With its hand-woven Italian-leather clutches and impossibly soft double-faced cashmere coats, Bottega Veneta has always positioned itself at the high end of the high-end market. Even in its new incarnation under Daniel Lee, it’s the luxury brand most closely associated with “stealth wealth” or quietly signalling status to those in the know rather than brash flash.
But while Bottega still sells plenty of minimalist-approved products, Lee’s collections have more look-at-me-appeal, generating plenty of social media debate, even after the brand disabled its Instagram account and wiped its Weibo presence.
Most recently, the fashion-conscious corner of Instagram was up in arms over a $3,390 floral-beaded Bottega Veneta necklace with silver hardware. The fire grew when it released a sterling silver, enamel-coated coiled necklace — fashioned to look like a phone cord — for $2,000. With populism on the rise and privilege under attack, followers on the industry watchdog account Diet Prada called the product a “scam.”
“I don’t know what’s more ridiculous, them trying to sell this or the people who buy it,” one Diet Prada commentator said.
A spokesperson for the brand declined to comment.
Chances are, plenty of Bottega Veneta customers won’t blink twice at these prices. At the beginning of the pandemic, as uncertainty set in among shoppers of all income brackets, some industry insiders thought luxury fashion prices — which have been rising since the Great Recession — would come back down to earth.
Raising Prices in a Pandemic
Instead, last spring, blue-chip brands like Louis Vuitton and Chanel moved to raise prices on handbags in particular, with some citing the cost of raw materials and labour. Chanel increased prices twice during the pandemic: once in May, when handbags went up 5 percent to 17 percent globally, and then again in October by another 5 percent.
“Like all major luxury brands, we regularly adjust our prices to take changes in our production costs and raw material prices, as well as exchange rate fluctuations, into account,” a spokesperson said at the time. “In the current environment, the price of certain raw materials, which were already difficult to procure due to the quality we require, has increased again.”
Analysts have other theories. Because sales were down during the pandemic, “brands (that could) rushed to increase prices in an effort to defend their bottom line,” said Bernstein’s Luca Solca. “After all, these are largely fixed cost businesses, so maintaining sales — either through price or volume — is of the essence.”
For some consumers, rising luxury prices were easily absorbed. With travel, restaurants and other experiences on hold, many high earners, jobs intact, found themselves with more disposable income than ever. On top of this, a booming stock market and crypto boom helped to boost their appetite for spending.
This comes after years of rapid new wealth creation in fast-growing economies like China as well as rising economic inequality, both of which have been a boon for the luxury market.
The proof is in the prices. Consider the Celine “Mini Luggage” tote in pebbled calfskin, which cost $1,600 in the US in 2011, just a year after it was introduced by then-new creative director Phoebe Philo. Today, the same bag sells for $3,100 on Celine.com, nearly double the price. When Yves Salomon first released its rabbit-fur-trimmed “Army” parka in 2010, it charged under $1,300. Today, it costs close to $2,100 on Ssense.com.
In the past year, global prices at Prada have increased by 13 percent on average, while Louis Vuitton’s prices are up 10 percent and Balenciaga’s are up 8 percent, according to analysis published by Bernstein, with additional data from Deloitte.
So far, the market has easily absorbed many of these significant increases. But how high can luxury prices go without consumer online backlash translating to real-life boycotts?
$500 T-Shirts, $1,000 Sneakers
It’s not only top-line handbags and garments made with rare materials that are skyrocketing in price. A decade ago, a pair of shoes rarely hit the $1,000 mark. Today, many of high fashion’s most-coveted pairs easily cross that threshold. T-shirts from designer brands often cost more than $500, and if sold-out SKUs are any indication, consumers appear to be comfortable paying those prices.
Who would have thought 10 years ago that people would buy $1,000 sneakers or T-shirts?
The rise in costs of “everyday” items can be explained, in part, by the changes in the luxury goods model. “The lower price point products have probably experienced higher inflation over the past few years, and seen the strongest price innovation,” Solca said.
In the past, entry-level products were often licensed businesses — perfumes, eyewear — managed by third parties. Today, however, “the entry customer is more opinionated and informed,” which requires a higher level of creativity on the brand’s end, according to Bain & Co.’s Federica Levato.
“In many companies, there are now departments dedicated to working on entry items — sneakers, T-shirts — and many of these categories are really revamped and rebuilt,” Levato said. “It’s the new way to attract a younger customer, but also a larger audience.”
While older luxury customers may balk at the prices of streetwear, young consumers are used to paying a premium on the second-hand market, making some of them less price sensitive than others in previous generations. They also know they can resell items, often viewing the ultimate cost of the product as the sticker price minus the resale value, boosting perceived affordability.
But Levato said it’s less about the price itself and more about “price relevance,” or the perceived value of an item. Cool items like Supreme T-shirts and Telfar bags don’t have to cost a lot to feel exclusive. Consumers still love a deal, expecting markdowns on products that were discounted in the past. Some brands will be able to continue to raise prices, while those that resonate less may have to pull back.
LVMH-owned Marc Jacobs, for instance, has chosen to further develop its lower-priced product ranges and even launch new ones, a reversal in strategy from 2015 when the company announced it would collapse the wildly popular Marc by Marc Jacobs contemporary line into the main collection. And, while the price of many Celine handbags are far higher than they were a decade ago, the Hedi Slimane-led brand’s overall prices have decreased an average 1 percent in the past year, according to Bernstein.
An October 2020 analysis by the investment management and research firm that took into consideration resale value, organic growth from the past five years and overall consumer interest found that luxury brands including Hermès, Dior and Cartier all had an opportunity to increase their price tags, while Tiffany, Longines and Bulgari should hold steady.
Regardless, those suffering from sticker shock may have to get used to seeing prices similar to those in Bottega’s latest jewellery collection. Ultimately, when consumers buy luxury goods they are paying for high-quality design, materials and construction, but most of all they are paying for social cachet. It’s worth it because the “right” people — whether that’s influencers or their peers — say it’s worth it.
“Who would have thought 10 years ago that people would buy $1,000 sneakers or T-shirts?” Solca said. “The Bottega Veneta beaded choker seems another step in this same direction, moving into a higher price bracket. Value — like beauty — is in the eye of the beholder.”