Chanel is to increase prices of their handbags the 3rd time in under 2 years in Europe and Asia to clamp down on price arbitrage. This chanel price increase may seem baffling as it is to the tune of 10%, but is easier to understand if see what's happening in the global macro environment.
The Euro has been weakening as compared to the US Dollar, owing to a variety of reasons, one of them being the Russia Ukraine War. In fact today the Euro is almost the same it would have been in 1986. The Euro is expected to weaken further.
In the above image it is clear that as the US dollar and the Euro are moving towards being almost 1:1 or if the EUR goes even lower in conversion, price of the Mini Flap Bag in Europe has to be increased so that an arbitrage opportunity is not created.
As a DTC brand selling in multi-currencies on our online store, pricing is an art and science both, we need to make sure we do not price ourselves out of the market, but also we need to be cognizant of the fact that we may be creating an arbitrage opportunity for tourists to the cheaper priced country may end up taking advantage of.
This arbitrage is fine as long as the currencies are not fluctuating wildly and causing the value of a product to be diminished.
Hence, Chanel is applying the price harmonization technique to preserve value of its products (bags) in this case as the global uncertainty is causing fluctuations in USD and EUR exchange rates.
If you are an online store running on Shopify and sell multi-currency, you can use Konigle to automate the price harmonization technique based on exchange rates between currency pairs.
