Luxury goods industry strategy for key handbag category is changing | kbnmart

The luxury goods market has been in turmoil since the end of 2023, and brands are reviewing their strategies. Especially with regard to leather accessories, a category that still plays a dominant role in their business. The industry has adapted to the market slowdown by raising prices in this key category, while reducing the assortment of small leather accessories and entry-level products, to better focus on items at the very top end of the range, as shown in a recent study by Retviews, the data analysis solution from digital consultancy Lectra.

According to the study, between 2023 and 2024, “the majority of luxury goods companies have increased the minimum price of all their leather goods compared to the previous year.” Bottega Veneta and Gucci topped the list, with prices increasing by 16%. Prada’s base price remained high at €290, similar to Bottega Veneta’s. Gucci, which is currently undergoing a brand repositioning, set the record for the lowest entry price for small leather goods, at €200. Gucci aims to increase prices, and it clearly still has room to raise prices in this category, while remaining competitive.

According to the study, China is the market where luxury brands set their highest retail prices. Handbag prices in China increased by 50% for Gucci, 33% for Valentino, 27% for Prada, and 21% for Bottega Veneta and Loewe. “Compared to China, price levels in Japan and South Korea remain low and almost stable, especially in Japan, which confirms the growth potential of the Asia-Pacific region, which is expected to expand significantly,” while price increases in the United States ranged between 12% and 22%.

This inflationary trend is particularly affecting the brand’s best-selling bags, and its most iconic models, such as the Prada Re-Edition nylon bag. Prices have risen particularly in China, where it retails for 20% more than in Europe. Fendi’s iconic Baguette bag costs €2,900 in France and €3,560 in China. Gucci’s Jackie 1961 bag costs €2,790 in Europe and €3,560 in China.

“The price gap between Prada’s Cleo and Re-Edition Nylon handbags is even more significant, as they are priced around 30% higher in China,” said Retviews, which observed a steady inflationary trend between 2022 and 2024 across all three continents, Europe, Asia and America. By monitoring the pricing trend of Prada’s Galleria Saffiano handbag, Retviews found that in the past two years, its price has increased by 37% in Europe, by 28% in the US, and by only 16% in China.

A closer look at the study reveals that the extent of price increases has not been uniform for all brands. Between July and December 2023, Bottega Veneta revised its leather accessories prices three times, for a total increase of 14%. Prada did so four times, for a total increase of 6%.

The significant price increases in accessories have been accompanied by a change in assortment strategy. The study noted a shrinking assortment of small leather goods. This category is considered a staple and primarily appeals to aspirational customers, who previously accounted for a large share of sales and are now on the wane. According to Retviews, “In terms of commercial strategy, major brands are now prioritizing more expensive items, targeting consumer groups with higher budgets and higher propensity to buy.”

Between 2023 and 2024, sales of small leather goods have generally declined among luxury brands. At Prada, for example, its share of the assortment fell from 30% to 23% in one year. Only Louis Vuitton bucked the trend, increasing its share of the assortment of small leather goods each year, trying to meet the needs of all customer segments.

Another strategy is to offer an endless variety of handbag versions, a true calling card of luxury brands. “To better attract consumers, brands are expanding their range by offering products in different sizes and in limited editions. For example, Retviews data shows that there are five versions of the iconic Margaux handbag from The Row, made of sophisticated materials such as patent leather and suede.” The Margaux bag is available in its five sizes and three main materials in all kinds of price variants, from €4,650 to €7,470.

Limited edition bags are more expensive, allowing brands to increase revenue while enhancing the appeal of some exclusive models. Additionally, these bags tend to be more profitable, as they involve smaller production runs.

Finally, the trend of small handbags continues. Their share of the assortment and their numbers in leather goods collections have increased significantly from year to year, according to the study, which notes “a significant increase in their presence in the collections at the beginning of this year, compared to last year.” The number of small models increased by 107% at Louis Vuitton, by 69% at Gucci and by 46% at Bottega Veneta, most likely because these bags, due to their very small size, require less material and are particularly profitable for brands.