In the run-up to the Holiday Season, Chanel hikes handbag prices

Chanel has again raised prices of its iconic handbags in the run-up to Christmas, with its famous 2.55 quilted bag costing 7,800 euros today versus 6,050 last December, according to a report by Reuters. The brand’s Small Classic Bag was 6,300 euros at the end of September and costs 7,300 euros today, an increase of 1,000 euros in just a few weeks time.

Price hikes not necessarily related to the pandemic

Luxury brands have regularly and incrementally increased prices since the pandemic, making up for last year’s losses and to maintain scarcity in the market. France’s rate of inflation in 2021 was 1.96 percent, meaning the increases do not represent national price developments.

Of the price increases, Delphine Dion, a professor at Essec Business School, told French news outlet BFM TV: “It is not surprising. Chanel must have noticed that this bag was sold too much. As soon as a product becomes too accessible, luxury brands increase the price to prevent it from becoming commonplace.” The worst that can happy to a luxury product, Dion explains, “is trivialization.” According to the professor, luxury responds to the opposite logic compared to mass market fluctuations.

“These are called Veblen goods, named after the economist sociologist who theorized this effect. This means that the more their price increases, the more demand increases. Unlike conventional products for which the price increase causes the price to drop.”

Chanel’s response to the price increases was that it routinely makes adjustments, like all luxury brands. “We regularly adjust our prices to take into account the evolution of our production costs and the prices of raw materials, as well as exchange rate fluctuations. In accordance with the commitments made in terms of price harmonization, these adjustments are made by ensuring that there is not too large a price difference between the different markets where the Brand is present / available,” the company told BFM business news.

There have been multiple reports this year of luxury houses increasing retail prices, with Louis Vuitton adding 8 percent on average to its handbags in its main markets, revealed Challenges.

While many companies have suffered from Covid’s economic repercussions, the luxury industry has remained resilient and robust. In 2020, Hermès shares jumped 32 percent, with a net profit of 1.174 billion euros in the first half of 2021, up 56 percent compared to 2019.

Chanel’s finance chief this summer told Reuters the group had not yet increased prices in 2021, but that this could change in the second half — in line with its policy of reviewing prices worldwide twice a year. The price hikes went into effect this week.

Chanel sales fell 17.6 percent last year but the privately owned company has raised prices on some items by as much as 29 percent over the course of a year. Interestingly, the large variation of its Classic Handbag, the Maxi, has retained the same price tag, costing 8,900 euros for all of 2021.