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.

Chanel Boy Bag Price Increases

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.

Chanel Bag Price Increase 2020

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.

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Orrrr
Orrrr
10 months ago

Greed

Nyp1217
Nyp1217
10 months ago

Chanel has lost its charm in my opinion and price increases prove they don’t care about their quality or customers

InQ
InQ
10 months ago

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.

Luna
Luna
10 months ago

Thank you for a well researched editorial. Well done.

I too do not own any Chanel nor have plans to contribute to that wheelhouse.

S.L
S.L
10 months ago

Without Karl, Chanel is so over.

Sheree
Sheree
10 months ago
Reply to  S.L

I agree

Vera
Vera
10 months ago
Reply to  S.L

Totally agree with you.

Vera
Vera
10 months ago

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.

Sheree
Sheree
10 months ago
Reply to  Vera

My next purchase on the proloved market.

Sheree
Sheree
10 months ago
Reply to  Sheree

Preloved

Sp01778
Sp01778
10 months ago

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.

r0gue
r0gue
10 months ago

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.

Susan
Susan
10 months ago

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……

Sheree
Sheree
10 months ago
Reply to  Susan

Yes and so is Karl

Cindy Latch
Cindy Latch
10 months ago

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.

Belle
Belle
10 months ago
Reply to  Cindy Latch

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.

Last edited 10 months ago by Belle
Mira
Mira
4 months ago
Reply to  Belle

YES!

Rehabbing CC buyer
Rehabbing CC buyer
10 months ago
Reply to  Cindy Latch

100% agree! No Chanel for me this year. Hermès (pre owned) and a YSL cross body received my bag $$$.

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