LVMH Is Spearheading Astronomical Luxury Price Hikes

Louis Vuitton

Even the designer executives are saying it — “Top luxury will cost more, while mid-priced fashion will cost less,” Brunello Cucinelli (of the eponymous cashmere house) told Reuters.  In general, analysts predict that the cost of absolute luxury goods — like Brunello Cucinelli — will continue to rise faster than both other product areas and inflation.

The 1% can thank LVMH for the extreme price hikes, where systematic increases account for a third of the company’s annual growth.  The cost of the luxury conglomerate’s Louis Vuitton line and most expensive champagnes, for example, all went up by 15% last year.

Another notable source of the price increases?  LVMH, for one, will cost more in Europe to account for increased Chinese consumerism there.  Chinese shoppers tend to buy luxury goods in Europe to avoid a hefty tax at home, thus LVMH is raising prices in the West so that, though they’ll still beat what Chinese consumers would have to pay in China, the company can get European revenues up even more.  Interestingly, a secondary effect of the Western price increase is to make those same goods in China (which cost around 50% more) actually seem like less of a rip-off.

What do all these price hikes mean for their audience?  Apparently, not much.  Absolute luxury is growing 6% a year, outperforming even so-called regular luxury brands (think Hermès vs. Marc Jacobs).   Meanwhile, for everyone on the sidelines, we think it’s an amusing show — if the sky’s not the limit, how high can they go?