WSJ Article: Handbag Prices Begin to Hit Their Limit

[SweetDaisy05]

I am fascinated with this subject since I have started buying LV. I have loved purses all my life. I have noticed the prices of purses have gone up a lot a few years ago in all markets. There is a big gap in prices between Premier and contemporary bags. I would love to see that market grows for fashionable bags that are made well and not copying other expensive brands. I do think the price increase alone strategy can't last forever. The bag world would have to change greatly in material and design to keep the price increases going. For example, wouldn't LV have to change the Monogram Speedy design if it is priced at $3000 +? Something would have to change. I'm fascinated to see how things will change and how different brands will cater to different groups of people.

 

[vintagefinds]

Some excellent points being made here...

I think the one takeaway that really got my attention were those customers who weren't supposed to be price-averse (can absorb the price increases without it being an issue) are deciding they aren't willing to pay it anymore, either, and that is where the tipping point for these price increases comes into play. The idea was to raise a brand's status simply with a price increase (which I think is a slap in the face to consumers and just lazy brand marketing in general) is something those with substantial wealth aren't buying into anymore. And without the aggressive price increases, several of these brands would have experienced revenue drops overall. This model just isn't sustainable--the handles of these bags aren't laced with gold.

It's one thing for the masses to decide the price is too high for what is offered since most of us have budgets and other long-term financial goals, but for those who have the substantial wealth to buy these bags after the price hikes? They aren't willing to do it anymore, either.

The mini bag trend is interesting because I think it is their way of 'trying to give relief' with a smaller price point but the bigger issue is that these brands really pushed the limit on what customers are willing to pay. Now even the top earning customers are pushing back.

Finally.

You hit the nail on the head. It was short sighted for these companies to believe they could not only survive but thrive selling only to the richest customers, and that these rich customers were so dumb and frivolous that they'd just shell out 20K to Chanel each year without a momentary thought because it's Chanel. Even the top 1% of Americans are mostly working professionals who like to know where their money is going and have some perspective on value. Not to mention their closets are only so big.

You can have a huge, growing company. You can have a company that caters to the wealthiest in the world. I'm not sure you can have both.

 

[Amazona]

Amazona, I have no idea who the Sultan of Brunei is, or whether or not he's a moron, but for the truly wealthy, he may just pay that $5,500 because to him, the amount is pocket change. At a certain level of wealth, the difference between $3K and 5.5K gets lost in the rounding. Or so I've heard! How on earth would I know?

Gosh, I hope this is true! Because really, the middle class is disappearing. I don't think the luxury brands have ever had to worry about losing the truly wealthy customer. But they are starting to lose the customer who wants a luxury item, but it's a little bit of a stretch. Billionaires will continue to buy Birkins, but the people who have to make choices, and save up to just get one may start to decide it's just not worth it. The problem for the luxury companies will only come, really, when the high-income customer decides to step away, JMHO.

The Sultan of Brunei is filthy rich and from what I've heard, not a moron.
I think for rich people it's just a question of things being worth their price. The people in my circle of friends&relatives who can buy whatever they want still look at the price and what they are getting for it. It doesn't matter if a bag has Chanel written on it - if the buyer isn't getting their money's worth then they will most likely look somewhere else for either the same bag for a better price or a better bag for the same price.

You are right on the money (pun intended) on the question of people with less-than-stellar-means being outpriced. I'm one of them - I have 2 Mulberry bags, and the rest are in the lines of Longchamp, Modalu, Boss and Lumi. So bags that cost 50-70% less than the higher end Mulberries these days. The brands offer me what I need; bags that I can afford to buy whenever I want them and use without care.
I don't feel comfortable paying Mulberry prices anymore, in the olden days before Bruno messed up the pricing I could think of buying a few more. Now it's just too much for me to spend my whole month's "extra" money on one single bag when I can get a weekend trip to central Europe AND bring home a nice bag for the same amount of money.

 

[TejasMama]

One surprising observation in the article is that some of the wealthier customers are now looking toward contemporary luxury brands, willing to 'step down' as it were because they simply don't see the value in the premier brands with their continued price hikes. While it's true that the very very top tier of earners won't feel the pitch of the price tag, even higher earners, the target audience for these brands, isn't going to just throw their money at something if they don't feel it's worth what they're paying. These brands pushed it to see how much money they could get and now they may be hitting the wall with that stately.

So, when you can't keep hiking prices, what's a brand to do? They're going to have to work harder to earn business. Novel idea, yes?

 

[luvprada]

I think the reality creeps in, when people realize movie stars etc. don't BUY those bags--they get them free from companies, so consumers see them being carried by popular icons. It's advertising.
Also, would a truly high-income, or wealth established, client REALLY consider the chanel girl bag or the ones with flatware glued on? Wouldn't impress anyone @ corporate events or dinner parties.

But think about how useful having extra flat wear could be at a party !
Sorry couldn't resist. Flatwear on a bag

 

[Iv7]

As someone who works in sales in premier designer, I think the wealthy customers are getting a new...way of thinking? Just my experiences or what I've noticed around Boston but....The customers that used to come in 1-2 years ago and drop a few grand on a new Handbag or a Dress are now taking either more time to think about it before making a purchase or having second thoughts, leading to no purchase.

And it may be just in Boston + rich suburbs around Boston, but for us, I feel like the lack of spending on boutique stores has been easily noticeable because of investments. Actually quite funny that the article came from WSJ but when I look around the rich communities around Boston, much more of the money compared to past years is going towards stock market, housing market (especially new constructed condos/apartments like Millennium Tower Boston), and perhaps just money staying in the bank.

I see much less "big" shopping bags from like LV/Gucci/Burberry in particular and more small ones. But it's not bad for companies to branch out in other areas to make money like small accessories...like men's belts?

 

[klynneann]

I think the idea of these micro bags being a way to appease customers unhappy with a full size bag's price point by giving them a lower price point at which to purchase a bag is ridiculous. I'd much rather pay an extra $500-1000 for a functional bag, than to spend $1000 on something that is really meant to be ornamentation on a larger bag (as many of these micro bags are being marketed). If I can't afford the $1500-2000 bag that I can actually carry things in, I'm certainly not going to be able to afford a $1000 "bag charm".

I am hopeful that higher end and truly wealthy customers are starting to turn away from these exorbitant prices, but the problem, as with every area of commercialism, is that if there is demand, prices will continue to increase. I'm a big sports fan and I believe there is a similar problem in sports. People complain about how expensive it is to take a family of four to, say, a baseball game nowadays. The problem is that people continue to buy tickets, so there is a demand. Just because some people stop buying tickets, if the stadiums continue to sell out because other people are buying tickets, then the consumer has no power. Everyone, or at least the vast majority of consumers, would have to refrain from buying before major league teams, luxury designers, and whatever else is powered by demand will be willing to make any changes. A few people here and there won't make a dent.

 

[remainsilly]

But think about how useful having extra flat wear could be at a party !
Sorry couldn't resist. Flatwear on a bag

Penn & Teller had a great trick, done with a fork & a palmed serving of liquid coffee creamer.
Unfortunately, chanel glued additional pearls onto their clutch's flatware. So, I'd be stuck in a boring conversation, rather than being able to scream, "Hey! Watch me stick this fork into my eye!"
Bummer.