Much of the reason why we love our material goods has to do with their perceived value. It may be because we simply think they’re pretty or useful so we assign them some personal value, or it’s flat-out because of their (sometimes very obvious) monetary worth.
High-status bags from our favorite luxury brands tend to fall into the second category because their products are what economists like to call “Veblen goods” ﹘ meaning that as their prices increase, so does consumer demand.
At the risk of sounding crass, we know that it feels good to walk around looking cute while knowing we’re toting around something expensive. Something special. Something that is out of reach for many.
Are the Prices Justified?
We’ve accepted that we must pay the price for some exclusivity, but as of late, members of the purse-loving community have been up in arms about one brand’s increasingly frequent price hikes that have left many of us wondering if the bags’ “specialness” is really worth it.
Chanel is a brand that almost everyone is familiar with. It’s all about colorful tweed and fancy brass buttons and of course, those pillowy flap bags that made it world-renowned. It’s clear to everyone that anything with those iconic interlocking C’s is to be considered the creme de la creme.
It takes a lot to run a multibillion-dollar fashion empire, so the occasional price increase is almost certainly justified. But the keyword here is ‘almost.’
Breaking Down the Price Increases
Over the past 2 years, prices on some of Chanel’s classic bags have gone up almost 25%.
It was always 5% here and then another 17% there, but many of us feel that it is becoming too much. Veblen good or not, there comes a point when price increases run the risk of having the inverse effect and begin to isolate the original customer base.
I’ll go ahead and let y’all know now that I don’t own a Chanel bag (unfortunately for me); however, that hasn’t stopped me from squirming around every time I get news of another price jump. I totally understand that luxury bags can be investments, but investment or not, I wanted to understand the full picture of why Chanel has been bold enough to continuously raise prices multiple times over the past 20 months.
Reasons for the Increases?
Some believe it’s to maintain exclusivity while others think the brand wants to reach peak dream bag status to sit alongside those from the more expensive brands like Hermès.
Those beliefs may or may not be true, but looking back at Chanel S.A.S’s recent timeline and various economic factors makes it clear that during trying times, they will rely on their customers to bear the brunt of it.
Let’s start from the beginning:
Late 2019 – Early 2020: The Beginning
(#1 -Impact in Highest Performing Market)
In October 2019, Chanel S.A.S rented out an entire section of the Grand Palais in Paris to present its 2020 spring/summer fashion show. Big shows cost big money, but Chanel makes its moola all over the world and could easily cover the costs from product sales in the new year, right?
Wrong.
In late winter 2019/ early spring 2020, COVID took hold in East Asia then rippled outward towards surrounding areas before hitching rides across the ocean. As we know, the pandemic rattled businesses both large and small.
This was especially worrisome for Chanel considering that 55% of its revenue from that year ($5,426,000,000!) came from the Asia-Pacific region of the world. To make the situation worse, it had also just finished navigating the demonstrations in Hong Kong AND had opened a new seven-story boutique in the Cheongdam-dong district of Seoul, South Korea.
And that must’ve been expensive.
According to the brand’s 2019 year-end report, the company was going to focus on “taking measures to preserve Chanel’s cash flow and desire as a global brand,” and also “encouraging customer response to reopen boutiques in Asia.”
Meanwhile, Chanel turned to Europe and the Americas. Unfortunately, western countries also started to go into lockdown one by one. This meant store closures that forced the focus towards online sales.
But while all of us were heading home, so were the raw material suppliers in France, manufacturers in Italy, distribution workers in New Jersey, and all of the people needed to make the supply chain run smoothly.
Less supply = more demand = higher prices. Cue price increase #1 in May of 2020.
Mid-2020: Back to Business… Kind Of.
(#2 -Lack of Tourism)
The boutiques eventually began to open back up but this time without their usual crowd of clientele. Generally, most boutiques are in large touristy metro areas, but with international travel still heavily restricted, travelers weren’t around to empty out their pockets. (Except me, but I didn’t buy anything.)
To requote the Parisian sales rep I spoke to in October 2020, “Now the days feel long without many people in the store. We still get people from Belgium and The Netherlands, and of course French people, but that’s about it”
Chanel’s dependence on tourism sales was apparent. It had now been ten months of fast-declining revenue.
Cue price increase #2 in October 2020.
