Oh there is demand for luxury handbags! Lots! But where is the supply?
With the end of the pandemic in sight, companies, like their customers, are trying to meet their post pandemic goals. On both of these lists, revenge buying comes in at the very top!
Revenue reports of luxury brands from the last quarter prove that there are ample buyers for luxury bags. People clearly want to indulge after being in lockdown for nearly a year. Whether it is due to savings accrued due to a simpler life or wealth amassed from trading in stocks or just a need to treat oneself, the desire to splurge runs high. No surprise, brands are eager to capitalize on this indulgence.
This presents a golden opportunity for luxury brands to recover some of the lost revenue in sales that they faced last year due to travel restrictions and negative sentiments. However, to cater to this surge in demand, brands must ensure that shelves and store rooms are stocked with the latest collections. They need goods ready to be sold ASAP.
But throwing their plans off, yet again, is another side-effect of the pandemic…
As you can imagine, the entire global supply chain faced massive disruptions all of last year. Just as things are starting to normalize, now there is a problem of shipping backlog. The supply chain is finding it hard to keep up with the sheer volumes of stock that need to be rapidly transported from factories to warehouses and stores around the world.
BoF recently reported a bottleneck jam at the Chicago port. Reportedly, ships wait endlessly to dock, and then face space scarcity due to full storage units. Airfreight isn’t operating at full capacity either, as only a handful of flights are running at the moment.
Furthermore, and perhaps more concerning, is the associated and inevitable increase in cost of material of goods. Raw materials aren’t reaching the manufacturers – which has added to the cost of getting them imported faster. This resulting cost hike is inevitably borne by the customer in the form of increased prices. Perhaps this explains the back to back price increases we see from brands like Chanel and Louis Vuitton since the start of the pandemic.
Recently, we wrote repeatedly about how difficult it is to get your hands on that Classic Chanel Flap. There was some difficulty even before the pandemic hit. However, the fervor to get the coveted arm candy reached a new high in the past few weeks with the launch of Chanel’s colors for SS21. One has to be placed on a reserve list secured with a credit card to be offered the opportunity to purchase the classic handbag in a desired color. All this without knowing what the exact color of the bag presented to you will be, or how long it will take to arrive!
Up until now, we were under the impression that this was a clever tactic deployed by the brand to increase demand and exclusivity! Consider the known and accepted strategy adopted by Hermès to limit the supply of Birkins and Kellys. But these recent reports show that there maybe an additional and different reason. It is now EVEN harder to get your hands on a Birkin or a Kelly bag than it was pre-pandemic! The supply chain challenge is a logical explanation for this situation.
Take the case of the 21P caramel for example. Despite demand, quite a few open and pending orders eventually were cancelled. Could this be because they wanted to direct the demand over to the season’s new colors or was it because the bags couldn’t be made or shipped in time?
Of course, the supply chain issues may be just one factor. Chanel’s recent marketing blitz for the Classic Flap Bag may worsen the supply-demand mismatch. And then again, there remains a loooong waitlist for the SS21 colors and bags …
We can only speculate on the actual reason(s), but we hope that these luxury bags become available soon!