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Wednesday, October 5, 2022
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Chanel Imposing Purchase Limits Due to Demand

Business

Chanel store | Image by Martin Good

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Chanel, a leading luxury brand, is increasing the exclusivity of its items due to skyrocketing demand.

The label’s chief financial officer, Philippe Blondiaux, explained to Reuters that the company must limit each client’s purchase quantity of specific items. This prevents certain retailers from purchasing bulk and establishing a monopoly on high-end products. The process expands availability for particular goods, prevents price gouging, and limits the resale of the items.

The limits will only be imposed on certain items and in specific regions.

One example is the Classic Flap Bag. Sotheby’s Auction House reports that this item retailed for around $1,200 in 1990 but now sells for close to $9,000. The product underwent four price jumps in 2021 but is still in high demand. Chanel now hopes to limit the quantity that retailers can obtain.

Chanel already limits purchases of the Classic Flap bag in South Korea. Still, these limitations have not affected demand. Reuters reports that in Seoul, customers line up before the sun rises to be the first to enter Chanel’s doors when the store opens.

Resellers may pay buyers up to $125 a day to stand in those lines and purchase items in bulk, Reuters reports. They then resell the exclusive items at markups of more than 20%.

Chanel has been screening clients that have patterns of bulk buying. After implementing the purchasing limits in those stores, their traffic dropped by 30%.

Sotheby’s says consumers can get a solid return on their investment if they purchase one of the bags. Chanel has raised prices several times during the pandemic, doubling the cost of the Classic Flap bag since 2019.

Reuters reports that the price increases align with what other luxury manufacturers are doing.

Inflation and currency fluctuations are driving iconic designers like Chanel to push their prices higher. Louis Vuitton and Gucci have also increased their pricetags to counter raw materials, transportation, and logistics expenses.

Some customers are frustrated by the purchasing restrictions, namely those in Russia, where international sanctions prevent residents from buying more than 300 euros’ worth of Chanel products at once.

Reuters reports some influencers in Russia have been destroying Chanel bags to protest the sanctions.

Chanel’s strategy has not impacted the brand’s revenues. Even though new lockdowns in China have caused sales in the country to plummet and the conflict in Ukraine has temporarily closed 17 Russian boutiques, overall sales are up. Chanel reported 2021 revenues of $15.6 billion, an increase of almost 50% from the year before.

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