Gucci, a prominent luxury fashion brand, has recently increased the prices of its handbags by up to 9%, following similar actions taken by competitors Louis Vuitton and Chanel. The COVID-19 pandemic has had a severe impact on the luxury fashion industry, leading to store closures and a significant decline in sales. As a result, these high-end labels are pushing for price increases to mitigate the financial repercussions.
The luxury fashion sector plays a significant role in the economies of countries such as Italy and France. However, due to global lockdowns, many stores were forced to close, resulting in a decrease in sales and an uncertain future for the luxury goods market. With a anticipated decline in people’s incomes, the industry is facing immense challenges.
A recent report by luxury goods analyst Flavio Cereda, commissioned by Jefferies, compared the prices of two Gucci handbags – the Dionysus priced at $2,290 and the Zumi priced at $2,980 – across various countries during May and June. The study found that both handbags experienced price increases ranging from 5% to 9% in Italy, Britain, and China.
Gucci’s parent company, Kering, declined to comment on the reasons behind the price hikes. However, Cereda believes that this adjustment will help bridge the gap between handbag prices in Europe, where they tend to be lower, and major luxury markets such as China. Chinese shoppers have been observed queuing outside stores as they gradually emerge from the lockdown.
Although the prices have increased, the Dionysus handbag in China still remains 28% more expensive in euros compared to Italy. For the Zumi, the price difference is 23%, as per Cereda’s data.
Cereda notes that Gucci’s decision to increase prices does not come as a surprise, as it is a way to counteract the decline in revenue. Capitalizing on its strong brand presence, Gucci is utilizing this opportunity to mitigate the impact of reduced sales. In May, Cereda downgraded Kering’s rating from “buy” to “hold,” reflecting the challenges faced by the luxury fashion industry.
Chanel also announced in May that it would raise prices on its handbags and select leather goods worldwide due to higher costs of raw materials resulting from disruptions in the supply chain caused by the coronavirus crisis. Furthermore, a review conducted by Reuters discovered that prices for Louis Vuitton handbags had also increased in Europe and the United States.
To summarize, Gucci’s decision to raise handbag prices is part of a broader trend within the luxury fashion industry. In response to the negative impact of the COVID-19 pandemic, brands like Gucci, Chanel, and Louis Vuitton are implementing price increases to offset the loss in revenue caused by store closures and reduced consumer spending.
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