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How much ‘luxury’ do high-end brands have to increase prices?
It probably won’t be much of a surprise to learn that there has been a trend of rising prices across every sector of the UK and the global economy in recent times. And according to multiple reports, many of the names that we most associate with the last word in desirability and opulence seem to have responded accordingly.
Indeed, a recent article from Forbes cited such examples as Louis Vuitton raising its prices on dresses, shoes and handbags by an estimated 6% to 7%. Whilst Tag Heuer reportedly intends to put up costs by around 5% to 6%.
To what extent are luxury brands being forced to act, and how much are they simply choosing to act?
This is a tantalising question for many industry observers. Forbes contributor Walter Loeb wrote that while prices creeping up is nothing new among premium brands, the particularly sharp rises seen lately indicate that costs have increased. And management has been forced to take action.
Even the highest-end brands are not immune to the effects of spiralling inflation, which has impacted on costs of manufacturing and expenditure incurred in shipping goods. Loeb cited such data as food prices have gone up by 7% since 2019, and apparel prices going up by around 14% in the same timeframe.
Amid talk of other potential contributing factors, such as higher interest rates and upward pressure on salaries, it is also interesting to ask whether some price rises have occurred due to luxury brands being better able to do so without customer resistance than non-luxury brands.
Agence France-Presse has indeed speculated on this, suggesting that the producers of luxury goods hiking their prices may even help make their products more desirable to customers.
The same AFP article quoted the CEO of LVMH – which controls a wide range of prestigious brands – as stating: “Our advantage over many other companies and groups is a certain price flexibility; i.e. we have the means to react to inflation.” Indeed, UBS analysts have estimated that such top brands as Louis Vuitton have actually raised their prices some two-and-a-half times higher than the inflation rate over the past two decades. They add: “Pricing power remains one of the key characteristics of the luxury goods industry.”
Place yourself profitably to succeed with your brand in 2022
Naturally, continual and sharp price increases are not a tool that even the best-insulated luxury brands are likely to be able to call upon forever. Demand can, and likely will, slow for particularly susceptible businesses operating in this space, so they will always need to ensure they achieve the right balancing act.
Partnering with a specialised and experienced digital marketing agency could be one step to help ensure your premium brand makes only the best-advised moves during 2022 and beyond.
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