Chanel, Hermes, LV raise prices in Korea, but sales remain strong

Luxury brands are hiking up prices in South Korea. Designers such as Hermes, Louis Vuitton and Chanel have increased their prices in Korea this year between January and March, with other brands including Prada, Burberry and Bottega Veneta following suit by raising their prices on June 1.

The luxury brand industry players say that the price increase is the result of various factors, including exchange rate and wages. Still, the price increase gap and its frequency have raised criticism.

For example, Louis Vuitton raised its price on seven occasions while Chanel increased the price on four occasions since January 2020.

“The increase rate of a popular Louis Vuitton bag reached almost 50% over the past year,” said an industry official, pointing out that it is out of the norm compared to the usual 5-6% increase rate.

DOMINO EFFECT? 

According to the luxury brand industry, major brands such as Louis Vuitton, Prada and Bottega Veneta all hiked the prices of their popular products on Tuesday. Also, Chanel, which had already raised prices on four occasions since last year, is said to be reviewing another price increase, sparking a backlash from consumers.

Italian luxury brand Bottega Veneta has increased the price of its Mini Jodie bag from 2.29 million won ($2,060) to 2.47 million won, up by nearly 8%. Prada also raised the price of its signature bags by around 100,000 won ($90) on average.

Industry watchers say the latest price hike is a domino effect started by the leading luxury brands, Hermes, Louis Vuitton and Chanel, which utilize a high-price strategy. The three brands with their strong price negotiation power will first increase their prices, with other luxury brands following in their footsteps.

Other high-end brands such as Burberry have joined the trend, raising the price of its Small Leather TB bag from 2.99 million won to 3.25 million won this month, up by almost 9%.

THE PRICIER THE PRODUCT, THE MORE KOREA BUYS

The irony is that luxury brands raise prices based on the paradox that they sell more when products are more expensive, as the desire to own something intensifies when it's harder to obtain.

However, this year’s increase is far above the average rate. Luxury brands usually increase their prices by 5-6% every year or two, meaning that the latest increase rate and frequency are unprecedented.

There are many factors why luxury brands can hike their prices fairly easily in Korea, with the main being strong demand for high-end goods in Asian markets, such as Korea and China.

Last year, the luxury brand market in the US and Europe shrank by 15% due to the global pandemic, while it reduced by only 7% in Asia.

Demand remains strong despite the price hikes, meaning that companies become more profitable if they raise their prices.

For example, the average retail price for the same luxury brand item in Korea is about 20.1% higher than in France as of last year, according to the global investment bank UBS.

“The demand for luxury brand items has escalated due to the prolonged COVID-19 crisis, which is driving consumers to purchase luxury goods with the money that normally would’ve been used to travel abroad,” said an industry official.


Write to Jeong-cheol Bae at bjc@hankyung.com
Danbee Lee edited this article.