Jun28

Let’s Talk Cost

The luxurious pricing policy …

Life is expensive, a good Nashville advertising photographer is expensive and the Chanel Bag costs more and more every year. So what’s the deal with this phenomenon of prices growing for the luxury products?

The dynamics of prices growing for luxury items are not always associated with recession in the economy, inflation or increased costs of production. The Wall Street Journal reports that the price of the Chanel quilted leather bag increased on average by 70% over the past five years, while the cost of the classical model bags from Louis Vuitton increased by 32% compared to the price in 2009.

There are several theories to explain the general trend of rising prices across the industry of luxury goods, including watches and jewelry. Some argue that the high prices are due to the need to point out the high-quality of the brands that have now “middling” competitors, gaining more and more popularity. As the quantity of goods sold by Michael Kors and Tory Burches increases, the more the price of the Chanel and Luis Vuitton will rise. The high brands are now serious about making the pricing gap bigger between their super luxurious products and the “middle” ones.

There are also economic experts that argue that the rise in prices ahead of inflation is due to the rise of the production costs. “We are no different from other luxury brands when it comes to the pricing policy, the costs of the raw materials are growing and the currency rates are changing,” – said the Chanel spokesman.

Some economists have suggested that the rise in prices is the brand strategy. It has the purpose to make one brand’s product more desirable. This phenomenon has long been known in the economy, the paradox is that the growth rates lead to no less, and to the ever-increasing sales as goods become more desirable, and the possession of it indicates a higher status.

What we see today is that this strategy is no longer working for particular brands. However, the Chanel bags are still keeping their prices up as there is no decrease in their demand.

Moral of the story: Chanel is worth the investment.