Price increases amongst the top luxury brands happen so often that discussions about them appear on the PurseForum regularly. The general consensus? Our members dislike them, and the mere rumor of one sparks what looks like panic buying of the styles that are expected to increase in price.

Great for the brands that increase them, right?

Yes, but they can actually be great for the people who buy from these brands. You read that right, I said, great.

Before all the e-tomatoes are hurled at me, let me explain why:

Take Chanel, for instance. Prices of their Classic Flap and Reissue have skyrocketed in the past decade. I still remember walking into the Chanel on Bloor Street in Toronto in 2008, when the Square Mini was CAD 2200. It was considered high back then, but now customers cannot even buy a considerably smaller SLG (small leather good), the Chanel WOC, for that price.

Chanel Reissue 2.55

Yet if I were to have purchased the Square Mini back then, I would have been able to buy into the Chanel brand at a much lower price point. Chanel has safeguarded its image and the perceived investment value of its bags by constantly raising prices. Even if I were to buy one today at a much higher price of CAD 5025 as of the date of this article, I am assured that the bag will most likely not depreciate.

Raising prices isn’t as easy as some people think. Brands that don’t have a demand that matches their increasing price points can experience sales declines at the chagrin of their investors. Mulberry is one such example when the brand decided to upscale a few years ago and introduce bags at higher price points than their previous Alexa and Bayswater bags. The higher price points did not resonate with their customers. The brand did not have the demand to increase the prices to the level they commanded. Subsequently, Mulberry introduced new bags at lower price points to prevent further sales decline.

Mulberry’s story is an illustration of the relationship between demand and pricing. Want to increase prices? Then be sure that your brand is desirable enough to warrant those prices. Brands famous for exorbitant price increases have carefully curated their brand image so that whatever you buy from them is desirable enough that lots of people are willing to pay those higher prices to obtain them.

Dior Lady Bag

Some consumers are outraged at how prices have increased without an increase in the craftsmanship and quality of the bag. Remember, you are often paying for the brand image rather than the product. After all, how is it possible that a bit of leather and metal hardware, even if the labor was truly intensive, costs over $5,000? Determining the price point for luxury items (and most mass-market items) is based on the perceived demand of the product. Yes, it may be calculated for items with a low-profit margin to prevent a company from taking in huge losses. However, luxury goods have very high profit margins, so that investors aren’t worried that their brand will go bankrupt if the price was a bit lower. It isn’t priced like Costco’s hot rotisserie chicken, which I learned actually sells for a loss but can draw customers into a store to increase overall sales and is a marketing tactic known as a loss-leader.

Price increases also help elevate a brand’s perceived level of luxury to the point where it helps maintain the perceived value of the goods that customers have and will purchase. Brands that are more aggressive in this approach can make their brand more upscale than other brands. Dior is one such example. About 12 years ago, Gucci and Dior’s price points were about the same for comparable products. However, through a series of price increases (as well as successful marketing), the Dior brand now has considerably higher price points than Gucci. The Soho Disco bag, an enduring design for Gucci, has at least doubled in price since that time, where its old price was around CAD 700, and its current price is CAD 1560. However, the Lady Dior has at least tripled in price, with the medium costing $1900 CAD in 2008 and now costing CAD 6600. I am not implying these two bags are comparable (they are not). They are merely used to illustrate how the price increases for these classic styles have been disproportionate.

Hermes Kelly

Hermès’ price increases have helped elevate the perceived image of the brand above Chanel. If Hermès did not do that, then Chanel may have been able to price some of their classic bags at a similar level to Hermès’ iconic Birkin and Kelly bags. Hermès customers should want the brand to keep elevating prices to place its status in one of the highest echelons of luxury, lest other brands supersede its level.

I’m not saying that I personally welcome the price increases. After all, my favorite brand of all time (Dior) is getting more and more unaffordable to me since my salary does not increase nearly as quickly as their prices. That being said, I am happy that the men’s Saddle I purchased when the price was CAD 3400 went up to CAD 4200 in just a year. Now, I have a bag that commands a higher price tag but at a lower price. It was thrilling to discover that the bag I already owned went up in price so much and that it could command a much higher price point.

I’m sure that I am not the only one who is thrilled to find out that what we own is selling for a lot more now. It’s similar to the thrill of getting something on sale when it is not supposed to go on sale.

So before you get upset about the next price increase, think of what would happen if the brand did not increase its prices constantly. Do we want the image of the brands that we love to not be elevated?

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lalarey
lalarey
9 months ago

I appreciate their desire to maintain the aura of exclusivity but exclusivity is not the only thing that shoppers look for- if you are going to raise the price THAT much more than inflation, and you don’t want to up your game (new designs? noticeable quality improvements, or new maintenance perks?) at least maintain the quality from your lower price point days. Most companies that sell high end or expensive goods are expected to show some innovation. I see none of that from Chanel, or Hermes, at least not in the last 40+ years!

