Luxury industry’s strategy for key handbag category is changing

The luxury market has been experiencing severe turbulence since the end of 2023, and labels are reviewing their strategies. Especially with regards to leather accessories, a category that continues to play a predominant role in their business. The industry has adapted to the market’s slow-down by raising prices in this key category, while scaling down their assortment of small leather accessories and entry-level products, to better focus on items at the very upper end of the range, as shown by a recent study by Retviews, the data analysis solution by digital consulting firm Lectra.

 
According to the study, between 2023 and 2024, “the majority of luxury players have increased the minimum price of all their leather products compared to the previous year.” Bottega Veneta and Gucci led the pack, with a 16% price rise. Prada‘s entry-level price remained high at €290, similar to that of Bottega Veneta. Gucci, currently undergoing a brand repositioning, held the record for the lowest entry price for small leather goods, at €200. Gucci is aiming to go even more upmarket, and clearly still has room for raising prices on this category, while staying competitive.

According to the study, China is the market where luxury labels are setting the highest retail prices. Handbag prices in China have increased by 50% for Gucci, by 33% for Valentino, 27% for Prada, and 21% for Bottega Veneta and Loewe. “Compared to China, pricing levels in Japan and South Korea are still low and virtually stable, especially in Japan, underlining the growth potential inherent in the Asia-Pacific region, which is expected to expand significantly,” while price rises in the USA ranged between 12% and 22%.

This inflationary trend is notably affecting the best-selling it bags, the labels’ most iconic models, Prada’s Re-Edition Nylon handbag for example. Their prices have jumped up especially in China, where they retail at prices 20% higher than in Europe. Fendi‘s renowned Baguette handbag is priced at €2,900 in France and at €3,560 in China. And Gucci’s Jackie 1961 bag costs €2,790 in Europe and €3,560 in China.

“The price gap for Prada’s Cleo and Re-Edition Nylon handbags is even more significant, as their price in China is nearly 30% higher,” said Retviews, which has noted a constant inflationary trend between 2022 and 2024 in all three continents, Europe, Asia and America. Monitoring the pricing trend of Prada’s Galleria Saffiano handbag, Retviews has discovered that, in the last two years, its price has risen by 37% in Europe, by 28% in the USA and only 16% in China.

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

Significant rises in accessories’ prices have gone hand in hand with a change in assortment strategy. The study noted a shrinking assortment of small leather goods. The category is regarded as entry-level and chiefly attracts aspirational customers, which once used to account for a significant share of sales and are now on the wane. According to Retviews, “in terms of commercial strategy, major labels are now prioritising the most expensive items, targeted at consumer clusters with higher budgets and a greater propensity to buy.”

Between 2023 and 2024, sales of small leather goods have generally slumped among luxury labels. At Prada for example, their assortment share decreased from 30% to 23% in a year. Only Louis Vuitton has bucked the trend, increasing its small leather goods’ assortment share every year, in an effort to cater to all customer segments.

Another strategy is to present an endless variety of versions for the various it bags, the luxury labels’ real calling card. “To better appeal to consumers, labels are broadening their range by offering products in different sizes and in limited editions. For example, Retviews data shows that there are five models of the famous Margaux handbag by The Row, in sophisticated materials like patent leather and suede.” With its five sizes and three main materials, the Margaux is available in all sorts of price variants, from €4,650 to €7,470.

Limited-edition bags are more expensive, and allow labels to raise their revenue, while boosting certain models’ exclusive appeal. Besides, they tend to be more profitable, as they involve smaller production runs.

Finally, the trend for mini handbags is here to stay. Their share of assortment and their numbers in leather goods collections have decidedly increased from one year to the next, according to the study, which noted “a remarkable increase in their presence within collections at the start of this year, compared to last year.”  The number of mini models has increased by 107% at Louis Vuitton, by 69% at Gucci and 46% at Bottega Veneta, most probably because, given their very small size, these bags require a smaller amount of material, and are especially profitable for labels.