As Chanel May Raise Global Prices Again, Will More Brands Follow Suit?

The privately-held French luxury brand Chanel will reportedly increase prices of three classic handbag styles by six percent, effective November 1, 2018, globally. That would tack on an additional 288.25 (RMB 2,000) to its products in China, according to Chinese media Fashion News Daily. In an email to Chanel accessories clients sent on October 17, the company stated that price increases are inevitable due to inflation and rising costs of production and materials; therefore, the prices of three bags--Timeless Classic, Boy Chanel and 2.55--will be increased. This is welcome news to fellow Chanel collectors who already own these bags, as the latter two styles were considered top investment-worthy handbags by auction house specialists. We reached out to Chanel to confirm the price increase but hadn't heard back as of the time of publication. This would the third time for Chanel to increase prices since May this year; the second price increase was in July. “It’s common for luxury brands to raise prices twice a year, as it’s a way to maintain their brand value,” commented Zhou Ting, Dean and Chief Researcher of luxury research organization Yaok Institute. “Though Chanel has prepared itself for global online business, it has kept the price gap between domestic and overseas markets small, even minimal, over the past three years,” Ting observed. Looking back on its history, Chanel has been leading price changes since 2015, when it first announced a price “harmonization” strategy that aimed to narrow the gap between domestic and overseas prices and discourage daigou business--individual sales agents that profit from those price differences. This time it appears the price increases would be set on a global level, so it likely won't affect the pricing gap between the domestic market and China. In other words, this potential increase is less directly related to the recent daigou crackdown in China and has more to do with rising demand. In Chanel's annual earnings results published on July 19 (released for the first time in its 108-year history), Chanel outpaced Gucci in revenues and posed as a close competitor to Louis Vuitton, the largest luxury goods company by revenue. Notably, Chanel’s growth in the year was primarily driven by sales in the Asia-Pacific region and Europe.

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As Chanel May Raise Global Prices Again, Will More Brands Follow Suit?