The luxury industry's strategy for the key handbag category is changing

The luxury market has been in a period of great turbulence since the end of 2023 and brands are reviewing their strategies, particularly when it comes to leather accessories, a category that continues to play a dominant role in their business. The industry has adapted to the market slowdown by raising prices in this key category, while reducing its assortment of small leather accessories and entry-level products, in order to focus more on high-end items, as demonstrated by a recent study by Retviews, the data analysis solution of the digital consultancy Lectra.

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

According to the study, China is the market where luxury brands are setting the highest retail prices. Handbag prices in China have 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 virtually stable, especially in Japan, underlining the inherent growth potential of the Asia-Pacific region, which is expected to expand significantly,” while price increases in the US ranged from 12% to 22%.

This inflationary trend is affecting the best-selling handbags, the brand's most iconic models, such as Prada's Re-Edition Nylon bag, whose prices have skyrocketed, especially in China, where they are sold at 20% more than in Europe. Fendi's famous Baguette bag costs €2,900 in France and €3,560 in China, and Gucci's Jackie 1961 bag costs €2,790 in Europe and €3,560 in China.

“The price difference between Prada’s Cleo and Re-Edition Nylon bags is even more significant, as their price in China is almost 30% higher,” says Retviews, which has noted a steady inflationary trend between 2022 and 2024 across three continents, Europe, Asia and America. Looking at the price development of Prada’s Galleria Saffiano bag, Retviews has found that over the past two years, its price has increased by 37% in Europe, 28% in the United States and only 16% in China.

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

The significant increase in accessory prices has been accompanied by a change in assortment strategy. The study notes a decline in the assortment of small leather goods. This category is considered entry-level and attracts mainly aspirational customers, which previously accounted for a significant share of sales and is now in decline. According to Retviews, “in terms of business strategy, major brands are now prioritising more expensive items, targeting consumer groups with higher budgets and a higher propensity to purchase.”

Between 2023 and 2024, sales of small leather goods have plummeted at luxury brands. At Prada, for example, its market share has dropped from 30% to 23% in one year. Only Louis Vuitton has gone against the tide, increasing its market share of small leather goods each year, in an effort to cater to all customer segments.

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

Limited edition bags are more expensive and allow brands to increase their revenues while boosting the exclusive appeal of certain models. They are also often more profitable as they involve smaller production runs.

Finally, the mini bag trend is here to stay. Their share of the range and their number in leather goods collections has clearly increased year on year, according to the study, which notes “a significant increase in their presence in collections at the beginning of this year, compared to last year.” The number of mini models has increased by 107% at Louis Vuitton, 69% at Gucci and 46% at Bottega Veneta, probably because, given their small size, these bags require less material and are particularly profitable for the brands.