How Chanel sets the fashion for global business with set prices worldwide

Chanel's president of fashion says the company's new strategy of standardising product prices worldwide will prepare it for the next two decades and help it to develop its share of the Chinese market. While some competitors are already following Chanel's lead, analysts warn the strategy could backfire by devaluing the fashion house's image and making it appear less exclusive. Chanel announced last month that it would "harmonise" prices worldwide, starting with three iconic handbag models: the 2.55, 11.12 and the Boy bag. The subsequent rise in its product prices in Europe and the parallel drop in Asia prompted a massive surge in spending in China in the days that followed, with a Boy bag falling from 32,700 yuan (HK$41,400) to about 26,000 yuan in China, while in Europe the same item rose to €3,720 (HK$32,200) from €3,100. "We made a very important decision, to treat our customers the same way everywhere in the world. It was a big decision," said Chanel's president of fashion, Bruno Pavlovsky. The move appears to be a game changer in luxury retail. Other brands are already following suit, with Burberry, Cartier and Patek Philippe moving to standardise their prices, too. "The reason we decided to do the price standardisation was to prepare ourselves for the next 20 years," Pavlovsky said. "The brand is quite strong; the year before we had double-digit growth in almost every market, so we can afford to make such a decision." The move, which shocked consumers and competitors, was a response to fluctuating currencies - the euro tumbled sharply this year - as well as a nod to "borderless retail" and the increasingly global business of fashion. "The idea, which is very deep for Chanel, is about the customers," added Pavlovsky. "We want to be able to treat them the same everywhere, which was not the case before." Zhou Ting, director of the Fortune Character Institute, a Shanghai-based research and consultancy group, said other luxury brands were likely to follow Chanel's model and cut prices in China and Asia. "While overall luxury sales remain sluggish on the mainland, this would be an effective tactic to boost local sales in the short term, although it could also risk devaluing the brand by making it appear [less exclusive] in consumers' minds," Zhou said. Pavlovsky said that last year, huge fluctuations in foreign exchange rates meant that some handbags had cost twice as much in mainland China as in Europe. "We had a signal that we could not continue to accept this kind of situation. Our customers are travelling everywhere and we want them to buy the brand because they love it, not because they can make some money this way or that way," he said. Chanel's move has undercut what had become a lucrative practice for parallel traders. Some traders were even enticing Chinese students with free trips to Paris so they could buy handbags (Chanel requires ID on purchase and has a per person quota) and resell them back home at an inflated price. Pavlovsky said the move also targeted websites, particularly in China, where Chanel could not be sure if products were "genuine, second hand or counterfeit". "It's just the beginning of our development in China," he said. Despite being one of the most coveted and recognised luxury labels in the country, Chanel has only 11 stores on the mainland and nine in Hong Kong. Pavlovsky hopes that resolving the price mismatches will help "convert" Chinese customers from a "bag or leather goods mindset to a fashion mindset". Pavlovsky said he was in no rush to open more mainland stores, but wanted to upgrade existing ones to be "the best". The company says price standardisation will be rolled out across other products this year. This year's Cruise collection, which debuted in Seoul this week, will be the first full collection to sell at standardised prices. "In coming years it will be difficult for others not to follow suit," said Pavlovsky. Zeng Mingyue, a researcher at Beijing's University of International Business and Economics, compared the relatively quiet shops of luxury brands on the mainland with those in Europe, which were packed with Chinese. He said price standardisation was a "must". "[Differential pricing] will hurt the brands' image and make them lose the opportunity to build up a stable customer base in China," Zeng said. Additional reporting by Celine Sun

How Chanel sets the fashion for global business with set prices worldwide

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Rivals copy its strategy of standardised prices, but analyst warns company is risking its image

Rivals copy its strategy of standardised prices, but analyst warns company is risking its image