To maintain the desirability and rarity of their products, luxury brands are raising prices. It is therefore no wonder that Chanel raised the price of one of its bags twice in a few months.
In one month, the price of Chanel’s “small classic bag” model has risen by 1,000 euros, from 6,300 euros at the end of September to 7,300 euros today.
On paper, this increase of +16% is surprising because it is much higher than inflation, especially when you consider that the same model was sold for “only” 5,500 euros this summer, or 33% less. The price increase was seen by May Berthelot, head of anti-counterfeiting at Videdressing and Leboncoin.
In fact, the price of luxury bags is rising steadily. It is even said that certain famous “it-bags”, which have become essential high-end leather goods, have taken up to 70% of their original value. from the date of their creation. That for the iconic Birkin of Hermès has thus never stopped rising for almost 40 years. As a result, luxury bags, like watches, have become financial investments in themselves.
Of course, Chanel is not the only brand that raises its prices. Yves Saint Laurent, for example, has increased it for his “Loulou small” model in quilted leather by almost 10% (from 1,690 euros to 1,850 euros), says May Berthelot on his Instagram account.
“The worst thing about a luxury product is trivialization”
“It’s not surprising. Chanel must have noticed that this bag was oversold. From the moment a product becomes too available, luxury brands increase the price to prevent it from becoming commonplace,” explains Delphine Dion, a professor at Essec Business School.
For “the worst thing about a luxury product is trivialization,” she assures. According to the professor, luxury responds to the opposite logic of the mass market.
“This is called Veblen goods, named after the economic sociologist who theorized this effect. This means that the more their price increases, the more the demand increases. Unlike conventional products, where the price increase causes the demand,” explains Delphine Dion.
Increase unrelated to the health crisis
Nothing to do with the rise in the price of raw materials due to the economic recovery after the crisis or with problems in the supply chain.
“While there are certainly supply problems, it does not justify such an increase,” continues Delphine Dion, when asked about the price of the “little classic bag” from Chanel, inflated by 1800 euros in a few months.
Chanel, who is interviewed by BFM Business, explains this increase in prices observed differently: “Like all the major luxury brands, we regularly adjust our prices to take into account developments in our production costs and commodity prices, as well as exchange rate fluctuations.
In line with the commitments made regarding price harmonization, these adjustments are made by ensuring that there is no excessive price difference between the different markets in which the brand is present / available “.
During the Covid crisis, several luxury brands raised their prices. Louis Vuitton had thus raised its prices by an average of 8% in its main markets, Challenges revealed. A way to increase the margin to compensate for the decrease in sales volume.
In fact, luxury has not really experienced the crisis. In 2020, Hermès shares rose by 32%, signing the best annual performance of CAC 40, with a net profit of € 1.174 billion in the first half of 2021, an increase of 56% over 2019.
In July 2021, LVMH announced a net profit of 5.3 billion, an increase of 64% compared to before the crisis. In the process, its historic competitor Kering also communicated a record high sales level of 8 billion euros for the first half of the year, or + 8.4% compared to before Covid.
In short, raising prices as a means of maintaining the desirability of a product is a common practice for the luxury industry, but brands can only afford if customers do not want to be aware of the price increase or who do not want to complain about it.