The price bubble has turned into a deadlock for brands. Analysts are wondering about possible solutions: they exclude the hypothesis of continuing with increases, but also that of starting with decreases. It would be another mistake that would make customers flee. By La Conceria.

The impasse of the brands

Luca Solca, an analyst at Bernstein, has drawn up a sort of price increase ranking with WWD. Between 2020 and 2023, Dior increased by 66%, Chanel by 59% and Moncler by 54%. They are not the only ones who have stepped on the accelerator: Prada ‘s prices have grown by 43%, Louis Vuitton by 31%, Saint Laurent by 25% and Gucci by 21%. Hermès and Burberry, to complete the picture, have recorded increases of 20% and 18% respectively. For Solca, brands can correct their aim in only one way: by introducing new products with a lower entry price. But also, by “strengthening the content of products that have had an increase in price” and increasing “innovation to encourage consumers to buy, regardless of the price” added Solca.

No room for mistakes

Analysts are talking about broadening the offer at the base. Because reducing the prices of iconic leather goods, explains Jean Revis (co-founder of the consultancy firm MAD), would be a mistake. “Someone who bought a bag for 5,000 euros and six months later finds it for 4,000 euros will never buy from the same brand again”. So what can brands do? For example, they could launch products at lower prices because they are either smaller or made of cheaper materials. Revis, similarly to what Solca proposed, suggests increasing the perceived value of existing bags by adding more functionality, for example with a pocket, a zip or reversibility. “Something that makes the bag more sophisticated at the same price,” he says. “The value perceived by the customer is important. Reducing quality is an option that no brand can afford”.

The return of diffusion lines

The impression, we add, is that analysts recommend reintroducing (under false pretenses) the reviled “diffusion lines”. Remember the various D&G, Red Valentino, Marc by Marc Jacobs, Versus Versace (and so on and so forth)? Secondary brands have long been a vehicle for commercial expansion in segments of the public (the so-called aspirational) that could not afford the prices of primary rands. In the last decade, in conjunction with the start of the season of price increases, companies have progressively abandoned diffusion lines because they “diluted the brand” (that is to say: they damaged its prestige). That source of revenue, however, is missed: apparently, we must prepare for its return.