It’s not uncommon for luxury brands to hike prices every once in a while, even during COVID times. Strong luxury brands such as Hermès, Chanel, Rolex, and others have been doing this for decades, but that doesn’t mean every single luxury brand is born equal and enjoys the same position when it comes to price readjustments. Keep reading to see our brief findings of brands’ desirability, resale value, and the growing income and wealth inequality.
WHY A PRICE INCREASE FROM DESIGNER BRAND NOW?
One might doubt the legitimacy of the various price increases of different luxury brands — notably including Chanel and Louis Vuitton, but the recent luxury price inflation has been supported and evident by the ever-increasing “Cost of Living Extremely Well Index” (produced by Forbes). Overthrowing the average consumer price index (CPI), the Cost of Living Extremely Well Index grew 5% annually as opposed the 3% annual growth of CPI — meaning the rich is (not surprisingly) getting richer, which is a big enough supporting factor for brands to hike their prices even during the global economic downturn. In addition, despite the slowing down of sales in America and Europe, the Chinese luxury market is quickly recovering and bouncing back to pre-pandemic levels. Other official sayings from brands that explain their price increases often include the rising costs of raw materials and creating a larger margin to cushion the impact of lowered overall sales volume everywhere else in the world.
THE CASE OF HERMÈS’ BRAND VALUE
However, not all luxury brands are set up to be able to hike prices annually, certainly not during the pandemic. For example, Hermès’ branding and pricing strategy allow the brand to sustain high levels of desirability. The sense of exclusivity by launching limited edition series and even sectioning off their clients into top and average clients allow them to create exclusive demand. Producing only 12,000 Birkins a year, Hermès only sell their iconic bags to their top clients, resulting in a year-long waiting list. Having a strong demand and a historically retrained price increase allow the brand to enjoy a bigger price increase reservoir.
“In January 2020, Hermès Birkin prices rose nominally in Europe. Tpically Hermès enacts minor hikes discretely at the beginning of each new year. In Feburary 2019, for example, Birkin prices rose approximately 3-5% … This year, for Birkins in the 25 and 30 sizes, prices rose by about 3%. The Birkin 35, however, saw no change.”
Birkin 30 Orange Epsom
Birkin 32 Black Togo
Kelly 32 (Sellier)
CHANEL’S “PRICE HARMONISATION”
Another top-tier luxury brand, Chanel, introduced an even steeper price increase of between 5-17% this year in March when the effects of the pandemic were starting to manifest globally. Chanel has called it a “price harmonisation”, in which price increases are set in place to align global prices for signature handbags to ensure customers are paying the same price anywhere in the world. Iconic Chanel pieces such as its 11.12 and 2.55 handbags, as well as its Boy, Gabrielle and Chanel 19 bags and WOCs are all subjected to bold prices raises.
Yellow Patent Leather
Black Patent Leather WOC
OTHER SOFT LUXURY BRANDS THAT HIKE PRICES ANNUALLY
Louis Vuitton, Dior, Gucci, Burberry, Saint Laurent, Tiffany, Bulgari, Moncler and Prada are all increasing their prices for various reasons but all have shown themselves as brands with strong organic growth and solid capability to support faster price increases.
WHAT DOES THAT MEAN FOR RESELLERS AND BUYERS?
Depending on the strength of a brand, especially if it’s Hermès or Chanel, followed by softer luxury brands such as Louis Vuitton, Dior, Gucci and a handful more, these brands are the most likely to retain its original value (some Hermès bags are sold for more compared to when they were bought!), partly due to its constantly rising prices, partly due to the quality of the products — there’s no better time to re-sell them here in Hong Kong with HULA considering our proximity with the Chinese luxury market, where Chinese luxury shoppers made up of 90% of global luxury sales last year in 2019.
Equally, if you’re looking for signature designs from these brands, the pre-owned market is always more reasonably priced despite the fluctuations in prices across the globe.