Covid 19 has savaged the global economy brutally, crushing the consumer demands of luxury goods. Many iconic labels and brands such as Roberto Cavalli, Diesel, J.C. Penney, Forever 21, to name a few have already filed for bankruptcy under chapter 11 where they are seeking to operate their few stores and in the meanwhile come up with a reorganization plan to clear the roaring debt. In the middle of squeezed disposable income of the consumer, a few of them, for the likes of- Chanel and Louis Vuitton are set for a significant price hike!

Price hike in the range of 1-2% have been reported globally on an annual basis due to increase in business cost inputs such as increase in price of raw materials, labour cost, taxes and duties of various countries. But the Covid pandemic has led to double the rate of price hike even more than the inflation rate of a country. All this is because the set labels like Chanel and LV can not compromise of quality and creativity. Chanel has announced its price hike percentage of 5-17% in its iconic products like Chanel boy, Gabrielle, Chanel 19, 11.12, 2.55 and small leather goods. LV on the other hand announced a price hike of 3% in March and another 5% in May thus leading to overall 8%. The increased prices were reflected in France but would eventually phase out globally.

China is considered to contribute to 35% of the global sale of luxury products which is estimated to reach 50% in near future. As the news leaked, thousands of shoppers in Asia flocked to Chanel stores to snap up handbags before the price increases take effect in their markets in what effectively became a sort of reverse sale. Lines formed outside Chanel boutiques in Shanghai, Hangzhou, Guangzhou and Beijing. In Seoul, the queues were so
long that the municipal government is considering an order to suspend Chanel from doing business in the city, citing fears over Covid-19 infections.

One of the spokesperson of Chanel at the interview with BOF commented, “The price hike is to pad margins and cushion the bottom-line impact of lower overall sales volume as they try to make up for their revenue loss during weeks of forced stores closures.”