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Why did the major luxury brands raise their prices during the health crisis

Why did the major luxury brands raise their prices during the health crisis

Boy Chanel
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According to analyses conducted by experts from Credit Suisse and revealed by Challenge magazine, Louis Vuitton has increased its prices by 8% in its main markets over the past year. According to the journal, most of this increase would have occurred after the first confinement. Chanel and Gucci also took advantage of the health crisis to increase their margins. But what is the cause of such a surge in prices in a time of global pandemic?

 

The answer to this question can be summed up in two words placed at the heart of the concerns of financial analysts, as well as the general management of companies: pricing power. This expression refers to the practice of increasing prices in times of economic hardening. In other words, it is a matter of improving profits to compensate for the drop-in sales volume. This ability to play on price leverage is nevertheless only reserved for reputable and stable companies whose price increases will not affect customer consumption. Even more so, if the latter do not realize the increase, then the company in question has very good pricing power.

 

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This notion therefore reflects “a favorable balance of power with respect to customers”, in the words of Gérard Moulin, head of European equity management at Amplegest. According to this specialist, pricing power is “a way of freeing oneself from cycles and adapting to changes.” The possibility for some firms to increase prices without losing market share is particularly important in times of economic difficulty.

 

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