Broken Nose 'Erusha'... Price Increase Slows Amid Recession

Louis Vuitton and Chanel Slow Down Price Increases
Department Store Sales Slump Due to High Interest Rates and Inflation
Sudden Price Hikes Possible at Year-End Amid Surging Gift Demand

The luxury brands known as the "Big Three"?Erusha (Herm?s, Louis Vuitton, Chanel)?are moderating their pace of price increases this year. This is attributed to sluggish sales caused by reduced consumer spending amid high inflation.

According to the distribution industry on the 20th, the leading luxury brands Herm?s, Louis Vuitton, and Chanel have each raised prices once, once, and twice respectively this year. Compared to last year, when Louis Vuitton and Chanel raised prices twice and four times respectively, the frequency has significantly decreased.

Citizens are waiting for the luxury store to open in front of a major department store's luxury hall in Seoul.
[Photo by Kang Jin-hyung]

Among these brands, Chanel has implemented the largest price hikes this year, increasing prices of key products by about 12% compared to the beginning of the year in two rounds in March and May. The flagship product, the "Chanel Classic Small," rose from 12.37 million KRW to 13.9 million KRW, up 12.36%; the "Chanel Classic Medium" increased from 13.16 million KRW to 14.5 million KRW, up 10.18%; and the "Chanel Classic Large" went from 14.2 million KRW to 15.7 million KRW, up 10.56%.

Herm?s and Louis Vuitton raised prices of major products such as bags and clothing once each in January and June by around 10%. The representative Herm?s "Lindy 26" increased from 10.23 million KRW to 11 million KRW, and the "Capucines MM," famous as the "Kim Hee-ae bag," rose from 9.84 million KRW to 10.55 million KRW, with both products now well above the 10 million KRW mark.

Price increases have also continued among other major luxury brands such as Gucci and Prada. However, these brands have also slowed the pace by reducing the magnitude and frequency of hikes compared to last year. For example, Prada raised prices of key clothing and bags nearly 10% in three rounds in January, March, and August this year. If Prada does not raise prices further this year, it will mark the fewest price increases in the past three years. Prada raised prices six times in 2021 and four times last year.

Gucci raised prices three times in April, October, and December. In April, the "GG Marmont line" increased by about 5-6%, in October, the "Horsebit 1955" line, famous as the "IU bag," rose by about 5-6%, and in December, the "Ophidia" line increased by 10-12%. Gucci raised prices five times in 2021 and three times last year.

Luxury brands had sharply raised prices following the post-COVID-19 surge in revenge spending, but this year, with continued high interest rates and inflation, consumer sentiment has cooled, limiting further price hikes. In fact, the sales growth rate of luxury sections in the three major domestic department stores (Lotte, Hyundai, Shinsegae) has significantly slowed through last month. Shinsegae Department Store, which saw the largest decline, experienced a drop in growth rate from over 40% in 2021 to 24.8% last year and just 0.3% this year. Lotte Department Store and Hyundai Department Store also only managed growth rates of 5% and 5.4% respectively this year.

However, with year-end events driving a surge in gift demand, there are voices suggesting the possibility of a "surprise increase" targeting the year-end and New Year period. Typically, Herm?s and Gucci have raised prices significantly at the end and beginning of each year. Professor Heo Kyung-ok of the Consumer Studies Department at Sungshin Women’s University explained, "With the prolonged economic downturn this year, luxury consumption is definitely less than last year," adding, "Even the most prestigious luxury brands would have found it difficult to implement price hikes as aggressively as before." She further noted, "However, since price increases have traditionally occurred during the year-end season when consumption rises annually, it is highly likely that prices will be raised once or twice more this year as well."

This content was produced with the assistance of AI translation services.