It was always the case, as somebody who traveled frequently for business, I knew exactly what to buy in which city/country in the world, it has a lot to do with taxation and transport, some things you can buy for close to half the price in the US, especially in places with a low VAT, other things, often if it is made in the country, the government tries to encourage local products and the local economy, so obviously as a buyer you could take advantage. Often the flight ticket would cost more, but if you are there anyway....
A Casual Analysis of Price Increases in Lux Market - Would Love to Hear Others’ Thoughts!
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It was always the case, as somebody who traveled frequently for business, I knew exactly what to buy in which city/country in the world, it has a lot to do with taxation and transport, some things you can buy for close to half the price in the US, especially in places with a low VAT, other things, often if it is made in the country, the government tries to encourage local products and the local economy, so obviously as a buyer you could take advantage. Often the flight ticket would cost more, but if you are there anyway....
Why does this thread reminds me of that scene in Crazy Rich Asians where guy coaxed child to finish his dinner saying "There are poor people in America."
A strong secondary market is a factor that jacks up demand. There is a thriving 2ndary market all over the globe now, esp w/ ecommerce, and the security of knowing you can resell quickly is propping up the market. Plus rich people don't get impacted by recession, and actually they are getting richer throughout pandemic, so price doesnt matter much (demand inelatic). All basic demand and supply stuff.
A strong secondary market is a factor that jacks up demand. There is a thriving 2ndary market all over the globe now, esp w/ ecommerce, and the security of knowing you can resell quickly is propping up the market. Plus rich people don't get impacted by recession, and actually they are getting richer throughout pandemic, so price doesnt matter much (demand inelatic). All basic demand and supply stuff.
Here is another factor: easy financing. Zero interest for installment sover a year or two are common credit card offers in Asia.
Good analysis. It reminds me of a Business of Fashion article I just read about China.
www.businessoffashion.com
Op-Ed | The Future of Luxury in 4 Trends
The post-virus luxury sector will be shaped by the acceleration of four existing trends, writes Erwan Rambourg.
True, we don't have quite such generous offers, but it is also the "buy now, pay later" thing that lets people fall into debt, in the end you pay for it, you have racked up a massive debt... I always prefer to buy items when I can afford them, heaven knows what might happen in a year, I might get sick, have an accident...
From my point of view, luxury brands mean luxury items which have a value for their quality, but also for the brand itself. I pressume that getting a "name" in the luxury market must be rather difficult and costly. I pressume that those luxury boutiques placed in the best avenues must be really expensive, not to mention publicity and all the show business included in the expenditure of a good brand. As we are not talking about bread and butter or casual shoes and clothing, my opinion is that you are not obliged to buy an expensive bag or parfume, it is your decision if you want to spend your money on this things or others.
Deflation means you need less money to purchase something. With inflation you need more money to buy the same thing.
We are not really in a deflation situation in Europe, but if inflation is below 2%, it is considered a risk of deflation exists, and you would have deflation in certain products/services. When the inflation is 1%, it means prices of products in average are increasing 1% during the year. If a company, like Chanel, are increasing prices say 15%, it means they are increasing prices 14% above the average.
In a perfect close market, if the inflation is 1% (meaning also people salaries are only going up 1%), it would be very difficult to increase your prices by 15% because your buyers would no longer be able to afford the product in the same conditions. Also, you would not need to, because you are paying your suppliers and your labor at the low inflation rate. So if your costs have only increased 1%, you only need to increase your prices 1% to maintain the same profit. But Chanel can afford to increase the prices well above the inflation rate they are living with (that in France and Italy) and still find more than enough buyers. So why not.
Also pricing in the luxury business does not follow typical market principles. What you are selling is exclusivity, and high prices are a part of that.
