Chanel revolutionizes the luxury market with a new price increase for Christmas

Chanel, one of the most established brands in the luxury market, is once again taking a risk with this rise in the price of its bags in the weeks leading up to Christmas. A strategy that adds to the new sales policy announced last month that limits customer purchases to one bag per year.

With the new sales policy, the firm intends to reduce the resale of its products in the secondary market, one of the big problems of the brand.

It is not the first time that Chanel has raised prices since the pandemic began. Its financial director, Philippe Blondiaux, announced in June the company's intention to review its pricing policy at least twice a year.

Marilé Pretel, specialist in brand management, professor at the CEU and the Master's in Fashion and Beauty Communication at Unidad Editorial understands that "brands are adjusting their profit margins to compensate for the losses caused during the year of the pandemic".

In addition, the current economic situation marked by the shortage of raw materials and the rise in energy prices is conditioning the sector on the supply side. Of course, Pretel points out that "since they are highly desired objects, the delay in delivery times takes a backseat compared to the strong desire for acquisition by the customer", a circumstance that would be benefiting this sector of products so exclusive.

For this reason, for Susana Campuzano, director of Luxury Advice, a boutique agency dedicated to comprehensive advice specialized in the luxury, premium and high-end sector, "firms tend to raise the price of their classics, the most demanded products and in which the price increase operation is less risky".

Pretel agrees that the iconic products of luxury brands, such as Chanel bags, "represent a safe value compared to novelties, which have their own process of maturation in the market."

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The truth is that despite the paralysis of international tourism, Chanel has overcome the coronavirus crisis better than most other retailers. Sales fell 17.6% last year, but the basic profit margin was around 20%, according to analysts, making it one of the most profitable companies in the sector.

"The brands that have suffered the least from the effects of the pandemic have been the ones that were most advanced in the digitization process," says Marilé Pretel. "In four weeks, what was planned to be done in five years was done," says Campuzano.

For Pretel, precisely digitization together with innovation and the rethinking of points of sale, are the great challenges facing the sector. In her opinion, the formula must combine the digital and face-to-face modalities.

"The challenge is not only in having a good e-commerce, but in the actions that lead you to achieve a good positioning as a brand." "Brands have to work on their social commitment because the new generations are demanding it and issues such as sustainability, for example, are conditioning their purchases."

Pretel goes further and concludes that "companies that do not have a defined brand purpose will be out of the market in a short period of time."