Why the New Chanel Price Increase and How will this Impact the Market?
Posted by The Ban Island Team
January 26, 2023
👋Hi everyone, welcome to our VIP members-only edition of Ban Island’s Collection Guide.
We interrupt your regularly scheduled collection guide with some breaking news:
Chanel price increase is confirmed in US, Canada, and possibly Europe.
With the rumor mill heating up the past week, I’ve checked with multiple of my SAs and unfortunately, they’ve confirmed that yes, it’s happening, and yes, it’s that steep.
Bags reported to be affected? All of our favorite Classics, of course:
- Classic Flap
- Chanel 19
- Boy Bag
- Reissue 2.55
This price increase isn’t subtle, like the usual ones we’ve seen them sneaking in on us.
Earlier this January, we saw an increase of “only” 3-6% across most styles. This round of price hikes is 10-12.5%. Basically each classic flap is about $1,000 USD more next month.
While the exact prices are still unknown, see the charts below for what the estimates are. (As always, all prices are in USD)
Chanel Classic Flap
Chanel 19
Chanel Boy Bag
Why the price increase?
1. Focusing on the VIPs
My sources shared that all the luxury retailers are focusing on their top 20% of clientele - the whales -- this 20% makes up 80% of the sale.
The strategy makes sense, which company isn’t focused on increasing total sales while decreasing costs? Highlighting the perfect ideal consumers who spend the most and service them more also means the company gets to lean out operations, increasing the profit margin.
The whales also currently buy in bulk - quite literally - a top clientele generates over $150K in sales per year, averaging 20 bags. (Now maybe more like 10). Would 10% change any buying pattern? Nope.
2. Doubling Down on Exclusivity
While all of these figures are speculative, we have analyzed Chanel and Hermès extensively through the years. The main dynamic at play is supply and demand.
With each price increase through the past years, Chanel is measuring the supply and demand -- still seeing a long line out the door and their Small or Medium classic flaps still have a wait list averaging 3 months out.
The answer is clearly to lower the demand (number of customers) by increasing the prices. It might seem counterintuitive to price out half of your customers, but it’s a strategy that has worked with Hermès, and many luxury brands are following the same playbook.
How will this impact the market?
Based on our Global Chanel Survey:
- 39.1% reported will now buy an Hermès bag instead
- 34.8% reported that they would still buy Chanel bags
If only 35% of customers will still buy Chanel at these new prices, that means the demand will indeed decline, and this drastic reduction of demand also means there isn’t much appetite for the collection value prices that’s often another 10-15% more than retail.
I.e., Medium Flap is $6,800 retail, with a market value around $7,200 (Hot colors)
After the price increase - retail will be $7800 (before taxes)
= Waitlist of 100 ladies will now reduce to 35 (based only 35% wanting this price tag still).
The waitlist will likely satisfy this shorter line of 35 - essentially eliminating any need of resellers.
Or if there is any waitlist at all, let’s say 5 ladies waiting, the hype is still simmered down.
If resellers charge 10% more, it’s now $8580 (before taxes), would the 5 ladies pay essentially $2000 more than June for this bag?
Probably not.
Our guess is that the preloved market would soften, quiet down with much less hype, effectively eliminating this aftermarket which is a focus and strategy of Chanel as well.
👉Check out our latest posts
- Chanel 21A Collection Drop Overview
- Top 10 Worst Collection Value Chanel Bags
- Top 10 Best Collection Value Chanel Bags
- Global Chanel Survey Results
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