Recently, it was reported that Cartier, a luxury jewelry brand of Richemont group, plans to raise prices by 3% – 5% in the next few weeks. Cartier is not the first luxury brand to raise prices in 2022. Hermes and Louis Vuitton have also announced price increases before. Over the past year, the prices of luxury brands such as Hermes, Silin, Louis Vuitton, Dior and Ferragamo have increased in turn, and their luxury groups have also achieved performance growth to varying degrees. Some brands said that the price rise was related to the rise of global manufacturing and transportation costs and fluctuating monetary policy. However, in the view of insiders, the reason for the rise in the price of luxury goods is far more than that “simple”.
Cartier will raise the price
The staff of Cartier SKP store told the shell finance reporter of the Beijing news that the price increase was about 4%. At present, no notice of the specific time of the price increase has been received.
In the professional watch shop of Cartier in Wangfujing Group Co.Ltd(600859) department store, the staff revealed that Cartier will raise the price every year. According to the law of previous years, there should be a price increase recently, but the specific price increase time has not been announced. Generally, the price increase range is about 5% – 10%.
At present, the product price on Cartier’s official website has not been adjusted, and the product price of Cartier tmall’s official flagship store is also consistent with the official website. In response to the rumor of price increase of the brand, the staff of the flagship store said: “we have not received the notice of price adjustment for the time being.”
As early as early as early April, netizens on xiaohongshu and other related platforms had released the news that Cartier would raise prices.
It is understood that Cartier raised its price twice in April and July last year. In July 2021, Cartier’s price increased by about 200 yuan to 2500 yuan, of which the entry-level price of the classic love series diamond inlaid Bracelet increased from 79500 yuan to 82000 yuan. The entry-level watch price of the new series tank must is 400 yuan to 19200 yuan higher than that of the discontinued entry-level watch tank solo.
price rise, performance increase
Cartier is just one of the luxury brands whose prices have risen frequently in recent years. In the face of luxury goods with “rising prices”, do consumers buy it?
Previously, the rumors of Cartier’s price rise had a certain discussion heat on social media platforms such as xiaohongshu. After the news of Diya’s jewelry price rise came out, netizens said that Diya hurriedly started with Diyi’s jewelry price rise. Xiaohongshu users who are also in Japan said that the price rise of Cartier superimposed the depreciation of the yen, and there were consumer queues in some Cartier stores in Japan.
With the news of the price rise of luxury brands, the three luxury groups previously disclosed that their performance in 2021 hit a new high in revenue.
In 2021, LVMH Group recorded a new revenue of 64.2 billion euros, a year-on-year increase of 44% over 2020 and a year-on-year increase of 20% over 2019; Net profit soared 156% year-on-year to 12 billion euros in 2020, up 68% year-on-year from 2019.
In addition to the strong rebound in market demand, some analysts pointed out that the sharp increase in LVMH group’s revenue and net profit is also related to the price increases of its luxury brands. In 2021, with the help of the price rise of luxury brands such as Louis Vuitton, Dior and Silin, the fashion and leather Department of LVMH group set a record revenue of 30.896 billion euros, an increase of 47% and 42% respectively year-on-year compared with 2020 and 2019.
Kaiyun group also set a new high in revenue in 2021. According to the data, the revenue of Kaiyun group was 17.645 billion euros, an increase of 35% year-on-year in 2020 and 13% year-on-year in 2019; The net profit was 3.361 billion euros, an increase of 70.4% year-on-year in 2020. Among them, Gucci, a luxury brand, made a significant contribution to the performance, with a revenue of 9.7 billion euros, accounting for more than half of the revenue of Kaiyun group in fiscal year 2021, an increase of 31% year-on-year in 2020; Sales in the fourth quarter increased by 32% over the same period in 2020 and 19% over the fourth quarter of 2019. According to incomplete statistics by the shell finance reporter of the Beijing News, gucci has raised prices twice a year on average since the outbreak of the epidemic. Another brand of Kaiyun group, Saint Laurent, which maintains the price increase frequency twice a year, also contributes significantly to the performance growth of the group. In 2021, Saint Laurent’s revenue increased by 44.5% year-on-year to € 2.521 billion.
