Chanel COVID-19-Era Price Hikes

Chanel’s COVID-19-Era Price Hikes

Chanel COVID-19-Era Price Hikes. Price hikes at a time of global economic devastation? It’s happening in luxury. As reported by WWD’s Tianwei Zhang on Tuesday, with luxury shopping reopened in China, some brands are increasing their prices, none more dramatically than Chanel.

Rumors across social media that significant increases would soon go into effect sent shoppers racing to Chanel outposts in Beijing, Shanghai, Guangzhou, and Hangzhou in search of pre-markup acquisitions.

Chanel confirmed the price hikes to WWD. They range from 5 to 17 percent in euros and apply to “a small portion” of the house’s handbag and small leather goods offerings. The changes go into effect over the next couple of days in China and are not limited to China.

In keeping with Chanel’s policy of global price consistency instituted several years ago, adjustments have been or will be instituted around the world. Any increases above 17 percent reflect currency and exchange rate fluctuations. The price hikes apply only to the iconic 11.12 and 2.55 handbags as well as the Boy, Gabrielle, and Chanel 19 bags and some small leather goods. Prices on seasonal bags, ready-to-wear, and shoes will not be impacted, nor will fragrance and beauty.

Chanel is not alone in upping prices in China; Louis Vuitton instituted hikes of 3 percent in March and an additional 5 percent in May.

At the first ring, any price increases on discretionary goods right now seem counterintuitive and confounding, luxury included. What could make a bag that was, say, $3,000 in February worth 17 percent more today? Luxury-level pricing has long been something of a mystery, even when factoring in the exceptional quality, inclusive of fine materials and exquisite craftsmanship, essential of a true luxury product.

Certainly, consumer perception matters. There, Chanel presides at the top of the food chain, its only real competitors for the ultimate power-luxe aura Hermès and Dior, each very different from the others in perception. (While highly regarded, a Dior bag doesn’t have the same resonance as its Chanel counterpart.)

Chanel-bag ownership telegraphs in a single item a heady amalgam of covetable luxury-client characteristics — wealth, chic, good (but not necessarily discreet) taste, sound judgment, appreciation for test-of-time validity fused with fashion currency. Another attraction: function. Anecdotally, in near-daily use, a Chanel bag performs with the gusto of a more egalitarian-sphere timepiece: It takes a licking and keeps on kicking.

Which still doesn’t explain a double-digit percent price increase at a time of global economic catastrophe. It does speak to the confidence of one of luxury’s most storied players in its long-nurtured brand ethos, and in the dedication and trust of its customer base.

Curious, I sent some questions to Chanel. (While the point was to investigate pricing, the quick, nondefensive response provided an example, the latest of many through the years, of Chanel’s excellence as a company. The house doesn’t huff, puff, and go all twisted knickers when presented with potentially uncomfortable questions.)

Responses duly considered, up to 17 percent price increases still seem not hunky-dory. Yet Chanel presented its case directly, logically, and without apology. Point one: The price increases are not an attempt to recoup some of the revenue lost during the coronavirus shutdowns that have devastated discretionary spending the world over.

“The current situation has absolutely no link with this decision,” the missive read. Rather, the move is part of an ongoing strategy of price reevaluation. Chanel typically adjusts its prices twice each year in response to various market conditions, including “constant” increases in production costs and the price of raw materials, and exchange-rate fluctuations.

As to how the specific increase amounts were arrived at, the company gave a nonspecific answer: “The price of a Chanel bag reflects not only a sense of exclusivity but also our values. Buying a Chanel bag brings with it renowned expertise and French design, an unfailing commitment to preserving skills and craftsmanship, leading-edge innovative manufacture, and guaranteed provenance of the raw materials (leather, jewelry ornamentations, etc.).”

Although the house began its explanation by stating that the COVID-19 pandemic did not factor into the increase, it did reference the pandemic fallout, if obliquely. “In these challenging times for our manufacturers and suppliers, it is essential for Chanel to continue to support them in the best possible way.

The know-how [of Chanel craftsmen], which combines tradition and innovation, must be valued.” This, the house said, “is a constant effort, and the price of our items also acknowledges their exceptional know-how. It is worth noting that in this trying period, they deserve to keep being recognized as unique craftsmen.”

Chanel stressed that any price increases are implemented only after careful consideration, and are necessary for the brand to continue investing to maintain its core standards of creativity and craft.

“Like other luxury brands, Chanel is making financial efforts to secure its supply of very high-quality skins by investing in the supply chain and acquiring suppliers. These investments are essential to guarantee the longevity of such iconic products [and to keep them] up to the standard’s Chanel’s clients expect.”

Those clients are highly discerning, and demanding of value — and implied values — in every purchase. Asked for the brand’s philosophical justification of the price increases, the response noted that “the value/exclusivity of a Chanel bag is based on a number of factors” including exceptional creativity;

exquisite materials, both types of leather, and ornamentations; a fusion of traditional craftsmanship and technological innovation; efforts to ensure traceability, and the quality implicit in being made in France or Italy, the historical epicenters of luxury leather goods.

Still, the house seeks to keep prices at a level deemed “reasonable” by its customers, who pay attention and know what they’re getting when they buy. “Our clients monitor price adjustments closely, and they have positively reacted to the harmonization policy we have been putting in place over the years.

When they buy a Chanel handbag, they consider that this design carries an essential value — although none of them is a staple product — and provides an exceptional emotion. These iconic bags are to Chanel’s leather goods what the jacket is to Chanel’s ready-to-wear line, and represent Chanel’s craftsmanship at its best.”

The trust thus established is essential, the company noted. “We also take great care to maintain the positioning of our creations as the highest in quality and the ultimate in luxury. We wish to retain our unique place in the eyes and hearts of our clients and therefore offer rare and exceptional products. All of this adds value.”

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