Late 2020 – Early 2021: Road to Recovery
By now, consumers already began to side-eye the company for increasing prices during a time when so many were dealing with instability. Rent was due but many didn’t have the financial backing due to reduced work hours or complete job loss. Many including Chanel’s own employees.
In the same year-end report, the company noted that there was a “decision taken not to utilize government employment support during lockdowns.”
Now I’m not saying that Chanel didn’t support their employees in some other way, but two chronological reports show that they started the year with 27,713 employees and ended the year with 27,018. Do what you want with that info.
Anyways, people were happy because vaccines were on the way. Shots went into arms, travel restrictions ease, and people felt good about going back out and making up for lost time.
Economies recovered in waves with expectations of healthy future growth. Foreign investment and global cash flow returned to countries as their COVID cases went down, causing the currency value to go up. Finally, Chanel could make sales and start paying some of its bills again! Or so they thought…
According to Philippe Blondiaux, its Chief Financial Officer, [Chanel] “has a policy of reviewing prices twice a year” and plans to do it again!
Mid 2021: We Are Here
(#3 – Fluctuation in Currency Value)
The problem with currency valuation is that it is dependent on the health of the economy it belongs to. No two countries handled vaccine rollout and reopening in the same way, which caused new variants to hit some places harder than others. People began to fear more shutdowns and economic growth expectations started to fall again, dragging currency valuation with them.
Sure, Chanel began to recover a bit but now all of those millions regained in revenue can actually be worth less than before! Cue last month’s price increase in July 2021.
So here we are: Chanel continues to try its hardest to recover from its ongoing losses while we are left to complain on the internet. And according to Philippe Blondiaux, its Chief Financial Officer, it “has a policy of reviewing prices twice a year” and plans to do it again!
We’re smart people that understand how businesses operate, but that doesn’t stop us from feeling put off by the whole situation. We love and respect Chanel for what it’s done for the fashion industry; however, its executives shouldn’t forget the importance of craftsmanship and innovative design in appealing to those who hold it in high regard.
If they prioritize profits higher than the demands of the market, they risk letting their products lose their luster.
Greed
Chanel has lost its charm in my opinion and price increases prove they don’t care about their quality or customers
I’m not sure a 3% reduction in staff numbers justifies 25% price hikes. Top line revenue numbers go up, costs goes down should mean higher profit.
Inflation did not increase by double digits so therefore costs of goods would not either.
And yes, there are less tourists spending. But the pandemic has not stopped these would-be tourist from purchasing from their local stores.
I live in Hong Kong and at the height of the pandemic, when most retail shops are squatting flies, there is still a line of people outside Chanel waiting to go in. I know the anecdotal evidence of a city does not represent the world. But if we take the financial performance of Hermes as an indicator, the “revenge spending” by consumers in Asia in the second half of 2020 was so vicious that it was pretty much net even compared to 2019.
Just saying.
Thank you for a well researched editorial. Well done.
I too do not own any Chanel nor have plans to contribute to that wheelhouse.
Without Karl, Chanel is so over.
I agree
Totally agree with you.
I’d rather buy Hermès. Chanel is now, since dearest Karl Lagerfeld left, a very nouveau rich brand and way expensive for its quality. I have not bought anything else from Chanel since then. Long live Hermès.
My next purchase on the proloved market.
Preloved
Chanel used to be on my bucket list of handbags to buy, but not anymore. I feel it is pure greed as to why the prices have increased. I also think the clothing is becoming tacky; why is Chanel written all over???? Poor Coco is probably turning over in her grave……
Yes and so is Karl
I love Chanel and was lucky to purchase 2 bags when I worked in retail, but it was still very expensive and now seems so out of reach. Your article is so well done and eye-opening, and I can’t see the justification for these increases. If these are supposed to be exclusive and high quality, they should offer free repairs & refurbishment in their products. An “investment” handbag shouldn’t mean I should dish out another $500 to have it cleaned, or spruced up. I was told by a Chanel salesperson that could be the cost…ridiculous.
I love Chanel and always will. I am however finding less and less bags I want to buy. I don’t think Hermes is more expensive apart from those ugly Birkin bags. Chanel needs to increase quality rather than price. Their jewellery is also looking poor quality sometimes.
As a loyal Chanel customer for years, I am disappointed as the selections as of late, in both accessories and leather goods, has not been good. Boutiques seem to be holding on to merchandise that is not as appealing to the loyal Chanel customer and the stores appear tired. I just keep waiting for the new season’s handbags and accessories to arrive, in the hopes that it will be pretty, and something I have not seen before or already own. Very disappointed this year.
