France’s Chanel SA, the world’s second biggest luxury brand next to Louis Vuitton, announced that it is set to bring the prices of its popular handbags down in China while raising them in Europe.
The price decrease will start on April 8 and will include three of its most famous handbags: Le Boy, 11.12 and 2.55.
From 38,200 yuan, the 11.12 and 2.55 will now cost 30,000 yuan. Le Boy's previous price of 32,700 yuan will now be 26,000 yuan.
In Europe, the 11.12 and 2.55 will have their price raised from 3,550 euros to 4,260, while Le Boy will increase from 3,100 to 3,720.
In a Reuters interview, Bruno Pavlovsky, Chanel's president of fashion, said that the brand will also standardize prices in other products this 2015. However, he clarified that the global price tags will not go beyond 10 percent, above or below, of their euro benchmark.
Chanel's price adjustment is seen as a way to address "parallel resell markets that are facilitated by price differences and hurt the business, the image and character of the brand."
According to Bain and Co., there has been a 1-percent decline in the sales of luxury good in mainland China from 2013 to 2014.
In the Bain and Co. statistics, Chinese nationals from the mainland have spent around 380 billion yuan abroad. This accounts for about 30 percent of the total international luxury market.
Hong Junjie, the director of the Beijing-based University of International Business and Economics' research center for luxury goods and services, remarked that "high prices are one of the main reasons for last year's decline in luxury consumption in the Chinese mainland."
Hong further revealed that high prices have pushed the consumers to buy overseas, debunking the previous theory that the high-price strategy in China will always be applicable as Chinese perceive that high quality and taste come at a high cost.
Asked about this issue, the world's third biggest luxury brand, Kering Group, refused to comment. Kering is the owner of BV and Gucci brands.
The research director predicted that "Chanel is likely to see an immediate increase in sales as a result (of the falls in prices) in the mainland."