Chanel Tests Purse Lovers With $3,000 Price Hikes

Companies from Procter & Gamble Co. to Verizon Communications Inc. have been raising prices to offset rising costs of raw materials, labor and transportation. Consumer prices for goods and services rose 7% in December, the fastest pace since 1982, spurring the Federal Reserve to begin raising interest rates in March.

A Chanel spokeswoman said the company regularly adjusts prices to take into account changes in production costs and raw materials, as well as exchange-rate fluctuations. “The price of certain raw materials, which were already difficult to procure due to the quality we require, is regularly increasing and therefore leads us to adjust our prices,” she said.

Luxury companies have been taking advantage of surging demand to reposition their brands as even more exclusive and costly, according to industry executives and analysts. The practice predates the pandemic, but has received a renewed push in the past year as shoppers, emerging from pandemic-induced lockdowns, have snapped up high-price handbags, shoes, jewelry and other items.

“All the luxury industry is raising prices,” John Idol, the chief executive officer of Capri Holdings Ltd. CPRI 1.01% , owner of Michael Kors, Jimmy Choo and Versace, told analysts recently. “We’ve seen absolutely no consumer resistance to any of the price increases that we have taken, and there will be more.”

Chanel’s price increases stand out for their size and frequency, said analysts and consumers. It raised prices on its Classic Flap bags three times in 2021. It made another price increase in January on different styles, including Coco Handle and Business Affinity bags, which now cost 8% to 12% more.

“Chanel has had more price increases over the past few years than other brands,” said Meaghan Mahoney Dusil, co-founder and CEO of PurseBlog.com and PurseForum.com, websites that track the market. “People are shocked not just by the number of times Chanel is raising prices but also by the amount. They are also complaining that the quality isn’t increasing in line with the prices.”

Hermès International SA raised prices by roughly 3% for 2022, slightly more than its usual 1% to 1.5% annual increase, according to Erwan Rambourg, head of consumer and retail research at HSBC. Mr. Rambourg said certain Louis Vuitton and Cartier items cost 3% to 5% more than they did a year ago. And Rolex SA this year raised prices by an average of 3.4%, according to the company.

Louis Vuitton declined to comment. Hermès and Cartier didn’t respond to requests for comment.

The Chanel spokeswoman said the company raised prices on its Classic Flap bags in January, July and November 2021, but declined to comment on the amount of the hike. She said the January 2021 increase reduced disparities in regional prices by raising prices in the U.S., while prices in other regions either rose slightly or stayed the same.

The Classic Flap is a Chanel bag that is instantly recognizable in fashion circles. It was first introduced in 1955 by Chanel founder Gabrielle “Coco” Chanel, who designed a rectangular-shaped bag made of quilted leather with a turn-lock closure. The bag had a chain shoulder strap, an innovation when most women carried purses in their hands. It was updated in the 1980s by Chanel creative director Karl Lagerfeld, who added a woven leather chain and an interlocking double-C clasp. The bag is known for its hand-sewn details and other luxurious touches, including the use of real gold in its clasps and chains.

“We expect price increases of a couple hundred dollars,” said Dee Gables, a 32-year-old novelist who lives in Clawson, Mich. “But to go up $2,000 in six months upset a lot of Chanel lovers.”

Ms. Gables, who tracks handbag prices as a hobby, said the quality hasn’t kept pace with the rising prices. She has seen bags in Chanel boutiques in recent years with crooked pockets, missing stitches and chain straps that don’t lie flat.

Valerie Chan, a 33-year-old financial analyst who lives in Forest Hills, Queens, said the clasp on a Chanel camera case broke a few months after she bought it at one of the brand’s boutiques in 2018. “If you’re going to pay such a high price, the materials and craftsmanship should keep up,” she said. “I understand they need to raise prices to keep up with inflation. But lately their prices seem to be increasing at a more rapid pace.”

The spokeswoman said Chanel uses only the best materials and craftsmanship and manufactures all products in France and Italy, regions known for their expertise in leather goods. She added that the company extended its warranty last year for bags and wallets with a chain shoulder strap to five years from two years.

Chanel’s new prices put it more in line with Hermès, whose Birkin and Kelly bags have waiting lists despite prices that run into the tens of thousands of dollars. Chanel’s brand is about as strong as Hermès but until recently its bags were less expensive, said Mr. Rambourg, the HSBC analyst.

“As much as some people are upset at Chanel’s price increases, they are still buying,” Ms. Mahoney Dusil said. “As the price goes up, it becomes unattainable for some. But the core customers won’t be priced out.”

Chanel is privately held and reports financial results once a year. Sales for the most recently reported year, which ended in December 2020, fell 18% to $10.1 billion. The spokeswoman said that sales began to recover in the fourth quarter of 2020 and that improvements continued into 2021.

The rising prices of new Chanel handbags has spurred buying in the secondary market. The average price of vintage Chanel handbags sold by RealReal Inc. was $2,312 last year, a 26% increase compared with 2020.

“Vintage Chanel bags are a more accessible option than new bags, particularly in light of Chanel’s ongoing price hikes,” said Kelly McSweeney, women’s merchandising manager at RealReal, which sells previously owned luxury goods.

Write to Suzanne Kapner at [email protected]