A Reflection on Handbags as Collectible Investments
According to Knight Frank Luxury Investment Index, the market for collectible handbags emerged after 2008. “As the US economy was spiraling, we really saw a rise in people buying handbags on the secondary market,” explains Caitlin Donovan, Christie’s Associate Vice President and Specialist for Handbags & Accessories. As of 2020, handbags have officially become an asset class. Outperforming the art market,Knight Frank published year-on-year gains of 13% for handbags, whereas art had an overall return of 5%.In times of uncertainty, the handbag market has recovered as Dior and Hermès reported selling out as stores reopen in Asia.
Christie’s auctioneer Rachel Koffsky reported brands with highest sales results, capture the most attention in the market include Hermès, Chanel, Louis Vuitton, Bottega Veneta and Dior.
My lifelong love of handbags is hereditary. My earliest memories include my handbag aficionado mother taking me along to shop for designer handbags with her. The women inside the stores, including my mother, were always made-up to perfection. They walk lightly around the store, peering at every nook and cranny with purpose, making sure they find the one bag they are meant to be with. The one bag that goes to gala dinners, brunches, graduation ceremonies, vacations or just a reward for their career milestones.
I’ve always thought of the whole process similar to picking a husband, as it is easy to be drawn to the shiniest,most gorgeous piece, but every girl needs a handbag catered for her lifestyle and needs. Are you a crossbody or clutch girl? Do you need to fit a laptop,pencil case, makeup bag and wallet in a bag?
Recent articles comparing handbags to a stock market may be unorthodox, but deserves consideration. Major luxury brands increase prices every year, I assume it’s due to inflation. On top of this, currency fluctuations and sales predictions has accelerated price increases in 2020. Political instability, mismanagement of the pandemic and stock market volatility are factors which could bump your dream bag up by a thousand dollars, or quite possibly more.
Vogue Business reported price increases in all major luxury brands in China, and Louis Vuitton was the brand with the highest price hikes. Raising prices during a pandemic is a risky move, but brand power allows for these fashion houses to reverse the laws of price sensitivity to demand. The customers are aware they are buying a piece of wearable art, art that has historical financial value. Chloé attempted to create scarcity of the Paddington, and created a waiting list similar to Hermès , but it led to customers purchasing counterfeit versions, as it lacks the prerequisite of market presence and momentum Hermès has.
The Economics of Designer Bags
The fashion houses of Hermès,Chanel and Louis Vuitton made coveted handbags long before the “It Bag” Sex and the City era. They can easily be classified as a Veblen good. The demand for a Veblen good increases as the price increases, contradicting with the law of demand. Handbags from these brands obey this,as they are a positional good, valued by how they are distributed amongst the population,not by how many there are in the market.
Positional goods embody one’s status in society. Owning an Hermès, Chanel or Louis Vuitton publicly displays your accumulated wealth,superiority and power. They are coveted because displaying them changes your perceived social status, as many of these bags are not affordable.
For a majority of women I saw in the stores growing up, their handbags tells the world they don’t need to work for a living. They are aware they lead envious,privileged lives and intend to display it through their handbags. It’s an old idea by Thorstein Veblen, called conspicuous consumption,where people buy expensive items to display their wealth simply because they can.
There’s a reason the term “investment bag” has been coined. Three years ago my father brought back a gift from Paris, the Daily Pouch from Louis Vuitton. It cost AUD$800 years ago, but it’s 2020 price is AUD$1000 on the Louis Vuitton, which is a 25% price increase over a short span of three years. It’s a slim, good sized pouch which is made of canvas and grained cowhide leather with subtle gold hardware,and it is deceptively sturdy. The lining is a soft,creamy brown colour with a small love note pocket inside. I rarely use it, due to it being one of my most prized possessions so it still looks brand new. In the events that I do, it fits my iPad 6, iPhone 7, thick wallet, documents, charger and passports. If it could fit a water bottle, it would be perfect. On the secondary market, it is priced significantly above AUD$800. There’s no prediction of the future, but researching the designer and price history of the bags you want, ensuring your bag is well-preserved, and picking neutral colours makes selecting your investment bag easier.
On the other hand, there are a number of risks involved. Despite Louis Vuitton having momentum and brand power, overexploiting their customer loyalty could backfire. Swiss luxury watchmakers employed aggressive pricing policies during the Chinese boom of 2010 to 2014, which resulted in four consecutive years of little to no growth for the industry. Many brands never recovered, and the same phenomenon could occur in the handbag industry. The oligopoly nature of the market results in price hikes by notable brands triggering similar price changes across the whole industry.
In addition, collectors are never vocal about the upkeep required of handbags. Owning one meant having to pay attention to water, sweaty hands,oils or chemicals in contact with your bag. Perfumes need to be carefully applied to avoid having a stain on your precious evening bag. I know a story of a family friend who carried a foldable Longchamp Le Pliage in her designer bags to carry the designer bags in the Le Pliage if it rains. Furthermore, taking your bags to repair also costs a lot. My mother’s Spontini strap was ripped in a clumsy accident. Heartbroken, I took the bag to Louis Vuitton for repair for an embarrassing amount of money. It had to be sent to France to have the straps re-sewn in and it was only returned after four months. Bag spas for weathered bags also cost money to disguise the wear and tear.
Lastly, luxury handbags, despite having utility, prestige is heavily coveted, is still an illiquid asset. The resale market is overcrowded, as not everyone needs a designer bag. It is easy to be swept up in the hype of the newest luxury asset class, but who knows if it’s not just an asset bubble? If you were to sell your handbag for money, the whole process will be lengthy. Consignments, whether in-store or online will charge a percentage of sale price as a “finder’s fee”, much like a brokerage fee for trading on the stock market. They will also have very specific conditions for selling, such as your bag will have to be near-pristine, and you’ll need to have receipts from when you purchased it. Finding a buyer who is willing to splurge on your vintage pieces will also take time. Is your item priced competitively compared to similar bags on the market, or will you have to risk lowering prices and witness a loss of your “investment” value? All of these factors need to be taken into account.
Handbags may be overwhelmingly attractive as an investment but similar to selecting a husband, make sure it has your best (financial) interests at heart. Does it suit your lifestyle, take care of your financial needs? Are you sure it’s not a spur-of-the-moment investment which you will lose passion for over time?
Glossary :
Veblen good : A Veblen good is a good for which demand increases as the price increases. Veblen goods are typically high-quality goods that are made well, are exclusive, and are a status symbol. Veblen goods are generally sought after by affluent consumers who place a premium on the utility of the good. (Investopedia)
Positional good : Positional goods are goods and services that people value because of their limited supply, and because they convey a high relative standing within society. Positional goods may include brand-name luxury handbags, a custom Feadship motor yacht, or front-row tickets to the Super Bowl. (Investopedia)
Bubble : A bubble is an economic cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. This fast inflation is followed by a quick decrease in value, or a contraction, that is sometimes referred to as a “crash” or a “bubble burst.” (Investopedia) Otherwise known as, paying for a Maybelline Mascara for a Fenty Beauty price. ( @girlsthatinvest on Instagram)
