The luxury fashion industry is facing a critical challenge: how to tackle the pricing problem and win back customers after a period of significant price hikes. With the recent collections from Chanel and Dior, two iconic brands are at the forefront of this debate.
The Price of Luxury: A Slump in the Making
The luxury sector has been in a two-year slump, struggling to regain its momentum post-pandemic. Pricing has emerged as a key concern, especially for French megabrands Dior and Chanel, which led the industry in price increases, far exceeding the long-term average, according to Bernstein.
Between 2020 and 2023, Chanel and Dior raised prices by 59% and 51%, respectively, on selected key products. This is significantly higher than the industry average of 36%. As a result, Bain estimates that over 50 million shoppers left the market between 2022 and 2025.
A Shift in Strategy: The Search for Growth
And here's where it gets controversial: Chanel and Dior are now taking steps to address this issue. Chanel's sales dropped by 4.3% in 2024, marking its first decline since 2020. Dior, part of LVMH's fashion and leather goods division, has also experienced two years of declining sales, down 5% last year.
Analysts predict that luxury growth this year will be driven by volume, as brands aim to rebuild their pricing power after years of 'greedflation.' Leather goods, traditionally a growth driver for the industry, will be crucial in bringing back sales growth.
The Charm Offensive: Lowering the Barrier to Entry
Chanel and Dior are not reducing the cost of entry for handbags, but they are expanding their lower-priced leather goods selection. At Dior, the proportion of leather goods priced below €4,000 has increased to 87% of the overall offer, up from 69% three years ago. Chanel has also increased its offerings below €4,000, with these products now accounting for nearly a third of their overall selection.
Both brands are focusing on lower-priced handbags and adding more affordable options, such as purses under €5,000. Dior's new Spring/Summer 2026 collection features a growing assortment of items under €1,000, including small accessories like wristlets and card holders. These products serve as a gateway for shoppers to engage with the brand before making the leap into the expensive handbag category.
A More Holistic Approach: Entry-Level Items
Claudia D'Arpizio, luxury lead at Bain, suggests a more holistic approach to entry-level items. She emphasizes the need for a compelling offer below a certain psychological threshold, one that doesn't require a significant investment. Dior and Chanel are highlighting their new, lower-priced products through partnerships with influencers and by making them more prominent in their collections.
The strategy is evident in the commercial rollouts and the designers' runway debuts. As Jessica Ramirez, founder of The Consumer Collective, notes, "It's a bit more commercial, with smaller bags, bag charms, accessories, and jewelry becoming entry statements."
The Challenge Ahead: Adjusting and Adapting
Brands like Chanel and Dior are adjusting their strategies, but they face external challenges too. Rising costs and lower consumer confidence are still barriers to many shoppers. As Nick Anderson, Berenberg analyst, points out, "A big issue for aspirational customers is not willingness but ability to buy."
So, what do you think? Is this a smart strategy to win back customers, or is it a risky move that could compromise the exclusivity of these luxury brands? Share your thoughts in the comments!
