PARIS — Positioning its brand for the future in an increasingly flat and digital world — and one racked by currency fluctuations — Chanel said Monday it plans to begin aligning the brand’s global pricing.
This story first appeared in the March 17, 2015 issue of WWD. Subscribe Today.
Effective April 8, the French fashion house is to harmonize sticker prices for three of its most iconic handbags, resulting in a sharp increase in Europe and a big drop in Asia.
For example, an 11.12 model, now priced at 3,550 euros in Europe, is to cost 4,260 euros come April 8, while the same bag in China, now 38,200 yuan, is to drop to about 30,000 yuan.
Meanwhile, the price of a Boy bag is to rise to 3,720 euros from 3,100 euros in Europe, while falling from 32,700 yuan to about 26,000 yuan. The 2.55 bag is the third classic model affected.
Ultimately, worldwide prices at the company are to never fluctuate more than 10 percent above or 10 percent below the global euro benchmark, said Bruno Pavlovsky, Chanel’s president of fashion, noting other products would be harmonized starting with the cruise 2015-16 fashion season.
He characterized the new pricing policy — which is bound to catch some of the brand’s competitors off guard — as a “better way to ensure the relationship we want to build with our customers.”
The shift is designed to ensure that customers are “seduced by the brand and by the products and not just led by these price differentials,” he said. “It’s to prepare the brand for the next 10 to 15 years. It’s more about the future than the past.”
Thanks to the rapid devaluation of the euro, price differences have become particularly stark in recent months, with some Chanel products costing twice as much in Asia as in Europe. According to Pavlovsky, this has led to a “huge increase in the parallel market, mainly in China and Southeast Asia,” despite the “very strong quotas” Chanel enforces in its boutiques.
The parallel market creates confusion about what products are genuine and which are counterfeit, a double headache for a luxury brand. “We want to be very clear that we are not part of that,” he said in an interview. “There is no way to go against that but to have the prices aligned.”
Chanel plans to introduce harmonized prices gradually and across all fashion categories, with the goal of full alignment by the end of this year, with the exception of Brazil, constrained by high export duties.
He noted prices in the U.S., U.K., Canada and Japan are already well aligned and would not require significant adjustment.
Harmonized prices will allow Chanel’s boutique managers to focus on building their local clientele, rather than being overwhelmed with “too many people coming for price differential attractiveness only.”
“We want to focus on customers who are seduced by the brand, who are seduced by our creativity, by our know-how and our finishing, and not just the price differential,” he explained.
Pavlovsky acknowledged that the new pricing policy would help position privately held Chanel for an eventual leap into digital commerce. “One day we will probably sell online, but we will do it when we are ready,” he said. “Our products need to be touched, tried, experienced. We can’t at the moment do this online.”
The executive declined to say when Chanel might venture into e-commerce, but suggested the company would need at least 18 months to two years “to develop something worldwide and powerful.”
Pavlovsky downplayed the prospect of a rush on products in Europe ahead of the April 8 increase, noting classic styles represent perhaps one-third of the brand’s handbag business in Europe.
Chanel’s designer Karl Lagerfeld turns out six collections each year, and most of its business is with novelties. What’s more, “our offer is very wide, so it’s a good opportunity to adjust our pricing policy,” he said. “In Europe, our local clients are buying a lot of bags between 2,000 and 4,000 euros and we’ll continue to have a lot to offer in this range.
“We are in a global world where people are moving very fast,” he said. “We want to have brand positioning which is consistent worldwide…I think it’s part of the Chanel posture to be very transparent about what we are doing.”
Chanel operates 190 boutiques in the world, and also distributes its fashion collections through department stores in the U.S.
Asked if he thought the pricing policy might disrupt the company’s business momentum, he replied, “I’m quite optimistic,” citing encouraging feedback from its boutique managers and robust business in countries like the U.S. and Japan.
“If we can do this, it’s because the brand is very strong,” he said, adding that “2014 has been the best year ever at Chanel, and we feel we are strong enough to do this.”