After Chanel And LV Want To Raise Prices, Global Consumers Are Queuing Up Urgently.

"Chanel is going to raise prices, and you don't start in advance?" this week, this news is full of social media and friends. It is reported that the French luxury brand has pioneered the pricing of its products in its local market, and will further expand to all markets. The queuing tide triggered by the announcement of Chanel price rises has reached China. In the evening of May 13th, more than 100 people outside the Chanel store in Harbour City, Hongkong, were waiting in line.

In addition to Harbour City, there are queues of people in three Chanel stores in Shanghai Peninsula, the national gold center and Hang Lung Plaza, including a number of brand stores at home and abroad, including South Korea's Seoul and Australia's Chadstone shopping center. Another French luxury brand, Louis Vuitton, also launched a price increase action on a series of products in many markets last week, raising the price range between 4% and 13%. Just now this week, the Champs Elysees, which was unsealed on Paris, appeared a queue of tens of meters outside its flagship store.

According to the purchase, the price increase of Chanel is much higher than that of Louis Vuitton. But later on, Chanel told Reuters that the price range of handbags and small leather goods will rise by 5% to 17% in euros.

Global price adjustment, this time for a while.

"As a result of production costs, raw material prices and exchange rate fluctuations, we will periodically adjust prices globally," Chanel said in an official statement, pointing out that the price adjustment is based on rising prices of some raw materials and is more difficult to purchase because of its high quality. "In the face of challenges faced by our manufacturers and suppliers, Chanel must continue to support them in the best possible way," the brand told Reuters, stressing that price adjustment is the same as all mainstream luxury brands.

"At the same time, we will continue to follow the global price coordination strategy, so as to avoid differences in product pricing between markets," the statement said. Indeed, many luxury brands routinely adjust their prices every year. Chanel launched the global price coordination strategy in 2015, and since then the strategy has been quietly followed by many luxury brands.

At that time, its products increased by 20% in the European market while the Chinese market dropped by 20%, which was welcomed by many consumers. This is because, according to Bain's 2014 Research Report on China's luxury goods market, the luxury market in the mainland of China for the first time showed a negative growth, which was 1% lower than that in 2013. 70% of Chinese buyers buy luxury goods through purchasing channels, of which 68% are due to price differences. Since then, more and more Chinese tourists have been shopping abroad, leading to the need for price coordination among brands and driving dual sales in the mainland and overseas markets.

The global price rise is facing a different scenario. Because of the epidemic, these luxury brands have to close their stores in China and Europe and the United States. The first two quarter performance can be met with heavy setbacks. Consumers have to stay in the country because of avoiding epidemics, plus months of confinement, and their consumption desire is seriously depressed. Announcing that the price increase can quickly push consumers who are sensitive to price to consume as soon as possible in a short period of time (thanks to the help of purchasing agents); secondly, they can further dilute the losses and costs before the price stabilizes and increase profits.

Is the news of raising prices a double-edged sword?

"Compared to other goods, the growth rate of luxury sales is extraordinary." Moon Ho-ik, a spokeswoman for Lotte Department, told Reuters that the number of people waiting in line is two to three times. From May 1st to May 10th, the sales of luxury goods increased by 30% over the same period last year, exceeding the total sales volume.

From a broader perspective, consumer demand and price sensitivity remain. In Hongkong, most of the queues are local residents in Hongkong. In addition to the wind up of the Chanel price increase, Harbour City, together with Times Square, will distribute HK $100 million worth of coupons in from May 11th to 17th. This is also the first time that the Hongkong shopping center has launched a Hong Kong shopping reward scheme and a non local consumption reward scheme.

The retail real estate behind these luxury brands also bears similar challenges. According to the performance data released by Kowloon warehouse, Hongkong's sales in Harbour City and Times Square both dropped by 20% in 2019, despite the impact of last year's turmoil in Harbour City. This year, it faces the continuing impact of the epidemic. From February, half of the rent has been halved, or Valentino has not been retained. The Italy luxury brand decided to close its largest flagship store in Harbour City last month after losing 20 million euros in revenue in Hongkong. Morgan Stanley released research report that the series plan is expected to drive sales of HK $1 billion 800 million, equivalent to 7.8% of retail sales in Hongkong in March this year.

