy of avoiding discount markets is a successful approach to preserving brand prestige and

long-term sustainability in the luxury market.

1 INTRODUCTION

The luxury fashion industry has long been

characterized by its exclusivity, craftsmanship, and

premium pricing, with brands striving to maintain an

aura of unattainable elegance and sophistication. On

the other hand, luxury goods refer to the products

with the highest ratio of invisible value/visible value

relationship. What people pursue is no longer the use

value of the commodity itself, but the symbolic

meaning of the commodity to some extent, and the

symbol is the symbol of identity and status. The most

iconic and prestigious luxury brand is Chanel, which

has always positioned itself at the pinnacle of the

fashion world. However, in an era of growing

consumer demand for affordable luxury goods and

accessible shopping experiences, many luxury brands

have expanded into the direct sales market to cater to

price-sensitive consumers. Chanel, by contrast, has

taken a strategic stance to avoid the direct sales

market altogether, choosing instead to maintain its

brand image through selective distribution channels

and tight retail controls. Most of the existing literature

focuses on the influence of brand extension and

channel expansion, but there are few studies on the

strategies of brands actively avoiding discount

markets. The purpose of this report is to explore the

strategic decision of Chanel, a renowned luxury

brand, to avoid the outlet market and to analyze how

this strategy impacts its brand prestige and luxury

value.

2 CASE STUDY

This report employs the method of case study-- The

influence of luxury brands after entering the outlet --

taking Prada as an example. Before Prada entered the

Outlets, it was a high-end positioning brand with

stable prices in the secondary market and low price

sensitivity of customers. Prada’s pre-outlet era was

marked by robust financial growth and a reputation as

a paragon of Italian luxury. Between 2010 and 2015,

the brand achieved a compound annual growth rate

(CAGR) of 3.2%, with revenue reaching €2.8 billion

in 2015 (Bain & Company, 2021). Prada is known for

its unique design and high-quality craftsmanship, and

is regarded as one of the representatives of luxury

brands. This success was underpinned by its

positioning as a “high-end brand” in the “intermediate

296

Gu, S.

Chanel’s Strategic Avoidance of the Outlet Market and Its Implications for Brand Prestige.

DOI: 10.5220/0013990500004916

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 2nd International Conference on Public Relations and Media Communication (PRMC 2025), pages 296-300

ISBN: 978-989-758-778-8

luxury” tier (Pavione & Pezzetti, 2014), blending

craftsmanship with modern design.

Before Prada entered the Outlets market, the

second-hand market price of Prada products is high

and the liquidity is good. Demand for used Prada is

high, especially in Asia, where the number of Prada

listings on luxury resale platforms increased by 40%

between 2013 and 2015 (The RealReal, 2023).

Consumers are willing to pay higher prices for used

goods because they are still seen as a symbol of high-

end products. Prada’s secondary market performance

reflected its exclusivity. For example, “Resale Value”

Bags from limited editions, such as the Saffiano

Leather Tote, retained 85% of their retail value on

platforms like The RealReal. Moreover, Prada has

always been seen as a high-end brand with a stable of

high social status repeat customers.65% of sales

originated from repeat customers, driven by limited

editions and personalized services (Prada Annual

Report, 2015). 78% of survey respondents associated

Prada with “modern sophistication,” ranking it third

behind Chanel and Gucci in brand prestige (Statista,

2015).

Prada’s decision to enter outlet markets in 2016

marked a strategic shift toward accessibility. By

2020, outlets accounted for 18% of its global sales

(Kering Integrated Report, 2020), but this expansion

came at a significant cost. After it entered Outlets

market, it's a brand with a tarnished image, declining

brand loyalty and Plummeting prices in the secondary

market. Firstly, the brand depreciated heavily in the

secondary market. Average resale prices for Prada

bags dropped to 55% of retail, with limited-edition

items losing 30% of their value within six months of

outlet debuts (The RealReal, 2023). Secondly, the

entry into the Outlets has made Prada less loyal to

consumers. Some loyal consumers are disappointed

by Prada's decision, believing that the brand no longer

adheres to its traditional high-end positioning. Repeat

purchases declined to 48% by 2020, with 32% of

loyal customers stating they would switch to more

exclusive brands (Prada Customer Survey, 2020).

