Chanel Korea employees fall prey to global head office

This is the fourth in a series highlighting operations of foreign luxury brands in Korea. ― ED.

By Park Jae-hyuk

Chanel Chairman Alain Wertheimer

Chanel has enjoyed long-lasting popularity among Korean consumers as one of the top three luxury brands, along with Hermes and Louis Vuitton. The fate of its employees in Korea, however, may not be luxurious at all.

According to Chanel Korea, Friday, the company carried out large-scale restructuring last year, which appears to have caused a mass resignation of employees who were working for its marketing and sales departments.

Back then, the Korean branch of the French fashion house said it integrated the department store and duty free divisions into a single unit, which it says was designed to keep up with the rapidly evolving business environment.

“This integration impacted very few positions,” a Chanel Korea spokesman said. “As a responsible employer, we supported the people with the highest standards following our usual social policy.”

The spokesman denied the possibility of additional restructuring, but industry sources expect that another large-scale shuffle will take place this year. The sources said that employees in finance and personnel divisions are highly likely to be the next targets.

To the chagrin of Chanel Korea employees, the massive payroll cut was not because the Seoul affiliate yielded poor results. Over the past few years, the firm has enjoyed increases in sales at major department stores here and last year it chalked up a double-digit growth.

Thanks to the popularity, Chanel Korea has raised prices of their products for years as well ― it cranked up prices of its cosmetics 3 percent last year and 5 percent this year at duty free shops and department stores. Although it recently cut prices of some products, many consumers regarded the discount event as a temporary clearance sale.

Analysts attributed the restructuring of the profitable Korean branch to the French headquarters’ slump in global sales. Data compiled by the Amsterdam Exchange showed that Chanel’s global head office has suffered declines in profits and sales since 2015.

Chanel International BV said last year that its operating profit in 2015 fell 23 percent to $1.6 billion and its sales fell 17 percent to $6.24 billion. Global CEO Maureen Chiquet also resigned in January last year over strategic differences, handing over her position to Chairman Alain Wertheimer, the grandson of Chanel co-founder Pierre Wertheimer.

However, Chanel headquarters declined to disclose specific regional and business performances.

Critics argued that Chanel cares only about its profitability and accordingly it attempts to cut its payroll even if it has raked in huge profits in Korea. It is also accused of being very reluctant in reinvestment or social contributions here.

Chanel Korea refuted the criticism, saying that the company regards corporate social responsibility (CSR) activities as a priority.

“We have set specific priorities that are relevant to our business, driven by their impact on the environment and society,” the spokesman said. “Those priorities were chosen from among the core subjects identified by international standards.”

Yet, the luxury brand has never made a donation in Korea, according to data compiled by Chaebul.com, a domestic consultancy.

“Because limited liability companies don’t have to post the amount of sales and donations, most of them tend to be stingy on CSR,” Chaebul.com CEO Chung Sun-Sup said. “The expected amendment of a related law will demand transparency in management of those companies, as they will be subject to external audits.”

Founded in 1909 by Coco Chanel in Paris, Chanel specializes in clothes, perfumes, jewelry and accessories.