European luxury brands may have painted themselves into a corner by raising prices dramatically in recent years, scaring off eager customers and testing the resolve of their most loyal customers.
“In an environment of subdued demand, rising prices and increasing gross margins are a concern for all customers,” said Luca Sorca, luxury goods analyst at Bernstein. “Not only those who have been bought out, but also those who can still afford it, may feel cheated,” said Luca Solca, a luxury goods analyst at Bernstein who calculated the eye-opening price. he said. Inflation in recent years.
A tally of carefully selected similar products shows that between 2020 and 2023, when consumers gorged themselves on luxury goods in their post-pandemic spending spree, prices rose by 66% for Dior, 59% for Chanel, and 54% for Moncler. It rose 43%. % at Prada, 31% at Louis Vuitton, 25% at Saint Laurent, 21% at Gucci, 20% at Hermès and 18% at Burberry.
HSBC analyst Irwin Lambourg calls this “greedflation,” and it’s a big sector headwind that won’t resolve quickly.
“With a few exceptions, most brands are indeed raising prices too quickly,” he wrote in a recent report. “Many will benefit from rebuilding the foothold for aspiring consumers to come back after the recent price cuts.”
Indeed, according to Jean Révis, co-founder of Paris-based luxury consultancy MAD, lowering the price of iconic leather goods is a big no-no.
“If you buy a handbag for 5,000 euros and six months later the exact same bag costs 4,000 euros, you’ll never go back to that brand,” he said in an interview.
Still, there are still some avenues brands can pull.
Although he declined to mention specific brand names, Reavis said some jewelery companies are proposing new products within their existing iconic ranges at more approachable prices.
“New entry-price products should be of the same quality, but use fewer expensive materials, which could result in lower prices,” he said.
In the future, he suggested, brands with iconic leather handbag models might consider introducing them in canvas or smaller versions.
Another way is to increase the value of your existing bag by adding functional details such as pockets, zippers, and reversibility.
“It makes the bag more sophisticated for the same price,” Reavis explained. “Value for the client is important. The trap is to reduce quality, and no brand can afford to do that.”
Beauty products and a wide range of gift categories, from enamel bracelets and bag charms to homewares, also offer a whole new avenue for offering a wide range of entry-priced products.
Rouge Hermès lipstick.
Provided by Hermes
“Brands struggle with aspiring customers. In most countries today, a large portion of business is done by encouraging current customers to upgrade and become even better customers for brands. “We are working hard,” Reavis said. “But the healthy growth of luxury brands always requires both. They need to continually hire and continually expand their existing client base. I don’t think you can say that. You need to find a way to tempt them. ”
In his view, “fashion has always had the power of creativity to attract aspirational customers,” and because many styles are seasonal and not easily comparable, there is the potential for more flexible pricing. We provide. “Creativity has to be part of the equation. It can’t just be price.”
Solca agreed, urging brands to make tickets cheaper and introduce new styles. It will “strengthen the content of all products whose prices have increased” and strengthen “innovations that stimulate consumers’ desire to purchase, regardless of price.”
Educating salespeople well about the sustainable features of products could be another way to attract younger, more aspirational customers to luxury brands, Reavis said. Luxury brands celebrate durability, noble materials and European production as beacons of high-quality consumption.
In a recent retail assessment of luxury stores around the world, MAD found that most employees were inadequately equipped to answer specific questions regarding, for example, compliance, production locations, and traceability.
“I’m not saying brands need to be active advocates, but I’m surprised that staff aren’t at least trained to answer questions when asked,” he said.
In his view, the reluctance to communicate stems from the luxury industry’s historical focus on design, quality, finish and perfection of the in-store experience, whereas sustainability It is said to be a complete and perpetual work in progress.
“The two ideas are very different,” he says. “Generally speaking, staff become very uncomfortable when this topic comes up.”
