Chanel’s strategy of frequent price increases, particularly on its iconic handbags, has recently faced significant challenges. The brand’s approach, which saw the Classic Medium Flap bag’s price rise from approximately $5,000 in 2013 to $10,800 in 2024, aimed to reinforce its luxury positioning and offset rising production costs. 

However, this aggressive pricing strategy has coincided with a downturn in the global luxury market. In 2024, Chanel reported a 4.3% decline in sales, totaling $18.7 billion, and a nearly 30% drop in operating profit to $4.5 billion. The Asian market, a significant revenue source for Chanel, experienced a 7.1% decrease in sales, contributing to the brand’s first simultaneous decline in both sales and profits since 2020. 

Consumer sentiment has also been affected. Longtime Chanel enthusiasts have expressed dissatisfaction with the steep price hikes, especially when comparing the brand’s offerings to competitors like Hermès. The price of the Chanel Classic Flap bag now approaches that of the Hermès Birkin 25, leading some consumers to question the value proposition of Chanel’s products. 

In response to these challenges, Chanel has indicated a more cautious approach to future price increases. While the brand maintains its policy of biannual price adjustments to account for inflation and currency fluctuations, there is a growing recognition of the need to balance pricing strategies with consumer expectations and market conditions. 

Looking ahead, Chanel is focusing on long-term investments to strengthen its position in the luxury market. The brand plans to maintain its capital spending at $1.8 billion in 2025, matching the previous year’s 43% increase. This includes allocating an additional $600 million to enhance its supply chains by bringing more production in-house. Furthermore, Chanel intends to open 48 new stores globally, with a focus on markets like the U.S., China, Mexico, India, and Canada. 

Chanel’s recent experiences underscore the complexities of navigating the luxury market, where brand prestige must be balanced with consumer perceptions and economic realities. As the brand moves forward, its strategies will likely continue to evolve in response to these dynamic factors.