Chanel is testing handbag lovers with $3,000 price hikes
Chanel SA’s small Classic Flap bag has always been a luxury item, but after three price hikes last year, it’s selling for $8,200. That’s up from the $5,200 it cost in 2019.
The French fashion house has raised prices at a faster rate than other luxury brands, analysts say, sparking an outcry from some shoppers and testing their willingness to pay.
Procter & Gamble Companies Co.
at Verizon Communications Inc.
raised prices to offset rising raw material, labor and transportation costs. Consumer prices for goods and services rose 7% in December, the fastest pace since 1982, prompting the Federal Reserve to begin raising interest rates in March.
A Chanel spokeswoman said the company regularly adjusts its prices to take into account changes in production costs and raw materials, as well as fluctuations in exchange rates. “The price of certain raw materials, which were already difficult to obtain due to the quality we demand, is increasing steadily and therefore leading us to adjust our prices,” she said.
Luxury companies have taken advantage of the growing demand to reposition their brands as even more exclusive and expensive, according to executives and industry analysts. The practice predates the pandemic, but has received new impetus in the past year as shoppers, emerging from pandemic-induced lockdowns, bought handbags, shoes, jewelry and other items expensive.
“The whole luxury industry is raising prices,” John Idol, CEO of Capri Holdings ltd.
, owner of Michael Kors, Jimmy Choo and Versace, recently told analysts. “We have seen absolutely no consumer resistance to any of the price increases we have taken, and there will be more.”
Chanel’s price increases stand out for their scale and frequency, analysts and consumers said. It raised the prices of its Classic Flap bags three times in 2021. It made another price increase in January on various styles, including the Coco Handle and Business Affinity bags, which now cost 8% to 12% more. .
“Chanel has seen more price increases in recent years than other brands,” said Meaghan Mahoney Dusil, co-founder and CEO of PurseBlog.com and PurseForum.com, market-tracking websites. “People are shocked not only by the number of times Chanel raises prices, but also by the amount. They also complain that the quality does not increase with the prices.
Hermes International HER
has raised prices by around 3% for 2022, slightly more than its usual annual increase of 1% to 1.5%, according to Erwan Rambourg, head of consumer and retail research at HSBC. Mr Rambourg said some Louis Vuitton and Cartier items cost 3-5% more than a year ago. And Rolex SA recently increased its prices by an average of 3.4%, according to the company.
Louis Vuitton declined to comment. Hermès and Cartier did not respond to requests for comment.
The Chanel spokeswoman said the company raised the prices of its Classic Flap bags in January, July and November 2021, but declined to comment on the amount of the increase. She said the January 2021 increase reduced regional price disparities by raising prices in the United States, while prices in other regions rose slightly or remained the same.
The Classic Flap is an instantly recognizable Chanel bag in fashion circles. It was first introduced in 1955 by Chanel founder Gabrielle “Coco” Chanel, who designed a rectangular-shaped bag in quilted leather with a twist lock. The bag had a chain shoulder strap, an innovation when most women carried handbags in their hands. It was updated in the 1980s by Chanel creative director Karl Lagerfeld, who added a braided leather chain and an interlocking double C clasp. The bag is known for its hand-stitched details and other luxurious touches, including the use of real gold in its clasps and chains.
“We expect price increases of a few hundred dollars,” said Dee Gables, a 32-year-old novelist who lives in Clawson, Michigan. “But going up $2,000 in six months upset a lot of Chanel lovers.”
Ms Gables, who tracks handbag prices as a hobby, said the quality has not kept up with rising prices. She’s seen bags in Chanel boutiques in recent years with crooked pockets, missing stitches and chain straps that don’t lie flat.
Valerie Chan, a 33-year-old financial analyst who lives in Forest Hills, Queens, said the clasp on a Chanel camera case broke a few months after she bought it from one of the boutiques in the brand in 2018. “If you’re going to pay such a high price, the materials and the craftsmanship have to keep up,” she said. “I understand that they have to raise the prices to keep up with inflation. But lately, their prices seem to be increasing at a faster rate.
The spokeswoman said Chanel uses only the best materials and craftsmanship and manufactures all products in France and Italy, regions known for their expertise in leather goods. She added that the company extended its warranty last year for bags and wallets with a chain strap to five years from two years.
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Chanel’s new prices put it more in line with Hermès, whose Birkin and Kelly bags have waiting lists despite prices running into the tens of thousands of dollars. The Chanel brand is about as strong as Hermès, but until recently its bags were cheaper, said HSBC analyst Mr Rambourg.
“Even though some people are upset about Chanel’s price increases, they continue to buy,” Ms. Mahoney Dusil said. “As the price increases, it becomes inaccessible for some. But the main customers will not be overpriced.
Chanel is a private company and publishes its financial results once a year. Sales in the most recent year, which ended in December 2020, fell 18% to $10.1 billion. The spokeswoman said sales began to recover in the fourth quarter of 2020 and the improvements continue into 2021.
Rising prices for new Chanel handbags spurred secondary market purchases. The average price of vintage Chanel handbags sold by RealReal Inc.
was $2,312 last year, a 26% increase over 2020.
“Vintage Chanel bags are a more accessible option than new bags, especially in light of Chanel’s ongoing price hikes,” said Kelly McSweeney, women’s merchandising manager at RealReal, which sells second-hand luxury goods. .
Write to Suzanne Kapner at [email protected]
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