Can Increasing Prices Help Luxury Brands?

    After a Louis Vuitton price increase, More luxury brands are rumored to follow suit—regionally and globally. But will Chinese shoppers keep spending?
    Chinese consumers contend that the pricing of Chanel will approach Hermès after this round of price increase. Photo: Shutterstock.
      Published   in Finance

    It is being reported that luxury houses like Chanel, Dior, Gucci, and others will increase their prices soon in response to Louis Vuitton’s price increase on May 5. Louis Vuitton and Dior haven't responded to Jing Daily’s requests for comment, while Chanel has confirmed to the local media outlet Jiemian Fashion that “they will adhere to the global pricing alignment to get rid of distinct price variations between different markets.” Though an insider at Dior disclosed that they have yet to receive any notification on a price increase for the time being.

    Although luxury storefronts in China have seen growing in-store traffic ever since the Labor Day holiday, Chinese daigous and luxury brand sales associates are now leaking the news about upcoming price increases to local consumers. As a result, many Chinese luxury shoppers are trying to buy their dream bags before the price increase goes into effect. This was Louis Vuitton’s third price increase over the first half of this year, and many local consumers are disappointed by the frequent price changes.

    Jing Take:#

    Thanks to regularly changing prices for raw materials, floating exchange rates, and issues with human labor, luxury houses have made price increases a common practice. During the COVID-19 crisis, brands are dealing with even bigger challenges, from halted manufacturing plants to banned transportation, and poor first-quarter stock performances might be threatening the brand equity of many. Given this, increasing prices is a prompt strategy that can help luxury companies get through the pandemic crisis and rectify their brand values.

    While China has shown early signals of economic recovery — and high-net-worth consumers have stayed resilient despite the ongoing pandemic — regional price increases don’t make for a well-considered strategy. Meanwhile, despite the huge buying power of local consumers, increasing prices either too frequently or by a large margin will potentially jeopardize customer loyalty.

    The Jing Take reports on a leading piece of news while presenting our editorial team’s analysis of its key implications for the luxury industry. In this recurring column, we analyze everything from product drops and mergers to heated debates that sprout up on Chinese social media.

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