Kaarin Vembar is obsessed with the luxury and clothing markets. She also has a sassy mouth, so her editor decided to give her a column in an effort to mine information for readers. Karin can be reached at [email protected].
Whoever says that what goes up must come down has obviously not been at Chanel.
The fashion house introduced triple price increases in last year to meet supply chain and raw material costs.
And they are not alone. LVMH’s Louis Vuitton announced that the company is raising prices globally due to manufacturing and transportation costs. Reuters reported on February 15 that the company’s prices would jump across a number of categories, including leather goods, accessories and fragrances. Five days earlier, hundreds of Louis Vuitton factory workers had organized a walkout to protest against low wages and difficult working hours.
Which raises the question: what exactly do these price increases cover?
As fashion month draws to a close and the trends for the upcoming season come to light (micro-mini-skirts! Y2K fashion! Cut-outs! Whatever the hell that hat is! by Marni!) one style that luxury retailers can agree on is price increases.
In a month of February earnings conference with analystsCapri CEO John Idol said price increases were already underway at Jimmy Choo and there were more on the way.
“The brand has been undervalued,” he said, before revealing Versace’s prices will also rise. “The whole luxury industry is raising prices,” he said, saying Versace’s higher price positioning would bode well for the company’s gross margin. And, not to be outdone, Michael Kors will also be raising its prices.
Idol said that historically it has sold handbags at much higher prices, so it’s “going back to where we were before.”
Idol was quick to point out that it’s not just about better margins, that the company is working to improve product quality. Which, sidenote, weren’t you doing this all this time?
(Speaking of the year 2000, if I can reclaim some “Mean Girls” dialogue by saying, Regina George-style, “So you’re okay…Your merchandise isn’t the best quality for several years now?”)
Tapestry, owner of the Coach, Kate Spade and Stuart Weitzman brands, said in its last call on earnings that the company was identifying ways to strategically raise prices to offset inflation.
“We see an avenue to take advantage of price increases to offset inflation, while maintaining our market position and delivering attractive value to our customers, which is our overarching goal,” said Tapestry CEO. , Joanne Crevoiserat, during the call.
Hermès, which reported an “exceptional year” in its latest earnings report, said the fashion house did not intend to use the prices as a means to stimulate growth. “Our price is the real price. There is a real relationship of trust between us and our customers, and I wouldn’t want to jeopardize it,” said Alex Dumas, executive chairman of Hermès. in a presentation after the annual results.
The company then explained that the price increases, which are expected to be around 3.5% this year, are the result of rising manufacturing costs. What I hear is that the prices will go up even more.
Even Telfar, which is known for its affordable prices for luxury, presented a Round Circle bag at New York Fashion Week for a retail price. almost $600, and everyone almost lost their minds. To be clear, this is not a price increase, but rather the introduction of a new product at a different price, when brand bags usually cost between $150 and $300.
Now may also be the time for the luxury market to do what it has been trying to do for years. Fashion houses were always trying to strike the right balance by setting global price standards. Chanel was trying to regulate prices due to currency fluctuations in 2015.
But back to the discussion of gravity. It’s not like luxury handbag pricing follows Newton’s rules. If, for example, supply chain costs decrease or normalize somewhat in the near future, do we expect fashion houses to adjust to lower production prices? That those who say “production costs are rising” in their incomes will adjust to these costs? Of course not. That’s why what’s happening right now is here to stay.