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Gucci climbs handbag costs to control coronavirus hit
- 27th Jun 2020
Gucci has raised the cost of handbags by up to 9%, joining rivals Louis Vuitton and Chanel in a wager that their brands will still lure the well off, as top luxury brands attempt to shake off the effect of the COVID-19 pandemic.
The luxury industry, which assumes a huge role in the economies of Italy and France, has been hard-hit by the virus-imposed shutdown that constrained the functioning of stores over the globe and could confront long periods of vulnerability the people’s incomes are probably going to fall.
Jefferies luxury goods analyst Flavio Cereda analyzed the costs in different nations of two Gucci handbags; the $2,290 Dionysus and the $2,980 Zumi, and they noticed that in the months of May and June their prices have increased between 5% and 9%. This phenomenon was notices in the luxury markets of Italy, Britain, and China.
Analyst Cereda said in a report the value change would limit the hole between handbag costs in Europe, which are lower than in significant luxury markets, for example, China, where customers have queued at stores as they rose up out of lockdown.
All things considered, the cost in euros of the Dionysus in China was 28% higher than in Italy even after the significant amount of increase in price. The gap remained at 23% for the Zumi, as per Flavio Cereda’s report.
Cereda said, “We are unsurprised that Gucci, another brand with strong brand heat, is following suit with opportunistic price increases in an attempt to mitigate revenue contraction”. Cereda suggested the customers in May to keep their purchasing decision on “hold” for the time being.
Chanel said in May that they are planning to increase prices of their handbags and other leather accessories globally due to the impact of the increasing raw material costs because of the crisis-imposed disruption in global supply chain.
The impact of the COVID-19 pandemic on global logistics & supply chains is “a major disruption, along the lines of having an earthquake or a tsunami,” said Morris Cohen, Wharton professor of operations, information, and decisions. Cohen added, “This is an unprecedented type of disruption. I don’t think we’ve ever seen anything quite like this.”
The uncertainties lying ahead is swinging between extremes. “As the shortages worsen before they get resolved, prices of many products could go up for consumers even if laws exist against price-gouging”, said Morris Cohen.
Even LVMH Maison, Louis Vuitton is set to rise its product prices globally.