BAG AN INVESTMENT WITH LUXURY HANDBAGS
Forget about making money on the stock market. You might be better off investing in luxury handbags. Based on investigations by Art Market Research (AMR), the investment potential of luxury bags from the likes of Hermès, Chanel and Louis Vuitton outstrips that of classic cars, fine wines, jewellery, and watches. Putting this in context, the most sought-after luxury bags have experienced an increase of 108% in the last 10 years. Watches, the so-called king of luxury investments, have only gone up by 72%.
HERMÈS – THE COVETED ONE
Hermès is not shy when it comes to whacking on hefty price tags to its wares. At the low end, a fan of the brand can pick up a bag for as little as £1,400. Hermès’ crown jewel, the Birkin, starts at only £6,370. And then there’s resale. A rare Hermès Himalaya Kelly bag fetched £309,561 at a Christie’s auction in Hong Kong in November 2020. The sale broke a world record for luxury bags, beating the white gold and diamond hardware-d Birkin sold by Christie’s in 2017. AMR reports that more than 3,500 designer handbags were sold at auction in 2019. The takings for the lot was a whopping £26.4 million.
PUSHING UP PRICES
And luxury brands surely capitalise on the desirability of their bags, increasing prices way beyond the rate of inflation. Last year, Hermès handbags went up by 17% while the FTSE 100 fell by just over 15%. LVMH’s star label, Louis Vuitton hiked prices in China, the USA, and Europe. For example, its Neverfull MM Monogram bag, which now costs $1,540 on its website, was priced at $1,320 in May 2020 and at $1,430 at the end of October, equating to an overall increase of 14%.
FOLLOWING SUIT
The other gameplayers did the same. Dior increased prices on specific products, while Chanel increased prices of certain handbags globally in May by between 5% and 17%. A Chanel spokesperson said:
“These adjustments are made while ensuring that we avoid excessive price differentials between countries.”
Gucci raised prices between May and June in Italy, the UK and China. Salvatore Ferragamo and Prada confirmed price hikes in July.
RECOVERY IN CHINA
While luxury price hikes have been worldwide, they work most effectively in markets such as China, whose economy is fast-recovering from the coronavirus pandemic and where the demand for luxury is high. It is even predicted that further price increases will be seen in this Asian market in 2021. Francesca Di Pasquantonio, MD of equity research at Deutsche Bank said:
“There is a possibility this year of getting away with it a little bit more. This year, Chinese consumers don’t travel to Japan or to France and therefore they don’t benchmark.”
The Fashion and Design Club does not agree with Di Pasquantonio. Chinese customers are astute and use WeChat to communicate with their Diagou to obtain information on prices outside China.
BETTER TO STICK WITH ART?
When the rumours of Chanel’s May 2020 price hike hit social media, people in China were queuing outside the brand’s stores to catch a bargain. Xie Lan, a documentary maker in Beijing, said she had managed to buy a handbag for 30,000 yuan ($4,225) before the price hike.
But raising prices also carries the risk of losing loyal clientele. Luna Xin, a finance broker also from Beijing, said that her dream of owning the mid-sized Chanel Classic Flap, whose price had gone up in May 2020 by 14.5% to 48,900 yuan, was now nothing more than that. She said:
“Last September, it was only 39,000 yuan, and now, only a bit more than half a year later, it costs 10,000 more.”
So if prices of luxury handbags continue to soar while demand dwindles, it might be best to think of bags as a short-term investment. Looking to the long-term? Then art is a better bet. In the past decade, art has surpassed handbags in value. Maybe don’t replace a Vincent van Gogh with a Birkin just yet.
