Should Luxury Brands Reduce their Prices?

Earlier this year, a medium leather Gucci Mercato tote bag, designed by Demna for Spring/Summer 2026, would have set you back $2,900. But in May, analysts at Bernstein noticed a shift: Gucci had quietly reduced the price of the tote by an estimated 20-25%.

The move was part of a wider turnaround strategy for Gucci and parent company Kering to boost sales volume and re-address the aspirational shopper, as outlined at the group’s Capital Markets Day in April. As the broader luxury market aims to re-address the 50 million luxury shoppers lost amid post-pandemic price hikes, is reducing prices the way to course correct?

During the pandemic boom era, most luxury labels sought to boost margins with price hikes across their goods. According to HSBC, the average price of personal luxury goods increased by a staggering 52% between 2019 and 2024.

For example, a medium Chanel classic flap bag, once $1,000 in the 1980s, retailed for around $5,800 in 2019. Today, the same bag will set you back $11,700. Similarly, the Louis Vuitton Neverfull’s price has tripled since its debut in 2007, climbing from roughly $645 to over $2,000. These two examples paint a bigger picture: luxury’s most iconic bags now cost double their original price.

Following these price hikes, compounded by high cost-of-living inflation in the US, slower macroeconomic growth in China and geopolitical issues in the Middle East, spending has further slowed, exacerbating pressure on luxury’s bottom line, says analyst Luca Solca, whose team at Bernstein identified the Gucci Mercato price reduction. This was a blow, “especially for mega-brands who thrive on aspirational consumers,” he says.

After luxury handbag prices began to climb, consumers began to question where the added value was coming from. Younger consumers in particular took to social media, where content began to proliferate about the insane margins on luxury goods from leading brands. Late last year, 72% of Gen Z luxury shoppers told Vogue Business that they would rather own a Walmart ‘Wirkin’ than an Hermès Birkin bag, and when interviewed, several respondents said they feel spending lots of money on luxury is distasteful, and they don’t find new luxury goods to be worth the cost.

“There is a major disconnect in luxury, and that’s the underlying issue for the pricing discussion,” says Achim Berg, former senior partner at McKinsey and founder of corporate think tank Fashion Sights. “A lot of people just don’t understand why the price has increased when the product hasn’t improved. And that is not a fringe issue. It is a core issue for the luxury industry [today].”

During Kering’s Q2 2026 earnings call in July, group CEO Luca De Meo said that in the past the group “played with elasticity” on pricing, which had had a “very big impact” on sales volume. Gucci revenues were down 2% to €1.41 billion in Q2, above consensus expectations, marking a significant improvement for the Italian house. But the label has faced annual sales losses every year since fiscal 2022. Revenues were down 22% in fiscal 2025 compared with the previous year. Kering is not alone. LVMH’s fashion division saw an 8% sales decline for fiscal 2025 and most of fashion’s biggest houses and conglomerates have faced tumbling revenues in recent years.

Gucci’s response — cutting the price on a certain style — is a bold method to reach those customers again. “We find that outright price cuts would undermine brand equity. But there is no doubt that the mix must be adjusted downwards for mega-brands to address their affordability issue and reconnect with the bulk of their aspirational consumer audience,” Solca says. “The sooner, the better. Gucci has been bold to bite the bullet, even if taking higher brand equity risk.”

The Gucci Mercato bag launched as part of the SS26 Generation Gucci handbag collection, under new-ish creative director Demna. The collection, featuring largely canvas shoulder bags and totes, has an average price of around $2,000, 27% lower than the average Gucci bag before, as reported by the Wall Street Journal.

It’s easier for brands to reduce the price of newer bag styles like the Mercato than of iconic bags, like a Chanel Double Flap or a Lady Dior, experts agree, because the consumer is less aware of the difference. “The reality is, it is almost impossible to touch the prices of an iconic piece for a well-established brand,” says Berg. “For those, you need to fix the price or adapt below inflation, and you hope the market catches up with your price point over time.”

