Think of it as an exclusivity tax
On the upper east side of Manhattan in a very elegant apartment, just a few blocks away from the Chanel boutique, Jean Shafiroff is a fan of the brand.
“Styles come and go and brands come and go but it seems to me that Chanel remains,” she says.
Shafiroff is wearing a forest green wool jacket (Chanel), and she’s taken out a few of her Chanel bags to show a reporter some of the classics. They have the signature quilted flap and interwoven metal and leather chain shoulder strap. She says, “If I’m willing to use a bag that I bought over 20 years ago, I think it’s pretty much a classic, don’t you?”
Philanthropist Jean Shafiroff with a classic Chanel bag and a biography of the designer.
But this is about more than just fashion — Shafiroff sees her choices as investments. “Like buying a piece of art,” she says.
A philanthropist on the board of seven charities, Shafiroff hosts a lot of fundraising events, and she bought her first Chanel bag, the classic one — with the quilted flap and the leather and metal chain — in the ’80s. She still carries it.
“It’s more chic now than it was then, because it’s vintage,” she says.
But there’s nothing vintage about the price. In the mid-’80s, a classic Chanel bag cost less than a thousand dollars. Adjusted for inflation, the price today should be about double. But a similar purse now costs north of $4,000 dollars, way past the rate of inflation. The cost of labor is up, not to mention leather. Then there’s the euro versus the dollar. But there’s another big reason the prices for Chanel bags have climbed so high, says Paul Swinand, an analyst with investment research firm Morningstar.
“There are more rich people in emerging markets, and they’re getting richer faster than we are,” he says.
In markets like Asia, wealthy consumers have an enormous appetite for western goods, Swinand says. “They want Cognac,” he says. “They want LVMH bags. They want Swiss watches.”
And they want Chanel purses, but they don’t want everybody else to have them too.
A sequined Chanel bag owned by Jean Shafiroff
“Think about it. You wouldn’t want everybody to have a Tiffany ring. You wouldn’t want everybody to have an Hermes bag,” says Swinand. “The allure of a Patek Philippe watch or a special signature Chanel bag is to walk in and say, ‘Oh my gosh, those are hard to get, you must have paid a lot of money for that.’ Maybe you don’t say that explicitly but that’s the allure.”
And Chanel knows it. So it keeps raising prices. Think of it as an exclusivity tax.
“This is not inflation increases, this is something that is really extraordinary, and replicates the index of living extremely well,” says Thomai Serdari, a professor of marketing at NYU’s Stern School of Business.
“It is a manufactured, namely,” she says, “an artificial market that keeps going up, as long as there are people who are wiling to spend.”
And Chanel isn’t the only brand to have taken this approach. Think Ferrari. Even Nike used pricing approach to set its sneakers apart, Serdari says. Burberry famously raised its prices after its trademarked plaid started becoming too popular.
From a business point of view, Jean Shafiroff can appreciate the exclusivity strategy — after all, she has an MBA.
“They’re making it less accessible, and I think that’s a very smart business technique,” she says. But from a personal point of view, Shafiroff says she doesn’t have plans to buy a new Chanel bag any time soon.
Just stop by Chanel’s Madison Ave boutique and you can see the brand’s strategy at work. To reinforce how precious they are, purses are presented on pedestals, one by one.
“Displayed the way objects would be displayed in a museum,” says Sedari. “It is intimidating. It is done on purpose, it should intimidate you. You shouldn’t feel like anybody can participate in that world.”
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