Understanding the Investment Return of a Chanel Bag
The price for a Chanel Medium Classic Flap bag has risen drastically from $1,150 in 1990 to $7,800 in 2021. While the 30-year compound annual growth rate of 6.5 percent for Chanel handbags is lower than the average for the S&P 500, it is is over 2x the rate of inflation in the US of 2.3% during that same period of time. The 5-year CAGR is directly in line with this stock market index, at about 10 percent. During the last five years, Chanel has consistently increased prices on its most popular handbag styles, from the Classic Flap and Boy Bag to the recently debuted Chanel 19.
A Luxury Price Boom
On July 1, 2021, Chanel shook the fashion industry, announcing that the prices for some of its most iconic handbags would be raised once again. This price increase would boost the price of Chanel bag models, like the Classic Maxi Flap, by up to 15 percent. This decision marked the third round of price adjustments instated by Chanel since the pandemic began. Yet, the gradual price increase of Chanel bags is not a stand-alone phenomenon. Luxury prices have been skyrocketing for decades, at over twice the rate of inflation. In a typical year, luxury brands like Chanel are expected to raise prices at least once or twice, largely in accordance with factors like material and labor costs. Moreover, price harmonization across global markets is an increasingly relevant part of the puzzle. In order to strategically increase tourist spending, luxury price tags have infamously been much higher in key Asian markets like China and Japan. Emerging from the worst of COVID-19, with customers eager to shop and top luxury players motivated to make up for lost revenues during lockdown, the Chanel price adjustments at hand are just one facet of a much greater trend in the world of luxury fashion.
The Future of Chanel Handbags
Chanel handbags are highly sought-after, iconic statement pieces, and demand is always higher than supply. Thus, Chanel continues to boost the prices of their most coveted offerings, and consumers will continue to pay. Since the start of the global pandemic, Chanel has boosted bag prices three times. The first spike came in May 2020, when the luxury fashion house increased the price of certain bags – including the 11.12, 2.55, Boy, Gabrielle and Chanel 19 – from 5 to 17 percent. Just five months later, in October 2020, Chanel boosted handbag price tags an additional 5 percent. By July 1, the price of styles like the Chanel 19 would be up an additional 10 percent, and the Flap bags another 15 percent. In the words of the Chanel brand itself, “the price of a Chanel bag reflects not only a sense of exclusivity, but also our values. Buying a Chanel bag brings with it renowned expertise and French design, an unfailing commitment to preserve skills and craftsmanship, leading-edge innovative manufacture, and guaranteed provenance of the raw materials (leather, jewelry ornamentations, etc.).” Evidently, the price hike of select Chanel purses adds to the allure of the brand, as more expensive directly correlates to more exclusive.
Impact on the Resale Market
Chanel bags remain the most sought after in the resale market and prices for excellent and pristine condition bags have mostly kept pace with the increase in retail prices over the last 10 years. Already, the days of finding a preloved Chanel bag on the secondary market for less than the original retail seem long over, regardless of the bag’s condition. Chanel bags on the resale market are known to maintain top resale values, and this is unlikely to change. If anything, the burgeoning demand on the secondary market helps Chanel successfully boost prices, as consumers can rest assured that there is a thriving market in place, should they want to resell in the future. It will be fascinating to see if resellers can ultimately charge Hermès-like premiums on Chanel purses, as worldwide prices continue to rise.