What is more exclusive than scarcity? It is a tactic long employed by luxury brands, limiting the availability of goods via higher price points, all the while fuelling sales of less expensive ranges, like beauty and perfume.
Chanel has increased the prices of its handbags several times since the onset of the pandemic, and not solely due to the increased costs of raw materials and shipping. It is also a strategy to control its distribution.
The company has recently put more stringent policies in place as the resale market is buoyant with pre-owned Chanel bags, something the brand is key to reduce. Starting this month Chanel will cap the sale of one bag per customer per year for each model. Whether it is a classic double flap or its iconic gold chain, customers will be limited in their purchases when it comes to buying the same style of bag.
“Although Chanel has already raised the prices of its most popular products three times this year,” wrote Hypebeast, “their bags are still a hot commodity among luxury shoppers. Many consumers around the world queue early in the morning to make sure they have a chance to shop.”
Chanel’s move is not unique. Over the years, several luxury brands have limited the number of bags that customers can buy, thus limiting resellers’ access to stocks. At Hermès, for example, a person can only buy the same bag design twice per year.
Chanel revenues grew by double digits in the first six months of 2021, and its full-year operating profit margin is on track to return to 2019 levels. While Chanel does not breakdown turnover per category its total revenue topped 10.1 billion dollars in 2020. Chanel’s Chief Financial Officer Philippe Blondiaux said: “For 2021 we estimate a growth of 35 percent which will bring us back to pre-pandemic levels.”
Sales of handbags return to pre-Covid levels
The accessories category has historically been the driving force of luxury sales and therefore proves to be a litmus test for market analysts. Sales of women’s bags and small personal accessories in the United States have nearly returned to 2019 levels – with revenue down by just 2 percent from March through August 2021, compared to 2019 before the pandemic, according to Retail Tracking data from The NPD Group.
Outperforming the market were hands-free silhouettes, including shoulder and crossbody bags, which are heavily associated with going out on the town and other social activities, whereas more office-oriented options, like totes and satchels, continued to struggle.
Retail revenue from shoulder bags grew by 14 percent, and cross-body bags rose by 7 percent percent, in the six months ending August 2021, compared to pre-pandemic 2019. Although they represent smaller revenue-generating categories in the overall accessories market, sales of clutches increased by 2 percent and cosmetic bags were up 48 percent, while satchels fell 5 percent and totes were down 1 percent. Handbag sales revenue bounced back faster than unit sales, largely due to average sales-price increases in 2021.