Reducing the price of bags people know very well is “a big statement” that undermines their value, making it impossible for luxury labels that have spent years (and plenty of dollars) on campaigns and storytelling to justify why their goods cost exactly what they cost, concurs luxury analyst Robert Burke. “It would be very unusual, because the last thing anyone wants is for the consumer to start to question the value of their goods. It’s too risky.”

“Luxury’s value ultimately comes from a shared understanding between the company and the consumer of the brand’s intrinsic value,” says Eric Fisch, HSBC US head of retail and apparel. “When a luxury house cuts prices, it implicitly signals a disconnect between price and value, which can dilute the brand’s overall image. As an alternative, brands could consider launching new products in different sizes, materials, or formulations, which justify a lower price point and bring aspirational shoppers back into the fold.”

However, if you’ve priced a newer bag [like the Mercato] too highly, and you need to course correct, “very few people will even recognize that you’ve changed the prices,” says Berg. “I think [in that instance] you can take [the price] down. You could also take the bag out entirely and replace it with a different SKU at a lower price point,” he says. “I think that the rationale is that we overplayed it, and we now need to change that.”

Gucci’s Mercato tote bag has reduced in price by an estimated 20-25%.

Brands also need to consider the resale market if mulling price reductions. During luxury’s pandemic boom era, when resale prices were high, people could tell themselves that luxury was an investment. But as luxury demand has moderated, so have resale prices, Berg says, meaning a top-price handbag feels like less of an investment. If a brand were to reduce the price of an iconic piece, “that would not only [upset the] direct customer. It would also annoy others who are trying to sell the item, as it devalues it across the board.”

It’s important to note that as behemoths like LVMH and Kering still face revenue losses, some of the more successful fashion brands today, with the strongest sales growth, are diversifying their product mix so they don’t alienate the entry-level consumer. Brands like Ralph Lauren and Coach are selling socks for $12, alongside coats for £2,000.

“There is a general renaissance for value for money,” Berg says. “Coach always had it, and it’s just playing that more offensively. That’s also why brands like Polène and Sézane are doing well. They are now operating slightly lower than where affordable luxury used to be; the stores feel like luxury boutiques, but [for the aspirational consumer] it’s less intimidating, there’s less of an entry barrier, and you get value for money.”

Outside the Coach show during NYFW FW24.

Luxury is shifting focus to boost its offering for this shopper. At Gucci, per de Meo’s plans, the Mercato price change is not their only move. The brand is diversifying its leather goods offering to “elevate the top tier”, offer a strong mid-price proposition of bags between €2,000-3,000 and, crucially, “redesign the entry-level without compromising quality”, read the slides from de Meo’s presentation, obtained by Vogue Business.

Other brands are taking a similar tack, developing entry-level offerings to recapture the aspirational shopper, with some success. After the appointment of Daniel Lee in 2022, Burberry introduced several new handbag styles with high prices that rivaled luxury maisons, including the Knight bag, released in September 2023 and priced at £2,490 ($3,360), well above the brand’s traditional handbag average price of £990.

The move drew criticism. And in the brand’s late 2024 strategic update, then new CEO Joshua Schulman — who joined the brand in July the same year — said that the brand’s previous strategy had taken pricing “too high across the board”, particularly in leather goods, and that it would restore a “good, better, best” architecture, with tiered products across every consumer segment.

Since then, Burberry has not reduced prices on existing goods, but the brand has shifted its pricing architecture downwards, launching a new entry-level bag collection that largely retails below £2,000 in 2025. On Burberry’s site, the proportion of bags over £2,000 has fallen from nearly 30% in late 2023 to around 3% today, according to a report from the Financial Times. In its latest earnings call, Burberry confirmed its new pricing structure is working. “Now handbags, women’s handbags are becoming a more meaningful part of the business, and this has been a very deliberate strategy of finding our sweet spot with good, better, best pricing in a luxury context,” Schulman said.