Why did luxury fashion brands suddenly increase prices in the middle of a pandemic?

Fashion brand Chanel said their decision to raise prices was not intended to save the gloomy business situation during the COVID-19 period. So the real cause is due?

The Covid-19 pandemic had a serious impact on the global economy and significantly reduced consumer demand for luxury goods. Now does not seem to be the right time to raise prices on expensive handbags. But that's exactly what leading fashion brands like Chanel and Louis Vuitton are doing.

THE INCREASING PRICE INCREASES

According to a report from  WWD , after the luxury goods business started operating again in China, a few brands decided to raise prices, notably among the Chanel fashion houses. The company says prices will increase from 5% to 17%, only applies to iconic handbags such as 11.12 and 2.55, as well as the Boy, Gabrielle and Chanel 19 bags along with some small leather goods. . Seasonal bag prices, ready-made clothes and shoes will not be affected, similar to beauty products and perfumes. This price increase will be applied in the next few days in China and not limited to this country. As the news spread, Chanel stores in Shanghai, Hangzhou, Guangzhou and Beijing became overloaded as customers rushed to buy handbags before the price hike took effect.

Chanel Boy is one of the bags that has a new price. (Image: Collage Vintage)

Chanel is not the only fashion brand to raise prices in the country of a billion people; Louis Vuitton increased 3% in March and added 5% in May. The French brand also tried to minimize the price difference. Last April, when the Chinese government lowered VAT on luxury goods from 16% to 13%, the company responded by lowering prices by 3% in China.

(Image: Getty Images)

CAUSES FROM A pandemic?

In the face of public and press inquiries, Chanel presented their case of price increases directly and reasonably. The price increase is not an attempt to regain some of the revenue lost due to the impact of the disease. This move is part of the current price reevaluation strategy, completely unrelated to the effects on the Covid-19 epidemic. Brands often adjust prices twice a year to meet different market conditions, including  increasing production costs and raw material prices  , as well as  fluctuations in exchange rates. .

(Photo: @thestylestalkercom)

Regarding how to determine the specific increase, Chanel stated that the cost of each product includes the unique, brand value, professional value and French manufacturing techniques. The high price is a commitment of the production quality as well as the origin of the raw material. This is a necessary measure for the brand to continue to invest and maintain the core standards of the manual creation process.

Many other luxury brands are also making financial efforts to ensure the supply of high quality leather, by investing in supply chains and acquiring suppliers. These investments are important to ensure the longevity of iconic products and to keep them up to the standards that customers expect.

(Photo: @eggcanvas)

Why do these big fashion houses choose China as the country to start the chain of price increases? The first is in consumption. Chinese consumers drove 90% of global luxury goods growth last year. In the first quarter results, Louis Vuitton owners LVMH reported a sharp increase in mainland sales, starting in mid-March when stores in the country began to reopen. However, Chinese consumers buy only one-third of their luxury goods in their home countries, with the remainder coming from overseas trips. So, with overseas sales at zero due to travel restrictions, mainland sales will have to double or triple to make up for lost revenue.

Despite the price increase, fashion brands still ensure customers can buy products within the willingness to pay and receive satisfactory products and services. (Photo: @thestreetpie)

In short, the price increase not only helps fashion brands to ensure the quality and value of products, but also a measure to adapt to changes in the market and economy. After having achieved initial success in the mainland market, the "big players" will continue to make the price increase in other countries.

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source: vinatex.com.vn