Finally, the brand's image is so damaged that it is no

longer seen as a representation of social status. A

survey by McKinsey (2020) found that 54% of luxury

consumers perceived Prada as “less exclusive” post-

outlet entry.

3 ANALYSE ON THE PROBLEMS

Prada's case highlights three risks to outlet expansion.

To begin with, when Prada carried out the expansion

of outlet stores, it introduced the conflicting

institutional logic, namely elite logic and market

logic, which seriously weakened the authenticity of

the brand. From the perspective of elite logic, Prada,

as a luxury brand with a long history and reputation,

has long maintained a high-end, exquisite and unique

brand image, and its products are positioned to serve

the elite class who pursue quality and uniqueness. The

design, materials and processes of each product are

strictly followed by high standards. Each product can

reflect the brand's high value and cultural

connotation. Nevertheless, the expansion of outlet

stores is often accompanied by the introduction of

market logic. In order to attract more consumers and

increase sales, outlet stores may adopt strategies that

go against elite logic. For instance, in order to reduce

costs, the material selection standard of the product

may be reduced to a certain extent or the production

process may be simplified. More popular styles may

be introduced, which may lack the original

uniqueness and high-end feel of the brand so as to

increase sales. Such conflicting institutional logic

makes the brand image blurred in the minds of

consumers, and consumers can no longer clearly feel

the high-end and unique value represented by Prada

brand, which leads to the weakening of brand

authenticity.

In addition, price-sensitive customers attracted to

outlets do not compensate for lost high-end clientele

(Gyomlai et al., 2021). High-end customers choose

Prada often pay attention to the high-end quality of

the brand, unique design and the story behind it, and

are willing to pay a high price for this unique

consumption experience. And the expansion of outlet

stores, especially the strategy of lowering prices to

attract more consumers, will attract a large number of

price-sensitive customers. These customers pay more

attention to the price of the product rather than the

high-end value of the brand, and they may choose to

buy Prada products just because of the price discount,

rather than truly identify with the culture and value of

the brand. The change of consumer structure will lead

to the alienation of the target customer group of the

brand. On the one hand, high-end customers may feel

that the brand is no longer unique and exclusive due

to the change of brand image and the emergence of a

large number of price-sensitive customers in outlet

stores, so as to reduce the purchase of Prada products.

On the other hand, price-sensitive customers increase

the short-term sales of outlet stores, but they are less

loyal to the brand and are likely to switch to other

brands once other brands with more price advantages

appear.

Eventually, depreciating resale values signal

reduced brand health, eroding long-term equity (Dion

& Borraz, 2017). When the resale value of Prada

products depreciates in the secondary market, it sends

a negative signal to the market, indicating that the

market recognition of the brand is declining and the

Chanel’s Strategic Avoidance of the Outlet Market and Its Implications for Brand Prestige

297

health of the brand is in question. This devaluation

will further erode the long-term equity of the brand as

consumers become concerned about the future

development of the brand and thus reduce investment

and purchase of the brand.

4 ANALYSIS OF CHANEL’S

STRATEGY

Chanel’s success stems from its mastery of “elitist

logic”, defined by exclusivity, craftsmanship, and

symbolic value (Thornton et al., 2012). This contrasts

with Prada’s failed attempt to hybridize elitist and

market logics (Debenedetti et al., 2025). Prada tried

to mix elitist logic and market logic but it failed

because the two are in conflict. Elitist logic

emphasizes the uniqueness and high-end positioning

of the brand, while market logic pays more attention

to the sales volume and market share of the product.

Exclusivity is an important cornerstone of Chanel's

elite logic. It creates a sense of scarcity and

uniqueness by tightly controlling the supply and

distribution channels of its products, making

consumers feel that owning Chanel products is a

privilege. Chanel reinforces its elitist logic by

carefully controlling consumers' shopping experience

through a selective distribution strategy. 80% of

Chanel sales occur in Directly Operated Stores,

including flagships on Rue Cambon and Harrods’

“Residence” concept stores (Dion & Arnould, 2011).

As an important display window of Chanel brand

image, the flagship store carries the history and

cultural heritage of the brand. Flagships feature

hidden cash registers, personalized lounges, and art

installations, creating a “domesticated” experience

(Debenedetti et al., 2025).

