The luxury fashion industry is facing a critical challenge: how to navigate the delicate balance between pricing and accessibility. With the recent collections from Chanel and Dior, two iconic brands are at the forefront of this debate.
After a post-pandemic boom, the luxury sector has experienced a two-year slump, and pricing has become a key concern. French powerhouses Dior and Chanel, known for their creative reboots, have implemented some of the industry's most significant price hikes, leading to a controversial situation.
According to Bernstein, these megabrands raised prices by a staggering 59% and 51% respectively on key products between 2020 and 2023, far exceeding the industry average of 36%. This aggressive pricing strategy has had a significant impact, resulting in over 50 million shoppers leaving the market between 2022 and 2025, as reported by Bain.
The consequences are evident: Chanel's sales dropped by 4.3% in 2024, marking its first decline since 2020, while Dior's performance has lagged behind its stablemate Louis Vuitton. Both brands are part of LVMH's fashion and leather goods division, which has suffered two consecutive years of declining sales, down 5% last year.
But here's where it gets interesting: analysts predict that luxury growth this year will be driven by volume, not pricing. Brands are now realizing that they've eroded their pricing power through years of 'greedflation', where price hikes were a primary driver of sales growth.
Leather goods, traditionally the industry's growth engine, have lost momentum during this slump. However, they are now seen as crucial for reviving sales in the coming year.
The commercial rollouts by Chanel and Dior showcase their strategies to address this challenge. Erwan Rambourg, global head of consumer and retail at HSBC, emphasizes the need to rebuild pricing pyramids and start recruiting new customers. He adds, "You can survive for a while by selling to high net worth individuals, but it's not sustainable in the long term."
So, how are these brands adapting?
The Handbag Charm Offensive:
Chanel and Dior are not reducing the entry cost for handbags, as tinkering with their core products risks diluting their exclusivity. Instead, they are expanding their lower-end leather goods selection.
At Dior, the proportion of leather goods priced below €4,000 has increased to 87% of their overall offer, up from 69% three years ago. Similarly, Chanel has seen a significant rise, with leather goods below €4,000 now accounting for nearly a third of their selection, compared to just 3.6% three years ago.
Chanel's statement emphasizes their commitment to offering a diverse range, ensuring every customer can find a suitable bag.
Both brands are also introducing more affordable handbags, with Dior's new Spring/Summer 2026 collection featuring an expanded assortment of items under €1,000. This includes an increase of 27% in small accessories like wristlets and card holders, according to Edited.
JP Morgan's analysis reveals that products below €1,000 made up 43% of Dior's new SKUs in January. These items, such as bag charms, brooches, and sneakers, serve as an entry point to hook shoppers before they invest in expensive handbags.
And this is the part most people miss: these entry-level items are strategically priced below a certain psychological threshold, creating a compelling offer without requiring a significant investment.
As these fashion houses refresh their lower-priced offerings, they are also promoting them aggressively. Dior, for instance, is partnering with influencers like Christie Tyler, Tina Leung, and Aimee Song to create a buzz around their new J'Adior ballet flat, priced at €890.
Jessica Ramirez, founder of The Consumer Collective, notes that this more commercial and entry-focused strategy was evident in the brands' runway debuts in October. She adds, "It's about creating layers of entry statements with smaller bags, bag charms, accessories, and even socks and hats."
However, the challenge is not just about pricing. Rising costs and lower consumer confidence are also factors beyond the brands' control. As Nick Anderson, Berenberg analyst, points out, "Aspirational customers may be willing, but their ability to buy is a significant issue."
So, what's next for the luxury fashion industry? Will these strategies be enough to win back shoppers and drive growth? The debate is open, and we invite you to share your thoughts in the comments below.
