Your Survival Guy’s boots on the ground in Paris revealed long ago that times are changing for luxury brands. The absence of Chinese buyers was the first blow, and now the second (not including tariffs) is the lack of awareness of some brands to adjust pricing after the greedy buildup of demand post-Covid.
In The Wall Street Journal, Carol Ryan explains the difficulties being faced by LVMH (owner of Christian Dior), Chanel, Hermès, and Richemont, which have seen sales drop in the last quarter or over the last year. She writes:
All four companies are considered to be at the top of the luxury pile and have little exposure to spending by aspirational shoppers, which tends to dry up when times are tough. But they have differed in their approach to pricing.
Luxury companies began to charge more during the pandemic, when excess savings sent demand for their goods through the roof. Brands raised prices by an average of 36% between 2020 and 2023, according to Bernstein analysis—roughly double the rate of overall U.S. inflation at the time.
Dior and Chanel went further, hiking 51% and 59% respectively. Chanel’s Classic Flap handbag has become a poster child for “greedflation” in the luxury industry. The purse, which cost $5,800 in medium back in 2019, will set an American shopper back $10,800 today.
Action Line: Retailers, both of luxury goods and essentials, must wake up to the new post-Covid reality. Consumers are not flush with government handout checks, and they’re taking a more measured approach to their spending. When you want to talk about your spending in retirement, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
