What Happened: If you thought Louis Vuitton bags were expensive before, just wait. On February 16, LVMH’s star brand hiked prices on its leather goods, perfumes, and accessories once again, citing “changes in production costs, raw materials, transportation, as well as inflation.”
According to Chinese media, models of the Capucines and Neverfull handbags online have risen to RMB 52,000 and RMB 14,400, up 11.8 percent and 20 percent, respectively. Meanwhile, the price of the Mini Pochette Accessoires, nicknamed the “little mahjong bag” in China, has jumped a whopping 54 percent, from RMB 3,500 to RMB 5,400. On Weibo, netizens shared pictures of shoppers queuing in front of stores to stock up prior to the changes kicking in.
The Jing Take: Luxury price hikes have become more pronounced since the pandemic as brands work to bolster profit margins, adjust for inflation, and account for ongoing supply chain disruptions. Louis Vuitton’s move comes shortly after an increase in October 2021 and follows in the footsteps of luxury rival Chanel, which has aggressively jacked up its costs three times last year; in fact, Chanel’s Classic Flap bag has surged a whopping $3,000, or nearly 60 percent, since 2019. Similarly, Dior, Hermès and Rolex kicked off the new year with more eye-watering price tags, placing their bets on high-end fashion’s resilience and desirability.
And it’s a bet that has paid off. For one, announcements of incoming price changes create a sense of urgency, as evidenced by the lines in front of the Louis Vuitton boutiques in China. Two, as goods become less accessible, it heightens the perception of the French brand’s exclusivity and rewards customers who purchased early, with classic items becoming investment pieces. Reflecting this strong consumer demand, LVMH reported that revenue soared 44 percent to $71.5 billion in 2021 thanks to its leather goods and fashion division — even amid the ongoing price hikes.
As LVMH chairman Bernard Arnault said in a recent earnings call, “if a product is highly desirable, well it comes at a high price,” pointing to the recent Tiffany and Patek Philippe collaboration which officially retailed at over $50,000. In other words, so long as Louis Vuitton maintains its quality and popularity, its famed monogrammed goods will likely grow more difficult to attain in the future. And if Louis Vuitton can get away with these pricing tactics, expect other luxury players to attempt to as well.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.