Musings On The 2020 Chanel Price Increase
A Chanel boutique at 31 Rue Cambon, Paris. Photo: CloverSac.
Gossip of a global price increase for Chanel began circling around the Purseblog forum weeks before the hike in May. There was plenty of speculation among the ladies on the percentage increase this time but more resonating was a protest over the timing in such a situation as now.
People queue to enter the Chanel boutique at a department store in Seoul, South Korea, May 13, 2020. Photo: Reuters
The global price increase started in the second week of May, with Europe getting its revised prices on the 11th, followed by Asia on the 14th and finally the USA on the 25th.
Regarding this increase, Chanel stated in an email to Reuters that “these adjustments are made while ensuring that we avoid excessive price differentials between countries, in line with our commitments regarding price harmonisation.”
Classic and Reissue price comparison between 2019 and 2020.
I will solely be focusing on the Classics and Reissue models throughout this critique as they were affected heaviest by the price hike. Although the WOC and Boy models were also impacted, they hovered below a 10% raise, making the increase not unusual from the standard annual price increase year over year. The United States was affected the least by the increase in prices, never climbing over 12%. However, Europe and Australia was hit the hardest with skyrocketing increases over 15%. While the price differences across the 3 continents are now closer compared to 2019 prices, sales tax and VAT has not been factored in yet.
A 3 year price history of the Mini Square Flap.
A perfect example is seen above, looking at the price history for the Mini Square Flap over a 3 year period. The most striking increase would be a steep 31% raise for Australia. However, such a drastic disparity in pricing is to be expected with a harmonisation strategy, considering the weaker Australian Dollar in comparison to the Euro Dollar.
While Chanel has given its official statement regarding this year’s price increase and owing it to a global price harmonisation, I still harboured suspicions about a subtle reasoning behind their increase. It is not to say that this is the first time that the storied French maison has chosen to conduct its annual price increase in May. However, the last increase in May took place in 2017, with the consecutive 2 yearly increases occurring in November.
I will be taking a look at two plausible reasons behind the raise which arrived at the height of an ongoing pandemic worldwide.
Megs Mahoney, editor at Purseblog, speculated before the official raise that this year’s substantial increase was a recovery strategy enacted by Chanel due to the ongoing crisis. After all, the French luxury brand had made the decision to halt all retail and manufacturing operations, instead transforming its production towards hygiene equipment. The multi billion dollar corporation had also opted out of the French government’s partial unemployment assistance, choosing to personally fund the salary of its employees working from home.
My issue towards this speculation is this - no matter how well intentioned they may be, why should consumers pay for the brand’s altruistic decisions? Chanel isn’t a new startup or independent designer that is financially struggling during this economy downturn. This is a multi billion dollar corporation we are addressing here. Are we as consumers going to reap the share of profits when the brand performs well? No. Prices will not be reducing either. If anything, this speculation is akin to a millionaire organising a fundraiser on social media and requesting the public to donate.
However, WWD reached out to Chanel seeking clarification and the brand had responded that “the current situation has absolutely no link with this decision (price increase).” That being said, it looks like any speculation on the economy’s influence on the price hike is right out the window.
Misaligned quilted diamonds on the Classic Flap in black caviar. Photo: Purseblog
Investing Into Higher Quality
“Like other luxury brands, Chanel is making financial efforts to secure its supply of very high-quality skins by investing in the supply chain and acquiring suppliers. These investments are essential to guarantee the longevity of such iconic products [and to keep them] up to the standard’s Chanel’s clients expect,” Chanel continued in its email to WWD. Chanel has stated that the brand is investing to maintain its product standards. It’s no secret among the handbag community that the brand’s quality and workmanship has deteriorated. Customers on handbag forums have cited poor stitching, malfunctioning hardware and shoddy handiwork that does not justify the ever rising premium prices. With new supply chain investments, the least Chanel could do would be to improve the quality of its products, especially for the handbag line.
“We also take great care to maintain the positioning of our creations as the highest in quality and the ultimate in luxury. We wish to retain our unique place in the eyes and hearts of our clients, and therefore offer rare and exceptional products. All of this adds value,” Chanel continued in its statement to WWD. I believe that the last sentence holds the true reason behind the sharp rise in prices - a realignment of the brand’s market positioning.
3 year price comparison between the Reissue 227 and Birkin 30.
With prices soaring after this year’s revised prices, Chanel is borderline in the Hermes price range, albeit without the legendary exclusivity and resale value that Hermes is renowned for. Women on handbag forums have compared the new prices of the Maxi Flap and Reissue 227 to the current price of a Birkin 30 in Togo leather. I was curious to see how the prices differentiated over the years and I decided to track both bags over a 3 year period. 2018 and 2019 still saw a huge disparity between both handbags and it was only this year that the gap narrowed significantly by only €650.
Having the audacity to conduct its annual price increase during the height of a global economy downturn is certainly a bold move for Chanel. Women may be fussing for now but the allure of the brand will always be there and they will soon be purchasing again. Chanel knows that. A small majority of handbag lovers like myself may stop purchasing new Chanel bags altogether. Of course, the brand isn’t affected in any way but we know better. Chanel has pretty big shoes to fill as they enter a new price range. Or they might just not care at all about the fine details. After all, the elite and rich never scrutinise that deep. We shall see.
