Chanel’s classic bag has always been a luxury item, but after three price increases in the past year, it sold for $ 8,200. In 2019, the price of the bag was $ 5,200.
The French fashion house has raised prices at a faster pace than other luxury brands, analysts say, and this has caused some consumers to revolt against the company and put their willingness to pay to the test.
Many companies, from Procter and Gamble to Verizon, have raised prices to balance the rising prices of raw materials, labor and transportation. Consumer prices and services rose 7% in December, the fastest pace since 1982, prompting the Federal Reserve to start raising interest rates in March.
A Chanel spokeswoman said the company changes prices routinely to take into account changes in production costs and raw materials as well as changes in currency rates. “The price of certain raw materials, which is already difficult to purchase in advance due to the quality we require, is constantly rising and therefore caused us to change our prices,” she said.
“The whole luxury industry raises prices”
Luxury companies are taking advantage of the rise in demand to reposition the brands as even more exclusive and expensive, say industry executives and analysts. This procedure started before the plague but in the last year has gained renewed momentum because consumers, who have come out of the plague closures, pen on luxury items like handbags, shoes, jewelry and other items.
“The entire luxury industry is raising prices,” John Eddon, CEO of Capri Holdings, owners Michael Kors, Jimmy Choo and Versace, told analysts recently. More are planned. “
Chanel’s price increases are noticeable because of their level and frequency, analysts and consumers say. The company has raised the price of its classic bag three times in 2021. It raised the price again in January for other products, including Coco Handle and Veterans Business Affinity, which are now up 8% to 12% more than they were before.
“Chanel has raised the price more times in recent years than other brands,” said Megan Mahoni Dosil, co-founder and CEO of PurseBlog.com and PurseForum.com, sites that track the market. “People are shocked not only by the number of times Chanel has raised prices but Also from the upload rate. They also complain that the quality does not rise alongside the price increase. “
Hermes has raised prices by about 3% in 2022, slightly more than the annual increase of 1% to 1.5% that the company typically makes, according to Erwan Ramburg, director of consumer research and sales at HSBC. Ramburg said some Louis Vuitton and Cartier products cost between 3% and 5% more than a year ago. Verolex has raised prices this year by an average of 3.4%, the company said.
Louis Vuitton declined to comment. Hermes and Cartier did not respond to requests for comment.
Customers were angry
A Chanel spokeswoman said the company raised prices on the classic portfolio in January, July and November 2021, but declined to comment on the extent of the increase. She said the January 2021 increase has reduced price gaps in different places by raising the price in the US, while prices elsewhere in the world have risen only slightly or have not changed.
The classic bag is a Chanel bag that can be immediately recognized in fashion circles. It was first introduced in 1955 by the company’s founder Gabriel “Coco” Chanel, who designed a leather rectangular bag that has a bracket with the company logo. The bag had a carrying chain, a novelty while most women held the purse in their hands. It was updated in the 1980s by Chanel Karl Lagerfeld’s creative director. The bag is recognized for handcrafted details and touches of luxury, including the use of real gold in its clasps and carrying chain.
“We expect a price increase of a few hundred dollars,” said Di Gables, a 32-year-old writer who lives in Clown, Michigan. “But going up to $ 2,000 in six months has upset a lot of fans of the brand.”
Gables, who tracks the prices of women’s bags as a hobby, said the quality did not rise alongside the price. She has seen bags in Chanel stores in recent years with crooked pockets, missing seams and necklaces that do not sit straight.
Valerie Chan, a 33-year-old financial analyst who lives in Forrest Hills, Queens, said the clasp on a Chanel camera case broke a few months after she bought it at one of the chain’s brand stores in 2018. “When going to pay such a high price, the materials and labor have to match,” she said. “I understand they need to raise a price to match inflation. But lately their price seems to be rising at a faster rate.”
The spokeswoman said Chanel uses only the best materials and craftsmen and manufacturers all over France and Italy, places that are recognized because of their expertise in processing leather products. The spokeswoman added that the company expanded its warranty last year on bags and purses with a carrying chain from two years to five years.
Chanel’s new prices put it closer to Hermes, whose Birkin and Kelly bags have a waiting list despite prices of tens of thousands of dollars. Chanel’s brand is about as strong as Hermes’s but until recently the company’s bags were cheaper, said Ramburg, HSBC’s CEO.
“As much as people are angry about Chanel’s price increase, they are still buying,” Mahoney Dosil said. “When the price goes up, it becomes unattainable for some consumers. But core consumers will still be able to afford it.”
Chanel is a private company and issues financial statements once a year. Sales in the last reported 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 improvements continued in 2021.
The rising prices of new Chanel handbags have also raised the prices of handbags in the secondary market. The average price of a used Chanel bag sold on the RealReal website was $ 2,312 last year, an increase of 26% over 2020.
“Used Chanel handbags are a more readily available option than new handbags, especially in light of Chanel’s many price increases,” said Kelly Maxwini, RealReal’s director of women’s products, who sells second-hand luxury products.