Price hikes backfire as Chanel loses China momentum

What happened After years of double-digit growth, Chanel is now facing the same headwinds slowing luxury giants across the board. The French house this week reported a 4.3 percent decline in revenues to $18.7 billion in 2024, its first contraction since 2020, alongside a 30 percent drop in operating profit to $4.5 billion. Much of that pressure is coming from its core markets: China and the U.S., which together account for half of global luxury demand but are now stalling. In Asia Pacific, Chanel’s performance has been uneven. Mainland China, once the crown jewel of Chanel’s global strategy, is losing momentum. Rising price sensitivity among local shoppers – coupled with ongoing economic uncertainty – is fueling the shift to parallel imports and resale platforms like Chinese e-commerce platform Dewu, where authenticated goods are sold at steep discounts. A classic Chanel Flap bag, for example, is now available on Dewu at up to 33 percent below retail. This type of price arbitrage is growing more attractive to consumers who’ve grown wary of Chanel’s years-long strategy of aggressive price hikes. The Jing Take In 2023, Chanel posted impressive full-year results, with global revenues climbing to $19.7 billion, marking a 16 percent increase at constant currency and 14.6 percent on a reported basis. The surge was bolstered by broad-based strength across all product categories – from leather goods to fine jewellery – and a confident pricing strategy that saw hikes of 6 to 8 percent across East and Southeast Asia. In China, these price increases have previously been a core sales driver. For many luxury consumers in the market, rising prices have historically signaled brand prestige and scarcity – a psychological play Chanel has long capitalized on. But this spring, signs of market fatigue began to surface. Last month, rumors of impending layoffs at Chanel’s China operations began circulating, after an alleged internal memo suggested that the brand plans to cut its workforce by 20%. While Chanel has denied the reports, the speculation underscores the pressure the house faces in recalibrating its local strategy. APAC tourism rebound a double-edged sword for luxury Adding to the challenge is the return of outbound Chinese luxury spending, particularly to Japan and South Korea, where favorable exchange rates offer further savings. Chanel, Hermès, and Louis Vuitton are all benefitting from the tourism rebound, but it's a double-edged sword. Chanel’s Yen-denominated sales in Japan may be rising, but at the cost of margin erosion, with Chinese consumers chasing value more than brand loyalty. In South Korea, another key APAC market, Chanel continues to face fierce competition from both global players and a booming secondhand scene. Brands like Otakaraya, Japan’s largest resale house, are expanding aggressively across the region, with Hong Kong their first overseas outpost. And while Matthieu Blazy’s anticipated debut as Chanel’s new creative director is expected to reinvigorate the fashion division – particularly leather goods – the reality is that accessory-driven growth alone may not be enough to offset structural market challenges in APAC. Chanel’s long-term bet includes further store expansion across China, with the maison planning the opening of 48 new boutiques globally this year, alongside new markets like India and Mexico. But the immediate APAC outlook remains clouded. Price transparency, digital-native resale, and economic caution among Gen Z and Gen Alpha buyers are redefining luxury’s value proposition. For Chanel, navigating that shift will require more than strong branding – it will take recalibrated pricing, localized strategy, and meaningful cultural connection in every market it hopes to lead. 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.

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Price hikes backfire as Chanel loses China momentum