Chanel Price Increase

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.

What is happening with EUR USD?

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 as it would have been in 1986. The Euro is expected to weaken further.

The grand price arbitrage on Chanel bags

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.

Price Harmonization

As a DTC brand selling in multiple currencies on our online store, pricing is both an art and a science. We need to make sure we do not price ourselves out of the market, but we also need to be cognizant of the fact that we may be creating an arbitrage opportunity for tourists to go to the cheaper-priced country they 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 the 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.