The fashion industry is in a state of flux, with two of its most prominent players, Dior and Chanel, facing a critical challenge: how to address the pricing problem while maintaining their luxury status. After years of significant price hikes, these brands are now struggling to attract shoppers back to their stores. The issue is particularly acute for French megabrands like Dior and Chanel, which led the industry in price increases, according to Bernstein. These brands raised prices by 59% and 51% respectively on selected key products between 2020 and 2023, compared to an industry average of 36%.
The steep price hikes have contributed to over 50 million shoppers leaving the market between 2022 and 2025, according to Bain. Chanel sales were down 4.3% in 2024, its first drop since 2020, while Dior has lagged behind its stablemate Louis Vuitton, both part of LVMH's key fashion and leather goods division. The luxury growth this year will be driven by volume, say analysts, as brands have few other options after eroding much of their pricing power through so-called greedflation.
To tackle this issue, Chanel and Dior are focusing on expanding their lower-priced leather goods selection. While they are not lowering the cost of entry for handbags, they are bulking up the lower end of their leather goods selection. At Dior, the proportion of leather goods priced below €4,000 has risen to 87% of the overall offer, compared to 69% three years ago. For Chanel, leather goods priced below €4,000 have swelled from 3.6% to nearly a third of the overall offer.
In addition to expanding their lower-priced offerings, these fashion houses are also highlighting the new products prominently. Dior, for example, is aiming to turn its new J'Adior ballet flat, priced at €890, into a consumer hit through partnerships with influencers. As they inject freshness at lower price points, the fashion houses are also emphasizing the new products prominently. Brands have to try to pull all the levers at their disposal, including adjusting product, prices, and teams, including designers.
However, there may be factors beyond their control. Rising costs and lower confidence are still weighing on many shoppers. A big issue for aspirational customers is not willingness to buy, but rather ability to buy. The luxury industry is in a state of flux, and it remains to be seen whether these brands can successfully navigate this challenging landscape and win back shoppers.