I agree – the stores look tired and the collections just aren’t very inspiring (some are downright tacky). My biggest issue, however, is the quality of their products and their customer service. A handbag I purchased and was used only handful of times required repair, when it came back the lambskin leather was stretched and creased while in their custody, and the SAs really need to improve their customer service standards. For all the grief Hermès gets, you can’t fault their craftsmanship and their SAs are well trained and very professional.
YES!
100% agree! No Chanel for me this year. Hermès (pre owned) and a YSL cross body received my bag $$$.
I don’t think it’s a problem for a company to want to maximize profits. Despite price increases, the bags are still highly sought after by many. To me, a Chanel bag is no longer worth the price tag. I have the luxury of already owning some Chanel pieces, however. I have a Birkin, a few Chanel classics, and a Boy bag. I’m good. There are other pieces I want, but I don’t plan on buying them because the cost is no longer justified to me. Clearly, it’s worth it to many others, and the price increases will continue until that pool of customers is exhausted.
These were my thoughts exactly! Chanel is banking on their main cash cow (handbags) to keep them from drowning. Not based off of exclusivity, especially since they have not done anything significant to justified these price increases. Thank you for this article!
I will not buy chanel again. I hate when companies are so greedy. I am even thinking of not buying their cosmetics either.
I guess I disagree with most comments on here:
– Karl’s death will not significantly hurt Chanel in the long run. In fact, it could usher in a much-needed breath of fresh air. I personally love the latest collections.
– Price increases reflect the company’s goal: making a profit. It’s a business, not a charity. They clearly know what they are doing.
– I like both Chanel and Hermès but I don’t think they are comparable at all. In fact, they couldn’t be more opposite in terms of style.
I don’t think the styles are being compared here. It’s quality and price.
I love my Chanel classic flaps and always will. I am lucky enough to have eight classics in my collection. These were purchased over a period of 15 years. I have absolutely no quality issues with any of them. I have not found any bags lately with Chanel that I am drawn to, so I have to move on. If the Chanel 19 had leather on the interior I would get one but the fabric lining is a deal breaker on that bag for me. I have moved on to Hermes and oh my goodness it really is quite a journey trying to get exactly what I want there. This hobby of mine is just that, a fun hobby, collection or whatever you want to call it. I believe if you really have to save that seriously to get a bag such as these then maybe it is not for you. There are so many other great brands that are far less expensive and just as beautiful.
Yes, there are so many other great brands. I am just saddened that such legacy is being destroyed. My older classic flaps still look new and have no quality issues but my recent purchases have been soooo disappointing.
Very good article. One word GREED
100% spot on!
Price increases are prevailing amongst all the designer brands and I know it’s not only inevitable but natural for every brand, designer or not. However, I would expect some progress to go along with the price increase whether that be customer service, product quality, store designs, product designs, or unique marketing campaigns as an example. I see that with some brands but not all, and certainly not with Chanel. I’ve gone into so many of these boutiques time and time again over the last half year to experience their products and their service and the ambience and I see changes in some but not all. That’s why the price increase at Chanel is disappointing for me. I’ve not encountered anything different. The staff put on the same front. The products are very similar to the past seasons as are the marketing campaigns. They are a business and they need to make money but they need to EARN that money and not just slap on extra dollars to something that hasn’t changed.
A person on another forum went into chanel to look at the top handle bag. How about the SA took it out and it literally fell to the floor with the handle still in her hand. Quality sucks for these prices.
Gosh!
I’m not sure this article makes as much sense to me as I would like it to. I think an element that is missing is what people have been willing to pay for a bag if they “miss” it. I purchased a 19 before the increase in a covetable color, that exact bag is on Fashionphile right now for 1600 more. Like it’s insane what people will buy. The tan bags from 21P sold out before they hit the store so while people who don’t buy Chanel aren’t interested in buying Chanel, those die hard folks are still buying. Quite a few people purchased more because they weren’t traveling during the pandemic. As another poster said they are not a charity if you aren’t interested don’t buy.
I gave up on Chanel once they changed their repair/spa policy to 5 years or less. Such BS.
Loewe is the best quality, my first love.
I think I really don’t care and want to know the reason they increased the prices. The fact is, in terms of customer value, if it’s too high to accept just quit buying.
