Luxury prices in spotlight as Chanel enters new chapter

8 Jun 2024

The departure of Chanel's top designer early Thursday sent ripples across the $1.62 trillion luxury goods industry at a time when all the major global players are at a crossroads.

The playbook at the world's top fashion labels like privately owned Chanel and LVMH-owned Louis Vuitton and Dior has been to heavily market new styles from their high-profile designers while significantly boosting retail prices.

Major luxury companies have hiked product prices by 33% on average since 2019. That accounted for half of the industry's organic sales growth in the past two years, RBC estimates show.

As the cost of living soars around the world, shoppers have become pickier, challenging the companies' core strategies.

Chanel, the second largest luxury label after Louis Vuitton, reported 16% sales growth last year to nearly $20 billion, double the revenue a decade earlier. Price hikes accounted for more than half of the increase.

Chanel designer Virginie Viard, who had worked alongside Karl Lagerfeld and succeeded him after his death in 2019, made her mark at Chanel with breezy, Eighties-flavored renditions of the label's famous tweed ensembles. The news on Thursday of Viard's departure kicked off speculation about who will replace her.

Like many other luxury companies, Chanel has raised prices considerably since the pandemic, with the classic flap bag costing more than double at over 10,000 euros ($10,800).

Earlier this month, Chanel warned it was entering a more challenging environment, and has had to increasingly defend its lofty prices.