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Established couturière

In 1918, Chanel purchased the building at 31 rue Cambon, in one of the most fashionable districts of Paris. In 1921, she opened an early incarnation of a fashion boutique, featuring clothing, hats, and accessories, later expanded to offer jewellery and fragrances. By 1927, Chanel owned five properties on the rue Cambon, buildings numbered 23 to 31.

In the spring of 1920, Chanel was introduced to the Russian composer Igor Stravinsky by Sergei Diaghilev, impresario of the Ballets Russes. During the summer, Chanel discovered that the Stravinsky family sought a place to live, having left the Russian Soviet Republic after the war. She invited them to her new home, Bel Respiro, in the Paris suburb of Garches, until they could find a suitable residence. They arrived at Bel Respiro during the second week of September and remained until May 1921. She developed a romantic relationship with Igor Stravinsky during this time, but the affair was brief. Chanel also guaranteed the new (1920) Ballets Russes production of Stravinsky's Le Sacre du Printemps ('The Rite of Spring') against financial loss with an anonymous gift to Diaghilev, said to be 300,000 francs. In addition to turning out her couture collections, Chanel threw herself into designing dance costumes for the Ballets Russes. In the years 1923–1937, she collaborated on productions choreographed by Diaghilev and dancer Vaslav Nijinsky, notably Le Train bleu, a dance-opera; Orphée and Oedipe Roi.

In 1922, at the Longchamps races, Théophile Bader, founder of the Paris Galeries Lafayette, introduced Chanel to businessman Pierre Wertheimer. Bader was interested in selling Chanel No. 5 in his department store. In 1924, Chanel made an agreement with the Wertheimer brothers, Pierre and Paul, directors since 1917 of the eminent perfume and cosmetics house Bourjois. They created a corporate entity, Parfums Chanel, and the Wertheimers agreed to provide full financing for the production, marketing, and distribution of Chanel No. 5. The Wertheimers would receive seventy per cent of the profits, and Théophile Bader twenty per cent. For ten per cent of the stock, Chanel licensed her name to Parfums Chanel and withdrew from involvement in business operations. Later, unhappy with the arrangement, Chanel worked for more than twenty years to gain full control of Parfums Chanel. She said that Pierre Wertheimer was "the bandit who screwed me".

One of Chanel's longest enduring associations was with Misia Sert, a member of the bohemian elite in Paris and wife of Spanish painter José-Maria Sert. It is said that theirs was an immediate bond of kindred souls, and Misia was attracted to Chanel by "her genius, lethal wit, sarcasm and maniacal destructiveness, which intrigued and appalled everyone". Both women were convent-schooled, and maintained a friendship of shared interests and confidences. They also shared drug use. By 1935, Chanel had become a habitual drug user, injecting herself with morphine on a daily basis: a habit she maintained to the end of her life. According to Chandler Burr 's The Emperor of Scent, Luca Turin related an apocryphal story in circulation that Chanel was "called Coco because she threw the most fabulous cocaine parties in Paris".

The writer Colette, who moved in the same social circles as Chanel, provided a whimsical description of Chanel at work in her atelier, which appeared in Prisons et Paradis (1932):

If every human face bears a resemblance to some animal, then Mademoiselle Chanel is a small black bull. That tuft of curly black hair, the attribute of bull-calves, falls over her brow all the way to the eyelids and dances with every maneuver of her head.