Chanel Price Increase Expected, Hermes Sales Up – Is Luxury Fashion Back on Track?

According to the Madison Avenue Spy, now may be the time to bag a relative bargain on the Chanel 2.55 you’ve been eyeing. August is expected to bring a 20% increase in prices as certain luxury retailers begin to show signs of bouncing back from the difficult times that hit many people around the world.

Hermès posted second quarter sales results that were up 20% (must be the magic number), noting increased demand in Asia and the US, where a weaker Euro may have worked in the company’s favor. Groupe Laurent Perrier, a champagne maker, had a sales increase of 17% compared to the previous year, and Swiss watchmakers outpaced both for a 35% increase in exports compared to the previous year. {WSJ} Chanel recently opened a Korean store that set a one-day sales record of nearly $375,000. {JoongAng Daily}

Still, is now the best time to hike prices – particularly at a double digit rate? We’ll have to wait a few more weeks to see if the Chanel rumors pan out, but a recent report from MasterCard Advisors’ SpendingPulse showed a 3.9% decrease in spending compared to last June. With a few notable exceptions, even the good news isn’t entirely good. While sales are up, for many retailers this is an increase over sharp declines last year, so it’s not straight line growth.

What’s more, consumers with household incomes over $150,000 per year – the approximate entry level to be included among the top 20% of US households, account for almost 40% of spending. Luxury sales, which likely rely on $150k+ shoppers for a more significant portion of sales tend to fluctuate with the stock market. {Google News} Lately, the Dow Jones hasn’t been doing so well and may be an early sign of wealthy spenders becoming more conservative with their purchases in coming months.

The good news? Well, for the luxury retailers finally coming around to e-commerce, it may be better late than never. Online sales were up 9.7% overall. Apparel was the best performing category with growth of 18.6%, marking the seventh month of double digit gains. {Internet Retailer}

We know that Chanel has plans to finally offer a wider range of products to online shoppers – expanding on their existing beauty e-commerce area, and giving real competition to web savvy counterfeiters for the first time. Yet somehow we’re not sure if that will be enough if luxury shoppers start questioning why the same bag that was 20% less 2 weeks ago is suddenly more expensive. The Euro hit significant lows against the dollar this year, after laying off hundreds of workers at the height of the crisis we know they’re operating with a leaner workforce, and many brands cut production to respond to lowered demand. While Chanel is certainly one of the brands that can rely on its heritage to lend its products “investment” status, we’ll have to see if shoppers accept a price hike tied more to image than actual costs – or if they decide to invest elsewhere.