Alyssa: So this one I purchased in May of 2020 right before the
May 2020 price increase, so I got this one for 5800 and it
jumped to 6200 6300 I believe.
Lauren Shamo: This is luxury lifestyle content creator,
Alyssa Nora, and that's a medium classic flat bag she's holding
in November of 2019. The small version of this bag cost about
$5,200. Exactly one year later, the price was increased by about
12% and during 2021 An increase in January brought the bag to
$6,200 followed by a $900 jump in July and November that same
year $1,100 was added to the price tag by March 2020 to the
small classic Chanel handbag costs $8,454. And these price
increases were seen in seven different countries. So between
November 2019 and march 2022, the cost of a small classic flat
bag rose about 63%. Other top luxury brands increased prices
too. But why did Chanel increase its prices by so much. And could
this hurt the brand in the long run.
At the time, called Chanel mode was originally founded in Paris,
France in 1910. Gabrielle von Harish Chanel learned how to sew
in her orphanage. She was a tomboy and sold clothes that
were coined a poor girl look, which is completely different
from the marketing of the brand today.
Prof Thomaï Serdari: The takes a lot of time for a brand to gain
the status that Chanel enjoys today. This is a brand that has
existed for over 110 years, the founder was a legendary icon.
The brand survived through First and Second World Wars.
Lauren Shamo: This is the first shoulder bag launched in 1955.
It's called Chanel 2.55 And at the time costs $220. For
reference in 1955, a 24 inch black and white TV cost more
than $200 in a winter coat could set you back by about 20 to $30.
After World War Two Chanel became a household name and was
promoted by prominent women of the 1960s. This is Professor
from my Easter dari she teaches luxury marketing and branding at
NYU. And she says with the Chanel purchase, you get much
more than just an iconic handbag
Prof Thomaï Serdari: pricing strategies in the luxury market
is something very complex, and they actually do not follow the
formulas that you would find in the mass market. The pricing
formula always goes back to the physical rarity of all the
resources that the brand has in its availability not only the
excellent quality of the specific product, but also the
heritage that comes with a company and the company's
trajectory in constantly creating innovative products and
in creating great designs that respond to what the consumer
wants to wear today.
Lauren Shamo: The pandemic disrupted supply chains all
around the world, including the one for luxury materials used to
create Chanel products, most notably the element that all
their bags have Italian leather, and of course the fact that the
bags are made in Italy. Research shows that Italy's fashion
textile was one of the most exposed industries to the
effects of COVID-19. Industry sales dropped by about 40% and
exports dropped by about 30% By June of 2020. And that was also
the first time Chanel increased the price of its small classic
flap bag by $400 Since November 2019, whereas Dior increased the
price of his Lady Dior bag by 300 and July, and Louie Vuitton
increased the price of their speedy 25 bag in May by $80. But
Sotheby's Senior Vice President and Global Head of fashion and
accessories says these increases are generally normal.
Cynthia: The price increases and Chanel have been fairly
consistent over the last really 10 years. I think the amount of
awareness people have of Chanel pricing has increased over the
last 10 years. And then just the number of places you can buy
Chanel in terms of number of secondary markets.
Lauren Shamo: Google Trends shows worldwide searches for
Chanel classic flap bag have increased over the last three
years. Sotheby's launched its handbag and accessories sector
in 2018. Since then, the sector has grown by more than
13 100% 67% of Sotheby's bidders are under the age of 40. And the
number of bidders under the age of 20 has increased by 50% in
that timeframe.
Prof Thomaï Serdari: So you see that younger people younger
millennials and perhaps Gen Zers who have an income or disposable
income, are more willing to get their first luxury bag through a
pre owned item rather than going to the boutique itself that has
generated a lot of interest.
Lauren Shamo: Alyssa has also seen this growing interest in
Chanel firsthand within her large following the growth in a
new demographic is a huge driver and the increased demand for
Chanel. That's possibly due to social media and the rise of
influencers. A study done by McKinsey and Company found that
out of all generations, millennials were the most
optimistic about consumer spending increasing in December
of 2021. The growth is expected to come from the intent to
splurge and recent inflation. The growth in the second hand
market as well as social media and the rise in influencer
marketing has been troublesome for Chanel's image. sidari says
the French fashion house may be suffering from overexposure, and
is trying to take back the exclusivity of their brand.
Prof Thomaï Serdari: You have so many people wanting to get their
hands on this Chanel bag, the brand must somehow maintain this
balance between what is physically available, and what
is the perceived rarity for the consumer. If we all know that we
can get our hands on something, that product loses its
desirability. So the only way to recreate in effect, the distance
between the consumer and the brand is to increase the prices.
Cynthia: If we think of you know basic economic principles,
there's two ways to sell consumer goods. One is
discounting and volume. And the other is, you know, price
increases and exclusivity. And I think you can't choose both.
Lauren Shamo: But by bumping up prices by over 50%. Chanel is
somewhat closing the door on eager emerging consumers,
Alyssa: I hear about people really working to save up for
their classic flap, and it's like the bank they've been
wanting. And then there's a price increase, and their goal
just gets pushed out even further. And then they try and
reach that goal again. And then there's another price increase.
So I get the frustration, I would be to
Lauren Shamo: Alyssa has shared with her followers that she is
discouraged by these price increases. And so she spent
significantly less time looking for Chanel bags, but she knows
there's still a market
Alyssa: out there, you're always going to have people that are
just all about Chanel and love those bags, whatever the price
tag is if they want it bad enough like they will spend for
it.
Prof Thomaï Serdari: I insist on this point that luxury brand
never ignores that first bottom accessible tier of consumer,
because that generates really great volumes. And it's a great
source of cash flows.
Lauren Shamo: Regardless of these price changes, as well as
the proof of return for luxury handbags as a whole. The power
Chanel has on consumers of all ages is clear.
Cynthia: Is it possible to see, you know, Chanel bag selling for
$20,000 In the next 10 years? I think it's possible. If I buy a
Chanel bag in five to 10 years, it's going to be worth more. If
I buy another luxury brand, most likely that bag is going to
depreciate in value and depreciate by 3050 You know, 80%
over that same period of time.
Alyssa: This one was a preload find I got this in 2018 I think
for $2,000. And even then at the time, it was more of an impulse
purchase because I just thought it was like $2,000 Like that's a
lot. But when am I going to see this color again? Because Chanel
doesn't repeat their colors and I still get messages asking I
was like, Can you sell me that back? I think someone messaged
me too is like I'm prepared to I'm prepared to pay you $7,500