Why they do it: luxury and its repeated price increases

The latest to do so was Celine, joining the club of luxury brands that periodically raise their prices, seemingly heedless of any uncertainty and recessionary forecasts. They can do this for several reasons, starting with the reliability of their consumers


The latest brand to adjust its price list upwards was Celine. It imitated Louis Vuitton, Dior, and Fendi (all controlled by LVMH), who had already triggered the increase. The price of the Celine Triomphe chain shoulder bag in shiny calfskin, for example, rose 8.5% in the US and 6.5% in Europe. Celine thus joins the long list of brands that have decided to raise their tag prices in this first quarter of 2023.

The increases seem inevitable. But in recent years, their frequency and magnitude have been staggering, especially on iconic products, such as the most famous and sought-after it-bags. Why have the brands decided to initiate a policy of repeated price increases at a time when the higher cost of living is a challenge for all consumers?

The repeated price increases of luxury

The first answer is this: luxury attracts a very different type of buyer than the standard one. Those who buy it are likely less willing to drastically reduce their standard of living. They can afford it because they have accumulated savings during the Covid period and now want to enjoy post-pandemic freedom.

The purchasing power of luxury consumers is always reliable, so brands rely on this awareness to raise prices and maintain profits,’ Zhang Yi, CEO of iiMedia Research Institute, a leading Chinese market analysis company, confirms to the Global Times. Indeed, brands raise prices, but, especially in China, there is always a queue outside boutiques when a new product is launched. And many consumers accelerate their purchases to protect themselves from another rise.

Why do they do it

There are several reasons why luxury brands increase prices every year: inflation, rising production costs, and fluctuation between different currencies. The goal is always the same: to keep profits stable. The strategy of luxury labels is based on the value of product quality and durability, supported by product superiority and the willingness of customers to pay.

In the report “How strong is the pricing power of luxury goods“, KPMG analysts examined the relationship between price and desire, highlighting how the receipt plays a different role according to different luxury consumer segments and how high-end brands leverage customers who are emotionally attached to the brand. The analysts reveal the real motivation for the continuing rises: “The price of luxury items is set to rise to maintain exclusivity during periods of inflation”. OK, but beware: ‘However, the tactic of raising the price to create desire is becoming less and less effective‘.

The easiest way to create more desirability

Arnold Ma, the founder of the marketing agency Qumin, with offices in London and Shanghai, notes to the Jing Daily that ‘without product innovation or major changes, price increases are the easiest way for brands to create more desirability: the fewer people can afford it, the more that bag will be in demand’. A reasoning that works in China.

Mike Bastin, head of the MA Fashion Marketing and Branding program at the University of Southampton’s Winchester School of Art, explains why it works in China Daily. “In Beijing, cultural identity has supplanted mass consumption as the main driver of increased luxury shopping among younger Chinese. The queues for established Western luxury brands in China will continue to be long, but,’ Bastin warns, ‘they will not continue forever unless there are significant changes in both the design and distribution of these brands’.

An expanding market

Bain argues that despite the conditions for a recession in the major economies in 2023, “personal luxury goods should see further expansion“. This paves the way for further increases in price tags in the second half of the year. And it should not be underestimated that luxury will have a broader consumer base that will expand from around 400 million in 2022 to 500 million by 2030. New young customers who neither know the prices of the past nor consider it important to know them.

Read also: