How Dior and Chanel Are Tackling Fashion’s Pricing Problem: A Fresh Approach
The fashion industry is abuzz with the arrival of new collections from Chanel and Dior, two of the most prominent players in the luxury sector. But this time, the focus isn't solely on the creative reboot; it's on their strategic response to the pricing dilemma that has plagued the industry for years. With a two-year slump in the rearview mirror, the luxury market is now grappling with a key challenge: how to attract shoppers back while maintaining profitability.
The Pricing Dilemma
The issue is particularly acute for French powerhouses Dior and Chanel, which have led the industry in price hikes, surpassing the long-term average. Between 2020 and 2023, Chanel and Dior increased prices by 59% and 51%, respectively, on select key products, compared to an industry average of 36%. These steep hikes have contributed to a significant exodus of shoppers, with over 50 million leaving the market between 2022 and 2025, according to Bain.
The impact is evident in sales figures: Chanel's sales dropped 4.3% in 2024, its first decline since 2020, while Dior's sales lagged behind its stablemate Louis Vuitton, both part of LVMH's fashion and leather goods division, which suffered two years of declining sales, down 5% last year.
The Way Forward: Volume and Value
Analysts predict that luxury growth this year will be driven by volume, as brands have limited options after eroding much of their pricing power through so-called greedflation. This strategy, where price hikes accounted for a significant portion of sales growth, has left them vulnerable.
The solution lies in the traditional growth driver of leather goods, which has lost steam during the recent slump. By focusing on this category, brands can bring back sales growth in the coming year.
Handbag Charm Offensive
Instead of lowering the cost of entry for handbags, which could risk diluting exclusivity, Chanel and Dior are strategically expanding their lower-end leather goods offerings. Chanel's leather goods priced below €4,000 now account for nearly a third of its overall offer, up from 3.6% just three years ago, according to Data&Data figures.
Dior has taken a similar approach, with 87% of its leather goods priced below €4,000, compared to 69% three years ago. This shift includes a focus on smaller bags, bag charms, accessories, jewelry, socks, and hats, all priced below €1,000, according to The Consumer Collective's Jessica Ramirez.
Freshness and Influence
To attract shoppers, Dior is leveraging influencer partnerships, showcasing its new J'Adior ballet flats, priced at €890, through collaborations with Christie Tyler, Tina Leung, and Aimee Song. This strategy highlights the importance of fresh, affordable offerings in the current market.
The Power of Entry Points
Claudia D'Arpizio, luxury lead at Bain, emphasizes the importance of a holistic approach to entry-level items. By offering compelling products below a certain psychological threshold, brands can encourage purchases without focusing on investment. This strategy is evident in the introduction of bag charms, brooches, ballet flats, scarves, and sneakers, all priced below €1,000, at both Dior and Chanel.
Conclusion
As the fashion houses navigate the pricing dilemma, they are injecting freshness into their lower-priced offerings, leveraging influencer partnerships, and emphasizing the importance of entry-level items. The challenge remains to balance exclusivity and accessibility, ensuring long-term success in a market where shoppers are increasingly cautious about their spending.
