The escalating costs of luxury fashion have raised concerns about their sustainability. Luxury fashion brands have traditionally wielded strong pricing power, enabling them to increase prices without significantly losing customers. However, in 2023, prices have soared to unprecedented levels, and this trend shows no sign of slowing down.
According to data from the company EDITED, average luxury prices have increased by 25 percent since 2019. Luxury brands attribute these price hikes to factors such as inflation, regional price disparities, the aftermath of the pandemic, and the impact of the war in Ukraine. Still, for many luxury fashion brands, this upward trajectory has been ongoing for a longer period.
For instance, Chanel’s handbag prices have more than doubled since 2016. A classic 2.55 Chanel bag that sold for around $1,650 in 2008 now commands a price of approximately $10,200 in 2023. If the cost had risen in line with inflation over the 15-year period, it would be expected to cost around $2,359. This week, Pharrell Williams, the men’s creative director at Vuitton, introduced the label’s new Millionaire Speedy Bag, a made-to-order crocodile hide bag priced at one million dollars, creating a conspicuous display of extravagance.
“The pricing has become truly excessive across the industry,” noted influencer Bryan Yambao in an Instagram post when discussing a $6,000 woolen Miu Miu coat. “I believe it’s time for most brands to reconsider their pricing strategies.”
Over the past year, there have been indications that aspirational customers, who purchase entry-level luxury products like cosmetics and spirits, have reduced their spending. Middle-class professionals who once aspired to own luxury investment handbags or coats are finding themselves priced out of the market.
So, who is willing to spend $3,000 on a knit hat shaped like a duck from the British brand Burberry? What about $24,500 for a vicuña jacket by Brunello Cucinelli or $1,250 on a white cotton shirt by The Row?
The answer is primarily the top 1 percent or those willing to accumulate credit card debt. Analyst Luca Solca estimates that the top 5 percent of luxury clients now account for more than 40 percent of sales for most luxury goods brands. As wealth inequality grows worldwide, luxury brands are intensifying their focus on an increasingly smaller segment of their clientele. Will this strategy prove effective, or is there a potential backlash on the horizon that could deflate the luxury pricing bubble?
In a discussion among Style journalists, various aspects of luxury pricing were explored. The high prices of Phoebe Philo’s new line drew attention, even though they fall on the lower end of the luxury market. This has raised questions about the balance between accessibility and exclusivity in luxury fashion brands.
The 1 percent remains the target market for high fashion, leaving the rest of the population with more affordable items like perfumes and lipsticks. A significant portion of the middle class, who once saved for luxury pieces, now finds them out of reach.
The discussion also touched on the impact of credit card debt and the rise of the resale economy, where consumers can purchase luxury items secondhand, sometimes at prices exceeding the original retail cost. The psychology of pricing, scarcity, and brand loyalty plays a pivotal role in the luxury market.
While luxury brands may justify their pricing by pointing to mass-market collaborations, it appears that the luxury pricing trend is not likely to change anytime soon. The bubble of luxury fashion pricing shows no immediate signs of bursting.
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