Chanel raises prices again, exceeding 80,000.

Author | Cao Anxun

Editor | Zhang Xiaoling

On a Saturday morning at the end of August, the temperature in Shanghai soared to 32℃, but there was already a long queue outside the Chanel store in Shanghai IFC. Coincidentally, the Chanel stores in Beijing SKP and Chengdu IFC have also seen queues forming in recent days, as people have received hints from the sales staff and want to make their purchases before the price increase.

On September 1st, the hammer fell, and Chanel China raised its product prices. After a collective price increase of 10% for handbags in the past six months, Chanel has raised prices for the second time this year.

According to the official website, Chanel has raised prices for almost all classic and perennial styles, with an overall increase of about 7%. Among them, the prices of Chanel CF Medium and 2.55 Medium have both increased from 74,900 yuan to 80,500 yuan, breaking the 80,000 yuan mark and setting a new price record for Chanel handbags. Chanel 19 has increased from 47,100 yuan to 50,500 yuan, breaking the 50,000 yuan mark, and Chanel 22 has increased from 44,800 yuan to 48,100 yuan.

In March, Chanel had just experienced the first round of global price increases this year. At that time, the prices of CF Medium and 2.55 Medium had increased by 12.6%, surpassing the official price of Hermès' classic Lindy bag, which caused many consumers to exclaim that Chanel was abandoning the middle class.

Now, with Chanel's price increase once again, the prices of Chanel's most expensive handbags have surpassed Hermès' most representative Birkin 25 and Kelly 25, and its ambition to catch up with Hermès is unstoppable.

Currently, the official price of Hermès Birkin 25 in Topo leather with gold hardware and elephant gray is 83,900 yuan, and the official price of Kelly 25 in Epsom leather with gold hardware and elephant gray is 90,200 yuan. Excluding allocation factors, the price difference between them and Chanel CF Medium and 2.55 Medium is less than 10,000 yuan.

Zhou Ting, the director of the Luxury Goods Market Research Institute, said that Chanel is one of the luxury brands with the highest price increase in the past three years. The price increase in March this year brought the price range of the CF series close to the base price of Hermès Birkin. With the price increase in September, the prices of the CF series and the 2.55 series have officially entered the price range of Hermès Birkin.

"Chanel's goal is to make the unit price of benchmark products exceed that of Hermès. In addition to enhancing brand image, increasing sales and net profit, the price increase is also important because Chanel wants to challenge Hermès' brand position."

Behind this, in the field of handbags, Chanel has been catching up with Hermès comprehensively over the past three years through eight price adjustments, brand marketing, and strengthening its focus on high-net-worth individuals, and has tasted the "sweetness" from it.

Chanel's 2022 earnings report shows that in the 2022 fiscal year, Chanel achieved a 17% year-on-year increase in sales to $17.2 billion (approximately 121.4 billion yuan), making it the world's second-largest luxury brand after Louis Vuitton; operating profit increased by 5.8% to $5.8 billion. Chief Financial Officer of Chanel, Philippe Blondiaux, revealed at the performance meeting that half of the revenue growth came from price increases, while the other half came from overall sales volume improvement. All product lines recorded double-digit growth.

In recent years, every time Chanel raises prices, it triggers a buying frenzy. Upon hearing the news of the price increase, Xiao You (pseudonym), who had just bought a black lambskin bag, felt fortunate, saying, "Luckily I bought it early. I heard that the small-sized black lambskin bags at Shanghai Hang Lung Plaza, Golden Resources Mall, and The Peninsula were all sold out."

"Price increases enhance the brand image and give customers the concept of value preservation and appreciation, adding certain financial attributes to the products. Therefore, it creates a phenomenon where the higher the price, the better the sales," said Zhou Ting.

Regarding this year's pricing strategy, Philippe Blondiaux stated, "We will continue to maintain the previous pricing strategy in 2023." As for the reasons for the price increase, it is mainly due to rising wages, raw material prices, and inflation.

In addition to price increases, Chanel is also intensifying brand marketing and enhancing brand positioning to further attract high-net-worth individuals.

In the 2022 fiscal year, Chanel's expenditure on brand marketing activities amounted to $2.05 billion, a year-on-year increase of 14.3%, mainly used for hosting large-scale fashion shows in Paris and other global locations. In addition, over the past year, Chanel has also opened appointment-only private salons in Taikoo Hui in Guangzhou, Shanghai Hang Lung Plaza, and Beijing SKP, providing exclusive shopping experiences for high-net-worth individuals. In the future, Chanel will also open prestigious salon stores in Taikoo Hui in Guangzhou, Shenzhen Bay MixC, and Chengdu IFS. The investment in the Shenzhen Bay MixC store alone amounts to 43 million yuan.

Zhou Ting stated that Chanel has skillfully adjusted its customer segmentation using pricing tools, strengthened the stickiness of high-net-worth customers through exclusive salons, and maintained the style of top luxury brands.

However, the road of price increases and elevation of status is not smooth sailing. Chanel is facing increasingly discerning consumers.

After this round of price increases, in addition to celebrating and marveling at the bag purchases as comparable to financial investments, more consumers are also examining the differences between Chanel and Hermès bags. Axi (pseudonym) said, "Chanel's price increases in the past two years have been terrifying. The price I paid for the Chanel Classic Flap bag is like investing. I'm waiting for it to surpass 100,000 yuan one day. At this rate, it will be around 2025. But if it surpasses 100,000 yuan, I might as well focus on raising horses."

This means that on the road of catching up with Hermès, Chanel's pricing, quality, and brand will continue to be tested and balanced, and the competition between Chanel and Hermès will become increasingly fierce. KEIKO, who is studying in Japan, admitted that Chanel is like a noble lady. Even if she is careful every time she carries it, there are still scratches when she returns home. However, Hermès is versatile and durable, with better leather quality and craftsmanship.

Looking ahead, Zhou Ting stated that price increases carry risks, and frequent price increases challenge consumers' psychological tolerance. The ultimate result may be that most consumers leave, while a few price-insensitive ultra-high-net-worth clients will remain. The hierarchical attributes of the brand will be further highlighted, but sales may stagnate after reaching a peak. This may be what Chanel will look like in a few years.

But it will have nothing to do with the ordinary people. In this world of consumer differentiation, high-end consumption remains strong, but the middle class and bottom-end consumption are constantly downgrading. Chanel is the selector and prospector in this magical wave of consumer differentiation, and the ordinary people are destined to be abandoned by Chanel.