Every luxury brand was hit hard with the pandemic…. Only Chanel raised their prices as high as they did. They are trying to be something they are not and have been lacking craftsmanship and quality lately.
People are crying greed, but no one is making you buy. It’s either something you want and you buy or you don’t. I don’t recall going in to Audi and demanding they lower their prices to suit my needs. I just walk out and go down the street.
I’m in the minority here but I will continue to buy Chanel classic flaps, because I just love the bag, period. The prices keep increasing and quality, craftsmanship is not as good as the 90s, that is undeniable. But the price of luxury bags was never supposed to be correlated with the craftsmanship or quality of materials, the margin is always for the branding. Sadly I was not in a position to buy Chanel during the “golden days” (literally lol 24K playing was amazing) I will scour the pre loved market for vintage pieces and also continue to purchase from the boutique if the right color/leather/hardware became available. Price comparison vs Hermes is not relevant for my decision because I don’t enjoy Hermes bags.
Excellent! put in perspective!
They are also trying to price things out of reach for most of the consumer market, which is a good strategy considering Chanel has become too commonplace. I’ve noticed an increase in quality over the last year or so, maybe the last 4 collections, so that’s a big plus.
I don’t really think it’s up to us to try to understand WHY Chanel raises prices or costs xxx because it’s irrelevant. If you like it and can afford it, then buy it. If you can’t then don’t. I suspect Chanel is just trying to squeeze out the latter.
Every time I read the Chanel blog people say they will no longer buy and they are moving on. Yet, the same people come back to comment that they are moving on. If you don’t like the product don’t buy it. Complaining about the prices will do nothing. It’s not going the way of MK, as much as some people wish. I find it interesting that people compare it to Hermes. The bags are completely different in style. It seems people are more interested in the status vs the bag. Buy what’s in your budget and what you love vs aspiring to something because due to status.
My daughter and I bought Chanel bags in 2020 and 2021 altogether 5. My friend bought 4. I called around everywhere in June for a 19 woc and they were sold out everywhere! We went to the Chanel store in Nashville in June and the purse shelves were practically empty. They looked like they were going out of business. I asked the sales associate what was going on and he said, “They are throwing money at us!”. Because of our S.A. in Atlanta we were given close to first dibs as bags came in. I don’t know what these folk on this thread are talking about, but if they had been in the trenches like I have these last 2 years(like it always is) trying to obtain bags, whew chile! I have all the classics and some fashion, 15 years old to 2021, and I’ve never had a problem with any of them on quality. Believe me, Chanel is doing just fine!
Greedy because a company wants to make money….ridiculous. Nobody is holding a gun to your head to make a purchase.
Your comment is spot on, to exist companies have to make money and appease their executives with big payrolls. I love Chanel, my jumbo Classic Double Flap is still my favorite bag purchase ever. I do like the Chanel 19 and have considered getting one. Believe me, the price increases are not my favorite either. I hear Hermès mentioned so much in comparison but the prices at Hermès are absolutely nuts too! Also, who wants to do a song and a dance and beg an SA at Hermès to grace them with the privilege of purchasing a Birkin for $15,000.00? I understand that the craftsmanship of seasonal bags at Chanel can be suspect but the Classics are simply beautiful!
Quality is not there anymore. I love my maxi classic bag that is vintage. It just gets better. These new classic bags are crap periods.
I am hesitant to get a Chanel, same for LV, because there are too many fakes out there. If I carry a Chanel, be it real or fake, I’d be judged and speculated unnecessarily. In my opinion the classic flap look didn’t innovate enough over the years. I don’t need to break an arm and a leg to get a new one if I don’t care about exotic colors. To add salt to the wound I heard quality is dwindling, e.g., the stitching is not consistent. Probably I would get a vintage if I want one, if ever.
I mean I think the point of it being a classic is it’s consistency. Otherwise it would just be a seasonal bag.
Agree but that’s also why it’s so easy for people to produce fakes. And the quality will be no worse.
Greed. Plain and simple.
I will not buy Chanel at the boutique prices. The resale market is insane right now. The prices are above retail in some cases. I am getting off the Chanel train. Also to add insult to injury the quality of the new bags are atrocious. Better off with a vintage bag but again the prices are ridiculous.