Additionally, Chanel adopts the "disguise

strategy" to strengthen its exclusivity, cleverly

disguising the market logic, so that consumers can

feel more high-end and unique brands in the shopping

process. Products are displayed in residential-style

settings. For example, the Rue Cambon flagship

resembles a Parisian apartment. This disguise strategy

allows consumers to feel a home atmosphere while

appreciating the goods, silently pulling into the

distance between consumers. At the same time, this

family style further reflects the high-end of the brand,

making consumers feel as if they are in a private

space. Sales are not only sales but also disseminating

brand culture. They associates use storytelling to

emphasize heritage, such as Coco Chanel’s design

philosophy, diverting focus from transactions (Atwal

& Williams, 2009).

Besides, Chanel skillfully balances the

accessibility and exclusivity of its products through

its product differentiation strategy. In high-end

products line, Métiers d’Art collections remain

exclusive to Directly Operated Stores, with prices

averaging €15,000–€50,000. These high-end

products use the best materials and the most exquisite

craftsmanship, is the embodiment of Chanel elitist

logic. In accessible Lines, Fragrances (e.g., No. 5)

and entry-level bags (e.g., Gabrielle) are sold in select

department stores, but with strict inventory control

(Zhang, 2021). These products have relatively low

prices and are more easily accepted by mass

consumers, thus expanding the audience of the brand.

However, Chanel has exercised strict control over the

inventory of these products, avoiding excessive

supply of products and maintaining the scarcity and

uniqueness of the products.

5 FINANCIAL AND MARKET

PERFORMANCE ON CHANEL

Compared with Prada, Chanel's elitist logic strategy

has brought remarkable financial and marketing

results. In the aspect of revenue growth, Chanel’s

CAGR of 5.8% between 2016 and 2022, reaching

€15.6 billion in 2022 (Bain & Company, 2023). This

steady revenue growth trend shows that Chanel has a

strong competitiveness in the market. In the aspect of

secondary market, resale values average 92% of

retail, with classic items like the 2.55 bag

appreciating 15% annually (The RealReal, 2023).

This shows that Chanel products not only have a high

value at the time of purchase, but also have a strong

ability to preserve and increase value in the second-

hand market. This good secondary market

performance has further enhanced the reputation and

appeal of the Chanel brand. In the aspect of consumer

loyalty, 78% of purchases from repeat customers,

driven by limited editions and VIP events (Chanel

Annual Report, 2022). The scarcity and uniqueness of

limited-edition products attract the attention of

consumers, making them willing to buy again for the

sake of owning these unique products. VIP activities

provide consumers with an exclusive experience,

enhance the interaction and emotional connection

between consumers and brands, and further enhance

consumer loyalty.

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6 THEORETICAL AND

MANAGERIAL IMPLICATIONS

The research offers profound insights into the realm

of institutional logics within the luxury brand context.

It vividly demonstrates how brands can effectively

preserve and uphold an elitist logic through strategic

channel control. In the highly competitive luxury

market, institutional logics play a pivotal role in

shaping a brand's identity and market positioning. An

elitist logic is characterized by exclusivity, high - end

craftsmanship, and a strong emphasis on symbolic

value. By carefully selecting and managing

distribution channels, luxury brands can maintain the

integrity of this elitist logic. For instance, a brand can

choose to limit its presence to high - end, exclusive

locations such as flagship stores in prime city centers

or select luxury department stores. This strategic

approach ensures that the brand is associated with a

certain level of prestige and sophistication. It also

allows the brand to have greater control over the

customer experience, from the moment a customer

enters the store to the point of purchase. Moreover,

strategic channel control can help the brand avoid

dilution of its elitist logic. When a brand expands into

inappropriate channels or over - exposes itself, it risks

losing the exclusivity that is so crucial to its identity.

This research provides a theoretical framework for

understanding how luxury brands can navigate the

complex landscape of distribution channels to

preserve their unique institutional logics.

This study makes a significant contribution by

providing empirical evidence that links outlet entry to

secondary market depreciation and loyalty erosion.

