The Wall Street Journal: Chanel acts on prices as euro worsens gray market
PARIS—French fashion house Chanel said Tuesday it would increase prices in Europe on some of its prestigious handbags while slashing them in China in a bid to eliminate a growing price gap between Europe and Asia caused by the weakened euro.
Chanel said the price changes would take effect on April 8 and are required to eliminate a flourishing gray market for travelers who have been taking advantage of the vast price differential, buying handbags in Europe and reselling them in China.
“This measure is intended to reduce price differentials across countries, which have widened considerably further to the recent depreciation of the euro,” Chanel said.
The move could be the first of many price adjustments in the luxury industry after the deep slide in the euro against the dollar and other currencies has led the price of high-end accessories to vary greatly between New York, Paris and Beijing. While handbag prices have always been higher in markets outside of Europe, the current gap is far beyond the historical norm.
For consumers from mainland China—an important market for the luxury industry—a weak euro, in addition to hefty Chinese import duties, has made the price differential so large that it has prompted shoppers to buy their luxury goods, especially handbags, while traveling in Europe.
Currently, the price gap is large enough for a Chinese shopper to justify the trip to Europe. The price in China for the Chanel classic 11.12 bag is 38,200 yuan ($ 6,095), or about 63% higher than the €3,550 ($ 3,750) price a shopper pays in Paris for the same bag. Meanwhile, the same bag was recently selling for 31,000 yuan by one trader on Taobao.
An expanded version of this report appears at WSJ.com.