In “the new normal”, luxury items turn out to be significantly more expensive: at Chanel and Louis Vuitton for example, prices for handbags have risen by up to 17 % since the lockdown. Price hikes are taking place almost all over the world, but China might just be spared.
Rescuing margins
As coronavirus measures ease and shopping gradually resumes, the big luxury brands are trying to save their margins: Reuters reports price increases around the globe at luxury powerhouses such as Chanel, Louis Vuitton and Tiffany’s. Especially the prices of star products are said to have gone up in the last few weeks.
At Louis Vuitton, Reuters recorded a price increase of almost 14 % for a handbag in the United States, while in the South Korean capital Seoul some Tiffany & Co products had become 10 % more expensive by early May. The brands, for whom price discounts might harm their exclusive image, might be trying to make up for unsold stocks and lost sales due to the recent store closures. The expected decline in consumer confidence in the coming period only adds to the fear.
Not in China
Chanel freely admits that it has raised the prices of handbags and some small leather goods between 5 % and 17 %. According to the brand, this is because the pandemic has increased the cost of certain raw materials. However, the French fashion house is “ensuring” it avoids “excessive price differentials between countries”.
The latter is a striking statement, especially as it is generally known that luxury brands are significantly cheaper in the West than in China. That is exactly why two-thirds of Chinese people bought their Vuitton and Prada bags abroad, especially in Europe. With the disappearance of international travel, this could have a significant impact on luxury sales.
Chances are that brands will now try to eliminate historical price differences and encourage Chinese consumers to buy in their own country, especially as Bain consultants expect China to account for almost half of global luxury sales by 2025. In 2019, the country already accounted for 35 % of that spending. “We believe it is essential not to penalize our clients on the basis of geographic considerations”, Chanel responds diplomatically.