Brand dilution is a major concern for luxury brands,

as it can have far - reaching consequences for their

long - term viability and market value. When a luxury

brand enters the outlet market, it often faces the

challenge of maintaining its brand image. Outlet

stores typically offer products at discounted prices,

which can attract a different type of customer base.

This shift in the customer profile can lead to a

perception of the brand as being less exclusive and of

lower quality. The research shows that this change in

brand perception is reflected in the secondary market,

where the resale value of the brand's products

depreciates. Furthermore, the entry into the outlet

market can erode customer loyalty. Loyal customers,

who are often attracted to the brand's exclusivity and

high - end nature, may feel that the brand has

compromised its values. As a result, they may be less

likely to continue purchasing from the brand in the

future. The empirical evidence presented in this study

helps to establish a clear causal relationship between

outlet entry, secondary market performance, and

customer loyalty, which is invaluable for theoretical

understanding in the field of brand management.

7 SUGGESTIONS

Managers of luxury brands are advised to adopt a

channel segmentation strategy. This involves

reserving high - end products for direct - operated

stores. High - end products are the cornerstone of a

luxury brand's identity, representing the brand's

highest level of craftsmanship, design, and

exclusivity. Direct - operated stores offer greater

control over the brand environment, from the store

layout to the customer service. This allows brands to

create a luxurious and exclusive atmosphere that is in

line with the brand's image. In contrast, non - DOS

channels can be used for more accessible product

lines. However, strict inventory control is essential

when using non - DOS channels. This helps to

maintain the brand's exclusivity even for the more

accessible products. By limiting the availability of

these products, brands can create a sense of scarcity,

which can enhance their desirability and perceived

value.

Implementing “disguise strategies” is another

crucial managerial recommendation. One such

strategy is creating domesticated store environments.

Luxury brands can transform their stores into spaces

that resemble high - end residences or private clubs.

This approach helps to reinforce the brand's

exclusivity by creating a more intimate and

personalized shopping experience. In a domesticated

store environment, customers feel as if they are

entering a private and exclusive space, rather than a

typical retail store. This can be achieved through the

use of comfortable seating, soft lighting, and high -

quality interior design. Sales associates can also play

a key role in this strategy by providing personalized

service and engaging in storytelling. By sharing the

brand's history, values, and design inspiration, sales

associates can help customers develop a deeper

emotional connection with the brand. This not only

enhances the customer experience but also reinforces

the brand's exclusivity and prestige.

Managers should track resale values as a key

performance indicator of brand health. The secondary

market is a valuable source of information about a

brand's market perception and long - term viability. A

brand's resale value reflects how consumers view the

brand's quality, exclusivity, and desirability. If a

brand's resale value is high, it indicates that

consumers have a positive perception of the brand

and are willing to pay a premium for its products even

in the second - hand market. On the other hand, a

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299

declining resale value can be a warning sign of brand

dilution or a loss of brand appeal. By regularly

monitoring resale values, managers can identify

potential issues early and take proactive measures to

address them.

8 CONCLUSIONS

This study analyses the marketing strategies of

Chanel being avoidance of the Outlet market and its

implication for brand prestige. The findings suggest

that Chanel's decision stems from a desire to maintain

its brand's exclusivity, premium positioning, and

consumer perceptions of luxury. Chanel can control

the distribution of its products, ensuring they are sold

in carefully selected, high - end locations by steering

clear of the Oulet market. This strategy helps Chanel

to preserve its brand image as a symbol of

sophistication and quality. The significance of this

research lies in its contribution to understanding the

complex relationship between brand strategy,

distribution channels, and brand prestige in the luxury

goods industry. This study shows that it is a good

choice, demonstrating how a brand can safeguard its

long - term brand value through strategic choices of

Chanel not to enter the outlet market by analyzing the

case of Prada entering the outlet market. However,

there are some limitations to this study. It focuses

primarily on Chanel and may not fully represent the

experience of all luxury brands. The luxury market is

dynamic and consumer preferences can change

quickly. Future research could explore how other

luxury brands have navigated the outlet market and

compare their results to Chanel's. Further research

could investigate the long-term impact of emerging

distribution channels and digital marketing on brand

reputation in the luxury sector. This will give us a

more comprehensive understanding of the

development prospects of luxury brand management.

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