Chanel Ups Their Prices, Again--and They’re Not Alone

If you’re a loyal Chanel fan, then you’re already aware that the iconic brand has once again increased their prices of styles, like the Chanel 19 Small Bag, up by 10% as of July 1, 2021. This most recent price increase from Chanel marks it’s third increase in the span of 14 months; during a pandemic no less. Yes, Chanel’s increase was noteworthy among many fashion bibles and publications, but it is not unique from the current trend happening within luxury brands at present. 

According to an article from The Fashion Law, “Chanel hiked up its prices twice during the pandemic. First, it tacked on an increase of between 5% and 17% on certain bags in May 2020, citing a rise in the cost of certain raw materials and ‘the consequence of recent significant exchange rate fluctuations between the euro and certain local currencies’.” The Fashion Law went on to explain that Chanel followed this up with another 5% increase in October 2020 in line with a larger trend that has also seen some of its rivals, including Louis Vuitton, Dior, and Gucci, boosting price tags (and protecting margins) in the midst of the COVID-19 pandemic [1].

But is it too much increase in too short of time for their loyal customers? Apparently not. While some Asian consumers were not interested in buying Chanel products anymore citing “the exorbitant price tags”, according to the Korea Times, others were ready to do an ‘open run’. An open run refers to customers lining up before opening hours to rush inside as soon as a store opens to grab the items they want [1].

So why does Chanel need to raise it’s prices again, so shortly after it has already done so? According to a different article by The Fashion Law, “Chanel’s revenues fell by 18% on a year-over-year basis to $10.1 billion dollars in 2020 due to widespread closures of its network of brick-and-mortar stores.” The French fashion house also stated in its latest annual report in 2021 that profits were down by 41.4% to $2.05 billion compared to last year [2].

However, many can expect the return of “revenge shopping” (​​consumers making up for lost time with an increase in spending) to help offset these losses. Chanel has already stated that it’s “bouncing back quickly” with revenues for the first half of 2021 increasing by double-digits compared to its 2019 pre-pandemic numbers, driven largely by consumers in China and the U.S [2].

To be fair to Chanel, we have to also note that many other top designers are moving even more upmarket and hiking their prices in an attempt to make up for losses during the pandemic, according to an article from The Guardian [3]. While a lot of the world’s population suffered devastating personal financial loss during the pandemic, the super-rich got even richer. This strategy of increasing prices from many luxury fashion houses cashes in on this new surging demand for luxury goods from the small percentage of the population that have actually grown even wealthier during the pandemic [3].

Another factor in the recent price and sale increases points to the reintroduction of “shopping tourism” as borders start to open and leisure travel begins to be allowed in some parts of the world [4]. Those that have disposable income to travel often have the privilege of seeking out their favourite designer brands in different countries. Although prices on designer goods vary country to country and item to item, an overarching theme shows countries in Southeast Asia with some of the highest-priced European luxury items compared to Europe and the United States [4]. This usually drives Asian consumers to purchase more luxury goods on holiday while visiting Europe and the US as it makes sense economically to buy more where it’s more affordable.

If you’ve ever wanted to see the prices of luxury handbags and accessories across borders, take a look at the Luxury Fashion Index from Money.co.uk [5] (left and below). Are some luxury goods worth making the trip? Even with conversion rates, sometimes you can find a better deal on a designer dig while you're vacationing in other parts of the world!

However, if jetsetting isn’t on your calendar (or in your budget), then there’s an even better way to get your hands on authentic luxury without the hefty price tag! It comes as no surprise that the luxury resale market is going to gain from these designer price increases. Some people who are fed up with the surging prices will shift to the resale market to get the best bang for their buck. As prices increase on Chanel’s top handbags (among others like Louis Vuitton, Gucci and Dior), these bags will continue to perform well on the resale market as they retain their value time and time again [1].

Many can even see this as a win-win scenario for the resale market and the primary luxury market. Consumers, particularly those of the millennial ilk, have been known to be more willing to spend on bags (and other luxury goods, including watches) if they know that there is a thriving secondary market in place [1]. This means people are willing to buy Chanel products in the primary luxury market (straight from the company itself) if they believe the pieces will perform well in the secondary market. 

According to Harper’s Bazaar, “Increasingly, luxury brands are not simply accepting resale as part of the life cycle of their designs, but are joining forces with resellers. In February, Vestiaire Collective introduced its Brand Approved buyback program with Alexander McQueen. Past-season pieces can be returned to participating Alexander McQueen boutiques in exchange for store credit to shop the brand’s current collection, and are in turn, resold online.” [6]

In addition, and possibly most importantly, the luxury resale market provides a key solution to the negative environmental impact of overconsumption by putting back into circulation clothes and accessories that would otherwise be piling up in our closets—or, worse, in a landfill [6].

These are all the positive things to consider when being faced with further inflation pricing from our favourite designers. It doesn’t necessarily mean these designer pieces are becoming less accessible, you just have to be smart where you shop for them. Resale could be the (affordable, environmentally friendly, and now trendy) solution to this ongoing trend.

Sources:

1. “Chanel Boosts Prices Again, Sending Price Tags Up by 15 Percent or More for Certain Bags”, The Fashion Law, July 1, 2021. https://www.thefashionlaw.com/chanel-boosts-prices-again-sending-price-tags-up-by-15-percent-or-more-for-certain-bags/

2. “A Double-Digit Rebound is Currently Underway After Chanel Sales Fell by 18 Percent to $10.1 Billion in 2020”, The Fashion Law, June 15, 2021. https://www.thefashionlaw.com/a-double-digit-rebound-is-underway-as-chanel-sales-fell-by-18-percent-to-10-1-billion-in-2020/

3. Edward Helmore, “Reassuringly expensive: top fashion labels bid to lure elite back”, The Guardian, June 11, 2021. https://www.theguardian.com/fashion/2021/jul/11/reassuringly-expensive-top-fashion-labels-bid-to-lure-elite-back

4. Roxanne Robinson, “As International Travel Resumes, Luxury Goods Retail Prices Vary Globally, Study Finds“, Forbes, June 29, 2021. https://www.forbes.com/sites/roxannerobinson/2021/06/29/as-international-travel-resumes-luxury-goods-retail-price-varies-globally-study-finds/?sh=4d86d5f91aed

5. Salman Haqqi, “Luxury Fashion Index - the cost of iconic fashion around the world”, Money.co.uk, May 24, 2021. https://www.money.co.uk/credit-cards/luxury-fashion-index

6. Alison S. Cohn, “Luxury Brands are Embracing Circular Fashion”, Harper’s Bazaar, July 6, 2021. https://www.harpersbazaar.com/fashion/designers/a36577366/circular-fashion-june-july-2021/ 

Infographics:

Salman Haqqi, “Luxury Fashion Index - the cost of iconic fashion around the world”, Money.co.uk, May 24, 2021. https://www.money.co.uk/credit-cards/luxury-fashion-index