With Chinese consumers cutting back on luxury purchases, Chanel is responding in an interesting way by raising the prices of its premium products.
The French luxury brand has implemented similar price increases in Taiwan, Thailand, Malaysia, Australia, and Japan, resulting in a collective increase of 6% to 8%. This adjustment is attributed to currency exchange rate fluctuations, as reported by Bloomberg.
Chanel noted that these price modifications are in accordance to its price uniformity policy, wherein the brand evaluates its prices on a semiannual basis, usually in March and September.
Despite the significant pricing influence of luxury brands, recent trends have suggested a more prudent spending attitude in the past year, particularly among aspirational consumers who acquire entry-level luxury products. Luxury conglomerate LVMH’s latest quarterly report also attested to aspirational shoppers’ continued struggle in the current economic environment.
“After three roaring years and outstanding years, growth is converging toward numbers that are more in line with historical average,” said LVMH CFO Jean-Jacques Guiony on Tuesday, October 10, 2023, adding that this behavior was part of the cycle.
Corroborating this notion is another report from the Financial Times (FT), which states that luxury retailers had been thriving in the post-pandemic era, primarily due to consumers in China and the United States. However, signs suggest that the industry has reached its pinnacle of growth.
“There is a slowdown in the U.S., but compared to an absolutely crazy base,” said Michael Kliger, chief executive of luxury platform Mytheresa. “People got out of the pandemic and went bonkers.”
As mentioned by the Financial Times (FT), behemoths in the industry, such as Hermès and LVMH, have experienced robust growth this year. In contrast, Kering, the parent company of Gucci, has encountered challenges in revitalizing its flagship brand.
Simultaneously, numerous brands have observed a deceleration in sales growth in the United States, while the recovery in China, following its reopening, has been less brisk than initially anticipated.
For LVMH, the economic slowdown has translated to a 9% increase in Q3 2023 revenue compared to the same period in 2022. However, compared to the second quarter of 2023, there was a growth deceleration as that quarter witnessed a 17% year-on-year rise.
When examining the various divisions, LVMH’s fashion and leather goods segment generated €9.75 billion in sales, representing a 9% uptick from the previous year. In other sectors, perfumes and cosmetics experienced a 9% surge, selective retailing displayed an impressive 26% increase, watches and jewelry showed a modest 3% rise, while wines and spirits declined by 14%.
