Historically, luxury fashion brands have enjoyed strong pricing power. This means you can apply significant price increases without necessarily losing customers. However, in 2023, prices will reach shockingly high levels, and this trend shows no signs of slowing down.
According to data firm EDITED, the average price of luxury goods is 25% increase Many brands attribute the rise to everything from inflation and regional price balancing to the fallout from the pandemic and the impact of the war in Ukraine. But for many luxury fashion brands, this rise is occurring over a longer time horizon.
take chanel, handbag prices have more than doubled since 2016. Auction house Sotheby’s found a classic Chanel 2.55 bag selling for about $1,650 in 2008. In 2023, that number for Chanel will approach $10,200. (If the cost had increased in line with inflation The cost for 15 years is expected to be $2,359). This week, Vuitton men’s creative director Pharrell Williams unveiled the brand’s new line. millionaire speedy bag. The alligator leather bags are custom-made, cost millions of dollars, and have a decidedly Scrooge McDuck aura.
“Across the industry, pricing has become really irrational,” said influencer Brian Yambao. Instagram post This week we talked about the $6,000 Miu Miu wool coat. “I think now is a good time for most brands to lower their prices.”
Over the past year, there have been signs that so-called aspirational customers, who buy entry-level luxury goods such as cosmetics and spirits, are reining in their spending. Middle-class professionals who once saved up to buy high-end investment handbags and coats are aggressively discounting prices.
So who would spend $3,000 on a duck-shaped knit hat from British brand Burberry? How about $24,500 on a vicuña jacket from Brunello Cucinelli? Or $1,250 on a white cotton shirt from The Row?
The answer is clearly 1% (or anyone willing to take on credit card debt). Bernstein analyst Luca Solca estimates that the top 5 percent of luxury customers now account for more than 40 percent of sales for most luxury brands. As wealth inequality increases globally, luxury brands are focusing more than ever on reaching smaller groups of customers. Will this strategy work? Or is there a backlash that will burst the luxury price bubble?
The discussion between style journalists below has been edited and condensed.
elizabeth payton For many people, the price tags of luxury goods have always been unreasonable, almost immoral. And the price of luxury fashion continues to rise. Does it matter to customers?
Vanessa Friedman The high price tag of Phoebe Philo’s new line certainly struck a nerve, even though it’s actually at the lower end of the luxury market. I wondered why it was Philoline that caused so much anger.
stella bugbee It’s rare to see a collection for the first time and face the prices at the same time. We go to fashion shows to admire and critique on a conceptual level, but what we see on the runway often doesn’t end up in stores. It was more expensive than the old Celine.
VF However, almost all “luxury” items (including the new Celine) are now more expensive than the old Celine. Also, perhaps because Phoebe has become a mythical and fashion savior of women, for better or for worse, and we’ve been waiting for her line for years, Phoebe’s ability to offer her clothes to people The illusion that more women were saved was also created. More people. To some of her fans, this price seems almost like a betrayal.
EP The balance between accessibility and exclusivity has always been difficult for luxury fashion brands, especially as the sector expands into new markets. Now, many people who might have been treating themselves to bags are tightening their belts.
VF Well, 1 percent is the target market for high fashion. The rest have perfume and lipstick left.
EP True, but certain professionals felt they could save money for special pieces. A Burberry raincoat. A Gucci handbag. These are currently out of scope for almost everyone.
Guy Trevey Don’t forget about credit card debt. The Federal Reserve currently has its debt set at over $1 trillion.
SB The resale economy has also changed the calculus. All of these things are available second-hand soon after being sold at full price.
EP And if a product is popular enough, it may sell for more than the list price. For example, something like the Hermes Birkin.
VF There is some kind of war order here among those who consider it a badge of honor do not have Only people in very small clubs can buy at full price. Economics is involved, but above all, psychology is also involved.
EP Resale is also a great barometer to determine if your pricing strategy is working. Chanel and Hermes lead the resale market. Luxury brands that are riding the trend and raising prices aren’t faring so well. Any market correction would have more of an impact on brands that lose money on products that people want to sell on the secondary market.
jessica testa I know of at least one resale site called ReSee, which is based in Paris. There, Philo-era Celine is his third most popular brand after Chanel and Hermès. Additionally, there are several independent sellers on Instagram that specialize in Philo-era Celine designs, selling for more than the retail price they sold 10 years ago. Some people spend years scouring his eBay for specific products in their size.
VF So, back to Phoebe Philo’s current scarcity model. We don’t even know how much product they produced (the company won’t say), but the message is that the product is selling out, so the market will bear the price. I think it’s more valuable because it’s more expensive.
GT This is the work for which Daniel Kahneman won the Nobel Prize. Subjects were shown two identical cashmere sweaters, one much more expensive, and inevitably chose the more expensive of the two. What he meant was that we weren’t thinking about anything. We act irrationally.
VF I go back to the idea of betrayal. Because so many women identify with the character of Phoebe Philo, or at least with what Phoebe thought and what her work once represented, they are willing to pay more attention to the pricing of her new products. felt excluded or treated unfairly. They were very concerned about what she was going to create, but it seemed as if she didn’t care about getting them involved at all.
EP Phoebe and her extravagant powers also spent a considerable amount of time courting an eager audience. We’re just pulling up the drawbridge right now. Fashion is always in danger of seeming out of touch with the wider world, and certain pieces, such as Burberry’s duck hat, which seem to have been the talk of social media in recent months, feel even more special than usual. caused anger.
VF Burberry is also selling a $21,000 viscose dress with a Burberry knight on the front.
GT It’s a good idea to keep a dollar bill pinned to your chest at that point.
EP Speaking of dollars, a quarter of a trillion dollars is spent. wiped off The corporate values of Europe’s seven largest luxury goods companies have fallen since April, and sales have generally declined in most fashion groups. It’s about moving the aspiring middle class away from credit card machines.
J.T. What pisses me off the most is that even though luxury brands are collaborating with mass market brands, the price isn’t even in the middle and is still $900.
EP Like Banana Republic’s recent collaboration with Peter Do.
GT And it’s relatively new. In contrast, there have also been some great and totally affordable collaborations with Uniqlo from the likes of Jil Sander and Tomas Maier.
J.T. Guy Trevey May Just two days ago, someone complimented my Clare Waight Keller Uniqlo bag.
EP Treasures may sometimes appear in collaborations!
VF In a way, they are giving luxury brands an excuse to set their prices. Because they can say, “Well, but we did this or that collaboration for the mass market.”
EP I agree, but I don’t see this approach by the luxury goods giants changing anytime soon. It looks like the bubble hasn’t burst yet.