From the “holy trinity” to Dior and Prada, designer brands have long been synonymous with high prices. However, with each new year, consumers have noticed a steady increase in retail prices. In today’s article, we will explain why luxury brands raise their prices yearly and why now might be the ideal time to sell your preloved designer items for a profit.
Why Luxury Brand Prices Increase Yearly
Consumers are paying more than ever for high-end bags, jewelry, watches, and other luxuries for the following reasons:
“Inflation” is a sustained rise in the price level of goods and services. Various factors lead to this economic phenomenon, including increased demand, higher manufacturing costs, and changes in monetary policies.
For renowned designer brands in the fashion and jewelry sectors, inflation is a significant factor in increased prices. The cost of raw materials, shipment, and labor can shift overnight, leading to higher production expenses. Therefore, if those in the luxury business hope to maintain their multi-million-dollar profit margins, they must increase their prices to cover all surging costs.
2. Brand Value
A label’s value or image is one of the main reasons why designer items are expensive.
“Brand value” is how much a business is worth in the eyes of its customers and the marketplace. It represents a brand’s total tangible and intangible assets, including its reputation, customer loyalty, marketing and advertising efforts, intellectual property, and product quality.
For high-end brands like Cartier, Rolex, and others, brand value is critical in determining overall pricing. They must always exude exclusivity, prestige, and quality – attributes that create a strong brand identity and keep consumers willing to pay premium prices.
High-end fashion and jewelry houses also use their brand value to differentiate themselves from competitors. Take Hermès, for example. By positioning themselves as one of the industry’s most exclusive and high-quality brands, consumers continue to pay hundreds of thousands – and even millions – of dollars for their Birkin and Kelly. It’s no wonder designer handbags have become better investments than artwork.
In addition, maintaining brand value requires tenacity and commitment, as a luxury brand’s sales rely on sustaining product quality and all-channels marketing. Brands must also keep up with changing consumer trends and demands to ensure their name remains relevant in the marketplace.
3. Cost of Production
The term “cost of production” encompasses the entirety of a brand’s expenditures related to product creation. These costs include raw materials, labor, manufacturing equipment, research and development, and other overhead expenses.
Raw materials, in particular, are crucial in determining costs and retail pricing. The House of Chanel, for example, typically uses rare, high-quality, and expensive materials to produce their world-famous handbags, which drives up production costs.
Labor is also a significant factor. Luxury fashion houses and designer jewelry brands employ skilled artisans to bring their collections to life. Each talented employee deserves a high wage to compensate for their equally high-quality work. However, keep in mind that some brands outsource production to lower-cost countries to reduce costs per unit.
Another factor influencing a luxury brand’s pricing strategy is “demand,” which refers to the available quantity of a specific product or service.
Usually, how a consumer perceives a brand’s value and exclusivity drives demand. For instance, do you remember when Hermès had a five-year waiting list for Birkins? The handbag was so hard-to-get that almost every luxury consumer wanted one regardless of the price. Marketing tactic or not, the hype around Birkin bags single-handedly built high demand and desirability for Hermès. Even today, the fashion house makes it difficult for Birkin-wanters to become havers. Check out this article titled Hermès Birkin Owners Reveal Crazy Tips for Buying the Bag for all the juicy details.
Demand for luxury goods also fluctuates based on other factors, including consumer preferences, economic conditions, and market trends. For example, “Logomania” is a fashion trend that frequently comes and goes. Many consumers consider logo-covered designer handbags a staple for all seasons. In contrast, some beg to differ, calling the trend excessive or “tacky.” The market for designer logomania is substantial, but negative word-of-mouth (NWOM) spreads fast in fashion, lowering demand.
5. Limited Editions
“Limited editions” are collections or items produced in small batches and won’t be re-released. In most cases, they have unique designs, materials, or features that differentiate or distinguish them from the house’s regular product lineup.
Designer brands use this marketing tactic to build hype and demand around an upcoming collection. By releasing something in a limited quantity, the label creates a sense of urgency and desirability among consumers who love rare and exclusive pieces.
Limited editions are also incredibly popular among collectors or anyone willing to pay top dollar for a one-of-a-kind item. For instance, limited edition luxury watches and cars in collaboration with celebrated artists or designers can become highly sought-after collectibles. Plus, their market value skyrockets over time.
6. Marketing and Advertising
Did you know Charlize Theron signed an 11-year contract with Dior worth 55 million dollars to endorse the brand? How about Nicole Kidman receiving a whopping 12 million dollars for starring in a two-minute Chanel No. 5 campaign back in 2004?
There is no doubt that high-end brands spend a significant amount of money on marketing and advertising. They choose some of the world’s most influential public figures, turning actors and artists into brand ambassadors to solidify an aura of undeniable glamor and appeal.
Since most brands have several high-profile endorsers and release ad campaigns all-year long, these marketing and advertising costs add up, resulting in higher retail prices.
Takeaway: Why Do Designer Brand Prices Keep Increasing?
Designer brands raise their prices each year for various reasons, including inflation, brand value, cost of production, demand, limited editions, and marketing. Although the steep prices may deter some shoppers, upscale labels’ prestige and perceived worth will persistently captivate brand-conscious consumers. In fact, luxury fashion and jewelry houses are thriving despite the economy, proving the staying power of the ultra-rich.
Where to Resell Designer Bags in Scottsdale-Chander, AZ
From YSL’s Kaia to Loewe’s Puzzle bag, luxury purses from leading brands retain value and even appreciate over time. By selling your pre-owned designer bags to Biltmore Loan and Jewelry, you can profit and put that money towards your next dream bag and other financial goals. We also purchase high-end timepieces, jewelry, antiques, and other assets. Complete this online form or visit us today for an appraisal.