Economy

How The Pandemic Pushed Up Prices On Some Luxury Goods

Rather than offer discounts, high-end brands like Chanel are asking even more for their products. Silvia Ihring, style editor-at-large for  German daily Die Welt, explains why.

An assistant walking inside empty Chanel in Hong Kong.
Silvia Ihring

BERLIN — Now should be the ideal time for bargain hunters. Many clothes shops and online retailers have dropped the prices of designer items by up to 70% in a bid to shift stock that's been clogging up their warehouses throughout the coronavirus pandemic. But a few designer brands are resisting the urge to slash prices, and some are even going so far as to raise them.

Take Chanel as an example. In May, the French fashion house told Reuters that to mitigate the effects of the coronavirus pandemic, it planned to increase the price of selected bags by between 5% and 17%. The news agency also revealed that Louis Vuitton bags were more expensive in May than they had been the previous October. The Neverfull MM Monogram bag, currently sells for around $1,500, up from $1,320 in October.

Analysts from the U.S. financial services firm Jefferies reported price rises of between 5% and 9% on selected Gucci designs in the UK, China and Italy. At the beginning of July, a spokeswoman for Florence-based fashion house Salvatore Ferragamo announced that they intended to increase prices worldwide by between 5% and 7%.

These price hikes are nothing new in the world of luxury goods. "Many brands raise their prices every year, some even twice a year," says Oliver Merkel, an expert in luxury goods and partner at management consultants Bain & Company. "They do that to keep up with inflation, but they also often set prices a little above the inflation rate."

This means that some popular luxury items — Rolex watches, for example, or Hermès's famous Birkin bag — cost significantly more today than they did 10 years ago.

The virus spread and people across the globe stopped spending money on luxury items.

Even in normal times, that's not ideal for eager customers who may have scrimped for months to save up a few thousand euros so that they can own one of these status symbols. But these price hikes seem even more problematic in the context of the coronavirus pandemic, when countries across the world are seeing mass redundancies, salary reductions and companies in dire financial straits. In the middle of an unprecedented global crisis, the price of the largest model in Chanel's Classic Flap bag range, with its chain-link strap and iconic CC logo, has gone up by almost 1,000 euros, from 6,200 to 7,100 euros.

And yet, companies are pointing to the pandemic as the reason why prices are rising. It has caused severe financial difficulties for the industry as a whole, and individual brands are trying to balance out their losses. According to the latest study by Bain & Company, the market for luxury goods is set to shrink by between 20% and 35% this year.

A shopper walks with bags of purchases in New York. — Photo: John Lamparski/SOPA Images/ ZUMA Wire

The first impact was a huge drop in demand from customers in China. Then the virus spread and people across the globe stopped spending money on luxury items. Tourists from Asia, furthermore, represent a significant proportion of sales of designer fashion and accessories in Europe, and the travel restrictions spelled an end for international shopping trips. According to Chanel, the cost of raw materials has also significantly increased during the crisis.

It's difficult to judge whether these factors will justify price hikes for all brands, says Oliver Merkel. He says those companies that can afford to raise prices should be congratulated. "That means the brand's reputation is so strong that this kind of step will work for them," he explains. "Brands think very carefully about price changes."

Customers are still prepared to pay for the status and the emotional attachment associated with certain brands and products — especially those customers for whom a few hundred euros here or there won't make much difference.

"Chanel's customers are likely to be among those who haven't been hit particularly hard by the crisis," says Merkel. "We're seeing an explosion in the stock market, and property prices are rising again. Those are the kinds of industries where luxury consumers tend to work."

Customers are still prepared to pay for the status and the emotional attachment associated with certain brands and products.

While Chanel and Salvatore Ferragamo are using the effects of the crisis to justify their price rises, most brands are choosing not to comment on or explain their decisions. And with good reason, in Merkel's opinion. "Companies don't need to be defensive about this," he says. "On the contrary, they can point to the fact that they haven't made employees redundant, for example, or that they are still paying their staff's full salaries without accepting financial support from the government."

He says that those decisions are more important for a brand's image than the price of its goods. All customers know that the price of a luxury item isn't only determined by the cost of materials and production. "A pair of Gucci trainers costs around 500 euros, but its production costs are not significantly higher than a pair of Adidas trainers," Merkel explains. "People are also paying for the brand, and all the prestige it conveys."

Often the price itself sends an important message: namely, that this an especially exclusive product, desirable precisely because not everyone can own one. If the brand is well established and active in areas that are important to customers today — such as sustainability and tolerance — the price fades into insignificance alongside the larger narrative associated with the brand. That is, until it goes up again.

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La Sagrada Familia Delayed Again — Blame COVID-19 This Time

Hopes were dashed by local officials to see the completion of the iconic Barcelona church in 2026, in time for the 100th anniversary of the death of its renowned architect Antoni Guadí.

Work on La Sagrada Familia has been delayed because of the pandemic

By most accounts, it's currently the longest-running construction project in the world. And now, the completion of work on the iconic Barcelona church La Sagrada Familia, which began all the way back in 1882, is going to take even longer.

Barcelona-based daily El Periodico daily reports that work on the church, which began as the vision of master architect Antoni Gaudí, was slated to be completed in 2026. But a press conference Tuesday, Sep. 21 confirmed that the deadline won't be met, in part because of delays related to COVID-19. Officials also provided new details about the impending completion of the Mare de Déu tower (tower of the Virgin).

El Periódico - 09/22/2021

El Periodico daily reports on the latest delay from what may be the longest-running construction project in the world.

One tower after the other… Slowly but surely, La Sagrada Familia has been growing bigger and higher before Barcelonians and visitors' eager eyes for nearly 140 years. However, all will have to be a bit more patient before they see the famous architectural project finally completed. During Tuesday's press conference, general director of the Construction Board of the Sagrada Familia, Xavier Martínez, and the architect director, Jordi Faulí, had some good and bad news to share.

As feared, La Sagrada Familia's completion date has been delayed. Because of the pandemic, the halt put on the works in early March when Spain went into a national lockdown. So the hopes are dashed of the 2026 inauguration in what would have been the 100th anniversary of Gaudi's death.

Although he excluded new predictions of completion until post-COVID normalcy is restored - no earlier than 2024 -, Martínez says: "Finishing in 2030, rather than being a realistic forecast, would be an illusion, starting the construction process will not be easy," reports La Vanguardia.

But what's a few more years when you already have waited 139, after all? However delayed, the construction will reach another milestone very soon with the completion of the Mare de Déu tower (tower of the Virgin), the first tower of the temple to be completed in 44 years and the second tallest spire of the complex. It will be crowned by a 12-pointed star which will be illuminated on December 8, Immaculate Conception Day.

Next would be the completion of the Evangelist Lucas tower and eventually, the tower of Jesus Christ, the most prominent of the Sagrada Familia, reaching 172.5 meters thanks to an illuminated 13.5 meters wide "great cross." It will be made of glass and porcelain stoneware to reflect daylight and will be illuminated at night and project rays of light.

La Sagrada Familia through the years

La Sagrada Familia, 1889 - wikipedia

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