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Chanel and Louis Vuitton are raising the prices of their bags

Brands want to recoup losses incurred due to coronavirus

Chanel and Louis Vuitton are raising the prices of their bags Brands want to recoup losses incurred due to coronavirus

According to a Reuters report, Chanel and Louis Vuitton are raising the price of bags and leather goods to recoup losses incurred due to the lockdown from Covid-19 and the closure of stores.

Since the virus hit the key regions of luxury retail in Asia, in fact, sales have plummeted by 35%, pulling the handbrake on a more or less continuous growth process that had gone on undisturbed for the past decade. Chanel specifically announced that it would raise the prices of accessories between 5% and 17% due to the increase in the cost of raw materials caused by the pandemic. While in the case of Louis Vuitton, an item like the classic Neverfull MM Monogram bag had a 14% price increase compared to last October. And, in the case of the LVMH Group, Tiffany also raised its prices by 10% in South Korea "to reflect among other things, currency fluctuations and business input costs," the brand told Reuters

According to Luca Solca, an analyst for Bernstein, this is a strategy aimed at safeguarding profit margins – although not all brands will apply it for fear of arousing the reaction of consumers.
The situation of the big luxury brands is at this difficult time as on the one hand they have to dispose of the large quantities of unsold goods, but on the other, they are reluctant to lower their prices and apply discounts to keep the exclusivity of their products intact. The trick seems to have worked because, as Reuters reports, as soon as the rumour of a price increase spread on social media, many Asian customers queued outside luxury boutiques to shop before the new measures were applied. 

The whole thing becomes even more complicated because of the situation of brands on the Chinese market: it was already pointed out in an earlier article that luxury fashion was dependent on China, which accounts for 35% of its sales. Two-thirds of those sales were through tourism, however, as the prices of luxury goods in China were slightly higher than in Europe, but this year tourism will not be counted due to lockdown and most of the spending will take place domestically. Over the past few years, as a result of the gradual lowering of tariffs imposed by the government, luxury prices in China have been falling – but now brands are forced to realign these prices, maintaining customer loyalty and trying not to alter their margins. However, a Chanel spokesperson specified: 

We believe it is essential not to penalize our clients on the basis of geographic considerations”.