Monday, February 6, 2012

French Lux Companies Raise Prices

Price hikes of luxury items have become almost as common as political indiscretions. You don't know when they will happen, or to which brand, but it's bound to happen. Last week when we heard about a price hike at Chanel we yawned. An increase at Hermes made us sigh, a bump at Celine raised an eyebrow and the jump at Goyard finally made us sit up and wonder.

Yes, it's true, in the past month we've counted four French luxury brands that raised their prices on bags ranging from from 6% to 40%. As a matter of fact, the euro, which often influences the price of luxury goods in the United States was down almost 20% from highs last spring. The foreign currency has recovered a bit since last month but not enough to drive up sticker prices.

click on the image to see the stats

So what could be the source of the recent French fashion fix? Fashion analysts, believe that despite the global recession, growth in the world's billionaires is causing the price of luxury to rise. The corporate strategy appears to edge-out higher margins and profits while the opportunity presents itself.

An industry insider, was appalled when we told him that the Maxi size Chanel classic-flap bag was been repriced at $5400 from $4700. Handbags have the highest margins of any product in your local department store. That means that your pricey purse is more profitable than the smelly water otherwise known as perfume. We are told that most bags cost about $100 to make and that includes "the most popular hand-made" brands.

"It's a high class problem," a fashion finance expert says. "It's the story of the never ending gobstopper."

So how is this gobstopper effecting sales at your favorite boutiques and department stores? A Chanel sales person admitted that customers are not happy with the 13% increase of classic style bags. In the same breath, however, there is a 100 person waiting list for a medium size flap bag.

At Hermes, the popular Evelyne bag was $2900 for the large size but went to $3125 last week. "I've yet to see a customer freak out," the bag specialist remarked. "We have what people want and they continue to pay for it."

The St. Louis Goyard tote saw the biggest price gain of all our French subjects, going from $1170 to $1670. Most customers would agree that this bag may be past its prime but the company feels otherwise. "It was explained that Goyard is expanding and planning on opening more stores and needs more income," said a brand specialist.

Over at Celine, the popular Luggage Tote is now $2300 from $2000. Only two season ago the same bag was $1650. This is a classic example of supply and demand, an industry expert said. Right now there are waiting lists for this bag, so why not try to eek out more profits while the style is hot. Next season it will be a different bag and a different style.

So, as you begin to digest these new prices, will your shopping habits change? Is this gobstopper too hard to digest or is the temptation of luxury brands just too sweet to resist?

1 comment:

Lils said...

Interesting... It is not that the cost of the material cost more to make by 40%. I think the reason is more international countries like Asia are willing to spend the $$ for luxury French handbags since they regard these handbags as a must-have, demands for this goes even higher. Reading some of these articles it seems they prices a couple times a year, and people still buy...No wonder companies like Chanel are doing so well.