Have luxury brands gone too far with their recent price hikes?

What happened: Another new year, another bout of luxury rises as brands continue to inflate their prices. On January 18, Dior increased its prices, with a small size Lady Dior going from $4,800 (or 36,000 RMB) to $5,400 (41,000 RMB), an increase of 17%.

But even more controversial, another French brand, Celine, has raised prices for the second time in just three months. Initially priced at $853 (6,400 RMB), one of its wallets increased to $986 (7,400 RMB) at the end of 2021. And now it has been marked up to $1,186 (8,900 RMB).

The Jing plug: It has always been widely believed that luxury brands will increase their prices every year or more frequently. For example, from 2011 to 2020, Chanel’s average annual increase of 2.55 handbags has been growing for many years, reaching a 9.1% increase this year, according to CBNData. In May 2020, the house announced that due to the rising cost of raw materials affected by the pandemic, the prices of handbags and small leather goods would be increased overall by 5 to 17%.

However, no explanation was given for Celine’s RMB 1,500 price hike on her wallet, which infuriated netizens. “I can’t believe even the wallets have grown 1,500 in such a short time,” Liu Gongzi or 柳公子 wrote on the Xiaohongshu. Even though raising prices is a way to level up, a brand that constantly raises its price like Céline must be careful because this strategy must always be accompanied by a comprehensive marketing strategy.

Dior, for example, complemented its price hikes with a series of events designed to deepen its connection with consumers. She held her “Dior and Art” exhibitions in Shenzhen and Shanghai (but not without its own controversy), and these events seem to have distracted from their price hikes. On January 13, Dior also released a behind-the-scenes documentary from its early spring 2022 holiday show.

As Chinese consumers become more sophisticated and mature, they crave more meaning to justify their purchases. Rising prices confirm a perception of value, which creates the illusion of rarity and exclusivity, especially in China, where product selection can be limited. Yet this is not the only key to opening Chinese hearts and wallets. Beyond the creation of classic products, luxury must also give meaning to boost sales.

The Jing Plug reports on major news and presents our editorial team’s analysis of the main implications for the luxury industry. In the recurring column, we analyze everything from product declines and mergers to heated debates popping up on Chinese social media.

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