I’ve really enjoyed reading everyone’s responses to my original post! Thanks so much for humoring me personally and engaging in general. It was a “casual” analysis that kind of went a bit further than planned because when I posted this thread, I’d been uncharacteristically out sick from work for a little over 2 weeks with COVID symptoms. When I wasn’t sleeping, I was lying down browsing online shops so in an effort to curb the spending without straying too far away from designer fashion, I figured I’d research the current state of the luxe market and the price increases! The boycott was an idealistic hypothetical “solution” that will simply never be. Literally the one principle my strategic corporate finance professor kept drilling into my MBA cohort was that our only goal is to maximize shareholder value. So yes, of course, businesses will do what they do - as they should! It isn’t easy to build up a brand to the stature of Chanel and Hermès; that took generations, commitments against mass production, and as many others mentioned: keeping FOMO levels up for sure. My profession is in the technology industry which in many ways is much more sensitive and reactive to consumer demand but as with the luxury industry, tech has major players who are either still relevant because they’ve managed to get away with staying a monopoly lol or they legitimately have a loyal consumer base. The boycott suggestion was more to remind us that we as consumers have more power than we might realize, but is it realistic? Let’s just say that I have been an active and willing participant in the panic buying that’s been going on the past few weeks as we approach Chanel’s next price increase on November 1, lol. Lots of different perspectives and other contributing factors I hadn’t considered which is always the case in analyzing global markets and trends. I’ve also been really appreciative of the fact that we can have a discussion such as this on a forum about purses - for the ability to engage in discourse without hurling insults but also because it’s a nice (reverse) “break” from the threads that require less mental gymnastics but are oh-so-necessary and just as appreciated! I just wanted to say thanks and that I love this community!
It’s worth noting that Chanel made a commitment early on, when it became clear that COVID-related impacts to business in multiple ways was unavoidable, to persevere without government assistance and without staff reductions. When they had to halt production their staff was still paid. It’s admirable how they’ve navigated these uncharted waters to maintain solvency thus far and armed with an awareness of this info, it can make a positive difference on consumers’ sentiments over the price increases. It has for me, anyway.
That is very loable. Zara also maintained the full salaries of all its workers without asking for the government assistance and without dismissals (although now they are closing branches) and incurred huge losses. They also put their Spanish ateliers to make robes for health workers, purchased masks, and put their airport, planes and logistics at the disposal of the Spanish government to bring supplies from the East. Plus a big donation from Ortega himself.
But they did not raise their prices.
What I mean is, we should indeed support companies that do things right, but their pricing policies have to do exclusively with the kind of market they are in. For Zara, it doesn’t make sense for business to raise prices 20%, for Chanel it does, and there is nothing else to it.
Quite a few high end brands made masks and clothes for health workers, as did local business in the UK, it sways me much more to them, while I admire Zara for what they did, the quality of their items and the totally inconsistent sizing, I just can't bring myself to buy there often, also, might just be me, but I noticed that Zara seems more like fast fashion, you get tired of their items so quick, it is almost like they have a weird energy? I won't say no to a pair of sandals from Zara if they happen to catch my eye, but they are not items you want to keep for a long time (with some exceptions). I sound bonkers when I say they feel "cold" to me, but I think you know what I mean. I am just drifting more and more into sustainable, or I am simply too old for the latest trends and fashions...
Zara is fast fashion. They basically reinvented the concept.
I don’t buy in Zara, if not occasionally for my teenage daughter. A friend convinced me to get a recycled cashmere sweater this season and I thought hey, at least it is sustainable. But it is already falling apart, so much pilling! I use it for home.
Really, the robes and the masks is the least of what they did, even if their sanitary robe production was quite impressive. They have a huge work force, and to pay 100% of everybody’s salaries and without resorting to the governments programs which are the standard in all Europe is quite something. Very few big companies have done such a thing.
Plus their logistic capacity has been essential for the Spanish government to organize and bring supplies in. All the planes bringing respirators and whatnot from China were Zara planes or used Zara‘s infrastructure, including their airport.
Some calcualte their total contribution has been worth more than 300 million euro.
And Amancio Ortega donated (on top of his usual donations, he is very invested in philanthropy in the health sector) 70 million euro of his own money. Granted, he is one of the richest men in the world, but so is Jeff Bezos and look at him.
I have been quite in awe how Zara has reacted to this crisis, honestly, I think there are few that compare.
Sorry for the OT!
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As I said, full of admiration for what they did, but their clothes, the price for the quality relation doesn't work for me. I can see the appeal for teenagers, but if I have an item I like and that fits, I want to keep it, for a long time