Sandy
Sandy
9 months ago
Reply to  lalarey

I disagree with a bit of what you are saying. There are new popular styles, more on the Chanel side. (Chanel Cocoa handle, Chanel Boy, Chanel 19). I also want to note that the iconic pieces from both Chanel and Hermès are what makes them amazing IMO. One thing that I have noticed from my Chanel purchases, the iconic double flaps are made very well, the seasonal bags can be suspect. I agree completely, a seasonal bag is still pricey and we should expect stellar craftsmanship.

pinksky777
pinksky777
9 months ago
Reply to  Sandy

Every bag you mentioned is boring and outdone to say the least. Like I’m going to spend 7-10k on a Chanel bag that a million ppl have when I could get something less “madame”, and more original that appeals to a younger crowd. Chanel doesn’t even make quality bags anymore, my friends flap had three defects, yet all these suckers still pay up because it’s “Chanel” 🙄. Nobody is impressed.

Last edited 9 months ago by pinksky777
Ariana
Ariana
9 months ago
Reply to  pinksky777

I agree! I’m afraid to shell out for today’s Chanel thanks to the quality issues. Plus, I’m not into supporting a company that’s so outwardly rude to their clients.

Sam
Sam
9 months ago

If the quality and craftsmanship don’t match the price then I’m not purchasing. Chanel can continue to raise their prices, but I’m willing to bet there are fewer consumers (from every socioeconomic level) that buy them less frequently.

I understand exclusivity and a desire to increase profits, but Chanel is beginning to get a reputation of creating poor quality bags, with few exceptions. I was a huge fan and bought several, but soon became disenchanted when the corners of bags showed wear after a few months of infrequent use. Or, stitching became loose. Chanel needs to respect consumers and put out quality bags; also, they need to accept repairs longer than 5 years and accept all bags regardless if purchased at a retailer or reseller.

jess
jess
9 months ago

hmmm. Well I’m going to disagree here. If you look at bags as investment pieces that you are planning to resell, then yes, pricing creases can be welcome. But in that case, one can get very little use out of the bag as use will depreciate the bag’s resale price.
BUT for consumers who just want to purchase and enjoy a bag, the prices of some luxury goods have become ridiculous. It doesn’t cost that much to make even the most expensive bag. So luxury buyers need to know that the price they’re paying is mostly mark up and huge profit to the company.

Laura
Laura
9 months ago
Reply to  jess

Hey Jess, as an independent luxury bag maker, I’m very interested in your comment, “It doesn’t cost that much to make even the most expensive bag.” I’d love to hear your thoughts on this. What do you consider an appropriate markup to be?

Janine
Janine
9 months ago

Interesting read! I found your perspective super intriguing and by the end of the article you basically changed my mind about the price increases, haha!
Xx Janine
http://www.wantshoprepeat.com

Lara
Lara
9 months ago
Reply to  Janine

Surprisingly me too!

Kyle
Kyle
9 months ago

You didn’t explain, whatsoever, how this was good for the consumer. So yeah, you’re the only village idiot who is thrilled.

Ed B
Ed B
9 months ago

Nah, increases beyond inflation aren’t “good” for the consumer. Don’t get me wrong, I am super lucky that I haven’t been priced out of anything I like (can’t with exotics even if they were free), but it’s just an illusion that anything over ~3-5% a year is necessary for your bag to “not lose value”.

Causal resellers who only resell to clean out closets and buy new purchases aren’t making strategic purchases like special editions day 1 just to flip and sell for twice the amount next day. I don’t even believe that Chanel flap casual buyers only do it to sell at a profit a few years down the line.

The “investment” there is just “let me not lose all of this money” for many. Because you still do get years of use out of it (again, casual resellers, not flippers), so if you bought something for 4K, manage to sell for 2-3, you’ve essentially gotten a 2k bag for 4 years or however long you keep it, and there the math is cost-per-wear.

“No Ed, consumers always aim to MAKE money from purse purchases” you might say but I’d just laugh. I hope most of us don’t buy luxury bags just to “make” money. Invest in the lowest risk S&P500 the same 5k then, if wear means nothing…

I feel way more cheated by unnecessary price increases than I do secondhand pricing. I’m not saying I wish Hermes had a discount rack, I don’t need things to go DOWN in price, but keep up with inflation and stop there, imo, or maybe a biiiit more. Rest is just greed.

And hey, they want to make money, whatever, but let’s not pretend it’s for OUR good, come on now.

Melina
Melina
9 months ago

Prices have risen but the quality has gone down. Not worth it.

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