I’m glad I read this article because I thought I was the only one who noticed. I do think that the Chanel bag and for many of us, the iconic history, heritage, craftsmanship and the ‘specialness’ ie the fact that a Chanel bag will always be timeless-so as an investment it makes sense. Supply and demand is the cornerstone of decision making-and bags are their bread and butter. They have a range of customers-the longtime clients for whom money is no object which includes the clients who order haute couture, and the clients who will come back season after season; however-in a generation where online sales are so much bigger for other brands because their selections are offered on global luxury sites like Net-A-Porter, or via online shopping on the site, Chanel’s demographic is a little bit different. I have seen some exquisite bags that I would have loved-especially from the Metiers d’Art Collection…I did notice in the SS’21 RTW they had a bigger focus on the smaller leather goods as well. I do agree that Chanel is different under Virginie Viard, but I think they have, especially compared with other brands, stayed true to the house codes and heritage that makes them what they are while innovating. But what I think is that although the starting price for any Chanel bag(whether you are talking about the Iconic Collection, the Chanel 19 etc) is higher than most, you get a bag that you’ll love and wear for a lifetime that will elevate any wardrobe choice-absolutely timeless. I look at the Pre-Fall Collection(21-22) and Fall Collection and the bags are absolutely stunning. I’ve seen brands (outside of my other favorites like Fendi, Saint Laurent…) where you see ‘on trend’ bags starting at the $4000 range. I also think that Gucci has increased their prices on certain styles..I can’t be sure of that because there are different collections but I’m curious about it
Am I the only one who hears the tiniest violin when people cry about Chanel raising prices when people are “struggling?” Or complaints about Chanel making profits on the backs of its customers? The people who are struggling aren’t (or shouldn’t) be buying Chanel or any luxury item for that matter. So those of us who are still buying these ridiculous frivolities should count ourselves #blessed we weren’t wrecked by the pandemic. Personally, I don’t think luxury consumers can really complain about “greed” or astronomical price hikes by luxury companies. We buy tiny little bags that cost more than some people make in a month or a year, in the case of some Hermès bags. We buy them because we think they’re beautiful or functional or well made, but mostly we buy them because we can. I’m ok with the continuing price increases. It helps ensure the bags stay exclusive and special. If they increase prices beyond what is sustainable, they’ll see that in a drop in sales. Until then, we now can count on three things in life — death, taxes, and Chanel price increases.
I can’t tell if you’re trolling or if you are serious. If you’re serious, I don’t think you and I are reading the same posts. Many of the price hike complaints are not by people who don’t have enough money to afford Chanel bags. If your post is in earnest, clearly you do have enough money, and you seem to think other people don’t, and you obviously look down on them as a result. Many of the complaints are about whether the hikes are justified based on the quality of the bags. The question is whether it’s worth spending that much for a status symbol. I don’t think it is so I’ll vote with my dollars and spend elsewhere. Not everyone needs to display logos to feel special. I appreciate quality, and frankly quality is what constitutes genuine luxury. A mediocre handbag with a coveted label is not luxury. Calling it luxury is a misnomer the industry wants you to believe so you’ll feel special and overpay to buy their product. It’s highly manipulative. I’d rather buy a quality handmade bag made by a shop in Milan, Rome, or Florence, for my money. That’s real luxury.
Chanel has been on my bucket list for a very long time. I have been waiting for a right time to make a purchase and now with so many price increases, not sure if the right time will ever come. And getting a Hermes bag is another struggle.
I wish to no long wanted Chanel!!
I was eyeing the white classic for more than a decade. And I saw it on the magazine last year and been asking since.
Recently the SA call me at around 5 pm , said they have the white one if I m interested, but they can only hold it till the end of the day. It was a Boxing Day night. There are no way I could drop everything in hand and make an hour trip over. Is ridiculous, that take it or leave it attitude it stinks. And is cost almost USD 10000 for it. Sigh. They are pushing their customers away. And I do switch to Hermes for the past 5 years.
I am VERY disappointed with my two latest purchases. Quality plunged and price hike is pure greed. My older classic bag is very different from the new classic ones. Yes, Chanel is losing its charm because the loyal customers feel cheated. And please, let me share an important detail: It felt like I was begging for the handbag because salesperson was nasty nasty when I mentioned that the bag was the display one. Handbag had scratches and it did not have a box. Whatever their marketing department is trying to accomplish, causing shortages to instigate some phenomena, it is really disappointing. Chanel is destroying its reputation and a beautiful legacy. Sad.