Chanel Increases Prices to Compensate for Brexit

Back in March of 2016, we reported that Chanel increased it’s UK prices for the first time since the company’s global price harmonization effort in April 2015 (Read: Chanel Increases Prices in the UK). At the time, Classic prices were bumped up around 10% to bring them more in line with the US and Japan.

But that was pre-Brexit. As you may remember, on June 23 the citizens of the UK voted to formally withdraw from the European Union. Equity and currency markets swung wildly, and while stock markets have stabilized and in some cases hit pre-Brexit highs again (e.g. USA), the massive exchange rate adjustments seem to have solidified. The UK pound is still only slightly higher against the dollar than the historic lows it hit in the wake of Brexit.

We can report that sometime in July, for the second time this year, Chanel has increased UK prices. Classics are now 5-7% more expensive. Before the increase, the Medium Classic Flap was £3,380 – now, it’s £3,620.

StyleBefore March 2016March 2016 IncreaseInitial Amount IncreaseJuly 2016 Increase after BrexitAmount Increase from March
Chanel Medium Classic Flap Bag£3,075£3,380+ £305£3,620+ £240
Chanel Jumbo Classic Flap Bag£3,425£3,760+ £335£3,980+ £220
StyleBefore March 2016March 2016 IncreaseInitial Amount IncreaseJuly 2016 Increase after BrexitAmount Increase from March
Chanel Medium Classic Flap Bag£3,075£3,380+ £305£3,620+ £240
Chanel Jumbo Classic Flap Bag£3,425£3,760+ £335£3,980+ £220

Total Price Increase in 2016:

Chanel Medium Classic Flap (£3,075 to £3,620) = + £545. Overall, a 15% increase this year alone.

Chanel Jumbo Classic Flap (£3,425 to £3,980) =  + £555. Overall, a 14%  increase this year alone.

The Road to Price Harmonization

The weakness of the UK pound against other major currencies made the country very attractive for tourist spending (Read: Part 3: Brexit and the Asian Market);  for the past 3-4 months, the UK was THE cheapest country in the world to buy luxury (Read: Part 4 – UK: Cheapest Prices for Luxury Shopping).
But, the party seems to be winding down.

The price increase means that tourists will not find incredible savings on Chanel in the UK.  Let’s compare the USD Equivalent to each price change to get a better sense of Chanel’s plan for global price harmonization.

Current Chanel Prices in the US

StylePrice in the US
Chanel Medium Classic Flap$4,900
Chanel Jumbo Classic Flap$5,500

Currency Legend

CurrencyPre-BrexitPost-Brexit
1 GBP (£)$1.47$1.31

*Pre-Brexit exchange rates refer to June 22nd. Post-Brexit are based on today’s current conversion rates. Given the volatility of the pound and euro, values may be subject to change.

StyleUK Pre-March PriceUSD EquivalentUK March Price after IncreaseUSD EquivalentUK July Price after IncreaseUSD Equivalent
Chanel Medium Classic Flap£3,075$4,365£3,380$4,798£3,620$4,755
Chanel Jumbo Classic Flap£3,425$4,498£3,760$4,938£3,980$5,227
StyleUK Pre-March PriceUSD EquivalentUK March Price after IncreaseUSD EquivalentUK July Price after IncreaseUSD Equivalent
Chanel Medium Classic Flap£3,075$4,365£3,380$4,798£3,620$4,755
Chanel Jumbo Classic Flap£3,425$4,498£3,760$4,938£3,980$5,227

*USD Equivalents are based on the currency exchange rates of that specific month

Handbag Math

US Shoppers will not save a significant amount of money buying Chanel bags in the UK at this point. Buying a Chanel bag in the UK versus the US will still be somewhat cheaper though combined with the savings of the VAT refund (Read: Chapter 6 – How It Works: VAT Refund and Custom Duties).

  • If a US shopper bought a Chanel Medium Classic Flap Bag in the UK BEFORE the March price increase, they would’ve save $535 + VAT refund
  • If a US shopper bought a Chanel Medium Classic Flap Bag in the UK AFTER the March price increase, they would’ve save $102 + VAT refund
  • If a US shopper bought a Chanel Medium Classic Flap Bag currently in the UK AFTER the July price increase, they would save $145 + VAT refund simply due to the weaker pound because of Brexit

Example of VAT Refund

Chanel Medium Classic Flap

RegionChanel Classic Flap
USA$4,900
UK£3,620
VAT Refund (approx. 10%)- £362
Cost after VAT£3,258
USD Equivalent$4,279
Overall Savings$621

*Custom duties are not taken into account in this example above. Custom duties may decrease the amount of overall savings.

Future Price Increases?

The latest July price increase shouldn’t come as a big surprise. Chanel has been at the forefront of the luxury market trend towards global price harmonization (many think this effort was made in anticipation of a dramatic expansion of their e-commerce business) and the currency swings after Brexit wrecked their strategy. Most brands were probably waiting for the markets to cool down before adjusting prices, but we should see Chanel’s move as one of the first of many more to come.