Case Study: How the High Prices of Luxury Brands are Justified

Understanding Luxury Brands

Being a brand in the fashion industry can be equally rewarding and confusing. On the one hand, it is one of the most creative outlets for your ideas. And on the other, you must understand concepts that may not have fixed definitions. Let us take the term ‘luxury brands’ for example. Even as a customer, one has heard of this term. As an industry participant, you must have a clear understanding of what luxury means. It will help you decide whether you want to position your brand as a luxury brand.

The general perception of luxury brands is the high prices their products command. The first few names that come up when one thinks of luxury brands in the context of the fashion industry include names like Chanel, Gucci, and Ralph Lauren. These are some of the most expensive clothing brands in the industry, but that isn’t their only identity.

These brands aren’t called luxury brands because of their high prices. On the contrary, they charge such high prices because they are luxury brands. The definition of ‘luxury brands’ is fluid, as it involves not just the functional but the aspirational and emotional aspects associated with the brand.

There are debates around whether such high prices are justified for luxury brands, both inside the fashion industry and outside. We explore these questions with the help of Chanel, which is one of the most expensive clothing brands in the world. We will try to understand whether the high prices for brands like Chanel are justified.

Factors Influencing the Price of Luxury Brands

Before examining the factors influencing the price, let us see why a customer would choose a luxury brand like Chanel over a mass-market brand. The most crucial reason a customer would prefer a Chanel dress is the prestige associated with owning one. You may wonder how prestige comes into the picture. 

It is the sense of exclusivity attached to owning a piece from one of the most expensive clothing brands in the world. This exclusivity could be because of the incredible craftsmanship of the designer associated with the brand, the brand perception built by the brand’s marketing, or the sense of achievement one gets by owning the dress. Another major factor for customers wanting to purchase a luxury brand is the limited availability of the products.

When Chanel decides the price of their products, be it the iconic Chanel Classic Flap Bag or the Little Black Dress, they consider all the customers’ emotional needs they are fulfilling. So, the factors influencing the price point decisions include the following:

• Product Quality
• Exclusive Craftsmanship
• Brand Marketing

Why the High Price?

Previously, we saw the factors involved in the pricing decisions for Chanel products. Now, let us take a look at how these factors make Chanel one of the most expensive clothing brands in the world:

1. Product Quality – When a customer decides to purchase a luxury item, they are looking for good quality products that last for a long time. The high-end fashion brands, including Chanel, understand this completely. Thus, the materials used by the brand to make their clothes and fashion accessories undergo stringent quality checks.

The Classic Flap Bag from Chanel is made from the finest quality leather. Each bag undergoes a pre-defined number of steps for quality check, to ensure the durability of the bag. This utmost focus on quality and durability is one of the biggest reasons for the higher prices of Chanel products.

2. Exclusive Craftsmanship – This is one of the major drawing factors for Chanel dresses. The company released a video in 2017 that showcased how all elements of the dresses were hand-made to perfection. Be it the hand-painted fabric, the hand-stitched feathers giving it a silk-like appearance, or the hand-stitched sequins put together painstakingly with tweezers – the craftsmanship behind every Chanel dress is exquisite and unparalleled.

The experience of watching how a Chanel dress is made is as dreamy as owning one. This craftsmanship that makes each dress a treasure is, therefore, a major reason for the high price. Finding skilled professionals who create dresses with such finesse, put time and effort into creating each dress by hand, and the exclusivity of these dresses make sure the customers are willing to pay a higher price for any Chanel dress.

3. Brand Marketing – An important consideration when identifying a brand as a luxury brand is the aspirational value associated with it. As the word ‘luxury’ indicates, it is not a necessity. A customer can buy any dress if they need clothes to wear. But buying a Chanel dress means they have achieved something in life and have the luxury of owning one. This aspirational value is attributed to the brand through dedicated marketing efforts.

Appearance in all the major fashion shows, celebrity endorsements, gorgeous photoshoots with famous models, maintaining their digital presence, and a host of other marketing activities ensure such aspirational value for expensive clothing brands like Chanel. Each of these activities adds to the overall costs for the company. These costs invariably make their way into the price of the final products.

Justifying the High Price

We saw how Chanel does a fabulous job of exceeding their customers’ expectations – be it the quality or the aspirational value associated with their products. Maintaining such strict quality standards in terms of materials and craftsmanship entails costs. These costs are essential in maintaining the exclusivity of the brand.

The efforts required to create each piece ensure the Chanel products are rare, and hence, customers are willing to pay an additional price for them. When all these points are considered together, it becomes clear that the high price charged by luxury brands like Chanel is justified.

A validation of this is the fact that the company raised the price of its Medium Classic Flap Bag, not once but thrice in 2021, and the customers are still ready to pay for it. It is not just the costs, but the value that the customers see in the Chanel products that make them pay the high price willingly.

Wrapping Up

As we saw with the help of one of the most expensive clothing brands in the world – Chanel – the high prices charged by luxury brands are justified. It is especially relevant in the fashion industry because the products in this industry – apparel, jewelry, accessories, and footwear – have an associated aspirational value.

To find similar in-depth analyses of concepts that matter in the fashion industry, head over to Fashinza. An end-to-end B2B platform dedicated to the fashion industry, this is a great place to find a thriving community of brands, manufacturers, and suppliers. You can interact with the industry peers, understand their strengths, and build strong business partnerships. You can also find a lot of well-researched information about things relevant to the fashion industry. Explore Fashinza now to know more about the happenings in the industry and gain a wealth of knowledge.