When Jennifer Lawrence accepted her Academy Award for Best Actress in 2013, she tripped and fell on her way up the steps. The internet reaction was swift, with many expressing shock. But many more were complimenting her gown.

The pink ballgown that Lawrence wore that year was designed by Raf Simons for Christian Dior. It was a princess dress, feminine and elegant, giving the appearance of grace, even as its wearer lay on the theater stairs. Lawrence got up and accepted her award. But the memory of her beautiful gown lived on. For years, that has been the power of Christian Dior. Even in the rarified world of high fashion, few can match its timeless designs, characterized by a romantic sort of hyper-femineity. It’s an enviable space to occupy. Or at least, it has been, until quite recently.

Dior has made headlines for all the wrong reasons, as new reports suggest that the cost of producing its pricey designer bags is far less than the listed retail price. In particular, one $2,800 bag costs just $57 to make. This estimated cost includes labor, but not materials, which narrows the profit margin slightly. Still, Dior makes a significant return on every bag sold.

The disclosure has sparked fierce public discourse, with many consumers voicing their displeasure. Some question if the price tag is justified, almost solely for the benefit of showing off a designer item. Others have begun to question the ethics of such pricing strategies, accusing the brand of exploiting consumers and workers alike.

And the criticism has taken its toll. In the luxury markets, the perceived value of brand exclusivity and craftsmanship often surpasses the actual production cost, more so than in other industries. This new conversation undermines Dior’s position as a luxury brand, challenging the perceived value that has long justified its pricing. In the long term, a diminished brand reputation threatens other damages, including the possibility of declining sales, as well as the risk that even the strongest brand loyalists might consider switching to other designers.

Still, not all the fault lies with Dior. Similar revelations about other luxury brands suggest an industry-wide practice of hyper–price inflation. Brands throughout the market arguably need to adopt more ethical production methods if they hope to mitigate further reputational damage. Thus far, neither Dior nor its parent company LVMH have publicly commented on the reports. But without improved supply chain management and greater transparency moving forward, the damaging revelations could affect the overall market. Some countries might even choose to make regulatory changes, governing the pricing of these goods to provide greater protections for both consumers and workers.

Discussion Questions

1. What public perceptions about Dior have allowed it to charge such high prices for its products?
2. Are these types of price markups ethical? Try to argue both sides.

Sources: Carol Ryan, “Christian Dior’s $57 Handbags Have a Hidden Cost: Reputational Risk,” The Wall Street Journal, July 9, 2024; Charu Dwivedi, “Dior Marketing Strategy: Redefining Luxury,” The Strategy Story, May 28, 2023; OpenAI ChatGPT, “Assistance with Research on Christian Dior’s Handbag Production Costs and Reputational Risk,” ChatGPT, July 25, 2024; Pamela Danziger, “Italy Calls Out Dior for Unethical Supply Chain and Warns Other Luxury Brands About Abuses,” Unity Marketing, July 1, 2024.