But critics also point out that the price adjustment at this time is intended to make more profit from consumers who have been hit by the epidemic. In addition, excessive or frequent increase in price will jeopardize customer loyalty and brand image. According to the interface news: the price increase is the third increase in Louis Vuitton in nearly a year, the latest two time interval is only 2 months, after the outbreak of the new crown.

Many consumers expressed disappointment with luxury brands in social media. A netizen wrote in micro-blog: "the state of mind has completely collapsed. I will not buy it. Buy gold. Is gold not fragrant?" Many netizens also accused consumers of being too lenient about the price hike of luxury goods. They said that the price rise of haibai and Xibei restaurant was severely criticized after the outbreak, but luxury goods had gained a lot of income.

More importantly, despite the easing of the situation in South Korea and China, the epidemic that has not yet been completely dissipated should not be taken lightly. In the long queue of Chanel stores in Seoul, second major incidents of mass infection broke out in the city. The new crown virus spread by nightclub crowds has now led to 131 confirmed cases. According to the Korea Times, the Seoul municipal government is considering suspending the operation of the Chanel store by issuing an executive order because the re opening of the store is likely to increase the risk of group infection. Another potential problem is that some of the consumers are coming to Seoul from Seoul to buy the brand's products because Chanel stores outside the country have no stock.

In this regard, department stores have arranged staff at the entrance to check people's body temperature and remind them to wear masks. A spokesman for Chanel also said that a special queuing management system was introduced to minimize the number of queues outside the shop while ensuring adequate space in the store. This also reminds shopping centres and luxury brands that, despite the need to stimulate consumption and boost their performance, we must consider carefully and take more prudent and long-term measures.

Should every brand raise its price with the wind?

Rumors, including Gucci, Dior, Prada and other brands will follow up the price increase, but have not been officially confirmed. But not all luxury and fashion brands are easy to change their prices at this time, whether they are up or down.

According to BoF and McKinsey's launch, "the 2020 global fashion format report - new crown update update" shows that consumer confidence is at a historic low. The fashion industry has been particularly hard hit by the fact that clothing is not a necessary expenditure. In Europe and the United States, over 65% of consumers are expected to reduce clothing spending, while those who reduce household spending expect only 40%. In addition, 56% of consumers said that special promotions were the main factors driving them to buy clothes during the crisis. Luxury consumers will return to the state of paying full price for quality and never obsolete commodities.

This is why Chanel chose to raise its price only for its signature handbags, such as 2.55, Le Boy, Gabrielle, 19, and some small leather goods. Its classic product has proved that it is suitable for investment and value preservation at any time. Max Bittner, chief executive officer of Vestiaire Collective, a luxury resale website, said that since the outbreak of the outbreak, the price and sales volume of second-hand Chanel handbags has remained stable. "We have seen some initial signs that the classic section is better now," he said.

Chanel is a brand that still can keep alive during the economic downturn, so it has the qualification to raise the price. Louis Vuitton is also the same. According to Luca Solca, director of luxury goods at Bernstein, an investment bank, not every brand should follow blindly: "only when the brand has potential strong momentum or has very powerful energy, will it usually work?" (the brand that does not qualify) is usually very low success rate. An untimely increase in price can not help a brand that lacks its strength, improve its positioning, or even generate sales.

Jeffrey Berk, co-founder of another luxury resale website, Prive Porter, said: "(real high-end luxury goods can be preserved) is a universally accepted principle. "Even under the epidemic, the purchase of Chanel classic products is similar to" a way of saving money while indulging in a hobby while saving money "for affluent consumers.

For those consumers who are still sensitive to the price of luxury goods, according to the purchasing agency, if you have always wanted to buy a Chanel handbag that is never out of date, then hurry up before the price increases.