Over the past few years, prices in the luxury goods market have dramatically increased. This is something Pursebop noticed during the past few splurges but a spate of recent news articles has provided some hard numbers for my hunches. According to the WSJ, in the last five years, the price of the Chanel quilted classic has increased 70% to $4,900! Similarly, the LV speedy bag is up over 30%!
What’s causing the surge??? There are a few different theories:
1) As middle market luxury brands like Michael Kors expand, high-end fashion houses are increasing their prices to help consumers differentiate between levels of luxury. Says Milton Pedraza, head of the Luxury Institute, “The more Tory Burches and Michael Kors there are, the more the Chanels, Hermes and Louis Vuittons will try to price up.”
2) Costs of materials and labor are going up…According to a Chanel spokeswoman: “We are no different from other luxury brands in regularly adjusting our prices as our models, production costs, raw materials and exchange rates change.”
3) (I have to admit I had to do a little Wikipedia’ing to understand this one) Some economists argue that these price increases are strategic and designed to make the goods more desirable. Economist Thorstein Veblen proposed that there were certain luxury products, now known as Veblen goods, for which price increases can actually increase demand, contra conventional economic theory.
Regardless which of these is true, Chanel is set for another price increase in a few days on May 1. From what I’ve learned, the Jumbo Classic will go from $4,900 to $5,500 and the M/L Classic will go from $4,400 to $4,900 (increases are expected across all collections).
Looks like our Spring/Summer buying frenzy is soon coming to an end…