In addition, another luxury goods giant, Richemont group, also performed well in the first three quarters of 2021. According to the data, in the nine months ended December 31, 2021, the revenue of Richemont group was 14.565 billion euros, an increase of 50% over the same period of fiscal 2020 and 29% over the same period of fiscal 2019. Among them, the revenue of other sectors of fashion and accessories business represented by Kou Yi was 1.545 billion euros, an increase of 57% over the same period in fiscal 2020; The revenue of jewelry business represented by Cartier was 8.44 billion euros, an increase of 55% over the same period in fiscal 2020.
why luxury goods keep rising
Why do luxury goods always rise in price? Brand side and industry researchers have different views.
LVMH group has said that the main purpose of the price rise of its luxury brands is to control manufacturing and transportation costs. Bernard Arnault, CEO of LVMH group, also admitted at the previous financial report meeting that LVMH group would ensure profitability in an inflationary environment by raising prices and other measures.
In February this year, Louis Vuitton adjusted the price of its leather goods, fashion accessories and fragrances. In addition to the price increase of luxury brands such as Adidas and Chanel in 2022, the price of luxury brands such as Adidas and Chanel has also increased. Among them, Silin, who had raised the price at the end of last year, raised the price again in just three months.
In fact, luxury brands have always had the mechanism of inertial price increase every year. Take Louis Vuitton as an example. According to incomplete statistics, Louis Vuitton maintained a price increase frequency of 2-3 times a year before the epidemic. However, since the outbreak of the epidemic, the price rise frequency of Louis Vuitton has an upward trend every year.
CYRILLE Vigneron, chief executive of Cartier, has pointed out that a reasonable price rise will offset the impact of changes in the exchange rate of the US dollar and Chinese currency against the euro.
Previously, Chanel’s price increase statement also mentioned many times that the price increase is to ensure that brand products are sold at an equal price worldwide. Narrowing the price gap between China and the global market has also become a major factor in the price rise of some luxury brands in recent years.
According to Zhou Ting, President of VIP Research Institute, inflationary pressure is only the superficial reason and excuse for luxury brands to accelerate the price rise in the past two years. According to a research report recently released by the VIP Research Institute, the report divides consumers into core consumers and mass consumers. Core consumers refer to customers with personal net assets of more than 10 million yuan. Their insensitive unit price for purchasing luxury goods online is less than 30000 yuan, while the insensitive unit price for purchasing luxury goods online by mass consumers is 3000 yuan.
Zhou Ting believes that luxury brands first created increment with the consumption growth of core consumers, and then created increment with the consumption upgrading of mass consumers. Due to the epidemic and other factors, the consumption ability of mass consumers has been affected. Relying on the consumption growth of core consumers to create increment once again plays an important role. However, due to the limited number of core consumers, the brand can only increase the price in order to increase the consumer unit price and total consumption. Zhou Ting also pointed out that in the process of popularizing the brand, the brand image is also popularizing, and raising prices is one of the important means to maintain the high-end image of the brand.
Since the outbreak of the epidemic, Chinese consumers’ luxury spending in the local market has increased significantly. According to the report released by Bain, a consulting firm, the scale of China’s personal luxury market doubled compared with 2019 in 2021. It is expected to increase by 36% year-on-year in 2021 to nearly US $73.6 billion. China is expected to become the world’s largest luxury market in 2025.
The importance to the Chinese market is also reflected in the first quarter financial report of 2022 recently released by LVMH group. During the reporting period, Asian markets, including China, contributed about 37% of the group’s revenue. In addition, the revenue of the fashion and leather products sector increased by 30% year-on-year. LVMH group’s revenue in the first quarter of this year increased by 29% year-on-year to 18 billion euros. It is reported that many luxury goods companies, including Hermes, are optimistic about the development of the Chinese market in the medium and long term, and it is expected that consumer demand will accelerate and even rebound strongly with the improvement of the epidemic situation. VIP Research Institute also pointed out that even affected by the epidemic, China’s luxury market will still grow in 2022 compared with 2021, but the growth rate will slow down, which is expected to be about 15% – 18%.
