Investing in Handbags

If you thought investing in luxury investment handbags requires pouring over the pages of Vogue and Harper’s Bazaar and knowing the difference between crocodile and alligator skin, well, you’d be right. You can’t invest in fashion without some appreciation of its nuances. But honing your fashion expertise for investing is not so much about identifying the brands and styles you should buy so much as knowing which brands and styles to avoid.
This guide explains which brands have staying power and which don’t. More importantly, the guide clarifies the potential for the luxury handbag market to be lucrative. It also suggests tips to be profitable and the pitfalls to avoid. Read on to find out which brands are standing the test of time, and why the “it” factor is not at all a sign that a hot trend will one day make it to haute couture.

What Are Investment Handbags?

An investment handbag is a luxury accessory. It is a high-quality item associated with high-end fashion houses like Hermes, Chanel, or Louis Vuitton. Because of the high-quality materials and design, these bags are desirable because they wear well in terms of longevity, style, and value.

But when did the idea that handbags could provide a monetary return on an investment take hold, and is it defensible? Is it true that returns on luxury bags can exceed stock market returns?

Investments in the handbag market were fueled by a study by Baghunter, a luxury retail bag ecommerce site. The study reported that the Chanel Medium Classic Flap Bag increased in value by 72 percent between 2010 and 2015 and far outperformed housing prices in the United States, the S&P 500, and inflation.

Sounds incredible right? That’s because it kind of is. According to The Collectory, a luxury handbag curator and ecommerce site, the bag actually did outperform the annual S&P rate of return for that period, but only by 1 percent. Also, this particular bag aside, the Hermès Birkin bag (affectionately known as “The Birkin”) has long been considered the stalwart of luxury goods investment bags, and the rate of return for that item was lower than the stock market over the same period.

Still, as with other alternative investments like art, watches, whisky, and cryptocurrencies, the attraction of these assets is not limited to returns. Luxury items appeal to much more than the wallet; not least, the eye and the ego.

What Are the Attractions of Investment Handbags?

There are two aspects to the attraction of acquiring luxury handbags. One is the investment component, and the other is the consumer’s obsession with the latest brands celebrities and influencers are sporting on social media—namely, Instagram or YouTube.

According to the ecommerce blog Designer Bags, the Louis Vuitton Lambskin Embossed Monogram Coussin PM Black that retails around $4,000 has captured the heart and wallet of Miranda Kerr, Selena Gomez, Dua Lipa, and Jennifer Aniston and, probably, handbag investor enthusiasts.

What An Investor Should Know?

For investors, it is true that the top brands are exquisitely designed and manufactured. If preserved, they will continue to be beautiful and, therefore, sellable into the foreseeable future, even if used. The same can’t be said for luxury or vintage cars, for example, which are expensive to upkeep if used and breakdown if left to languish. In that regard, handbags are a low-maintenance investment.

Another attraction of investing in luxury markets is that wealthy people are often shielded from a recession and continue to spend even during economic downturns. This ensures the market always stays buoyant. For the most part, as long as a buyer pays close attention to the market price, luxury handbags hold their resale value well.

Designer handbags can offer a fast return. The laws of supply and demand apply, and a coveted item is likely to be very difficult to find. A bag might be just very expensive or one of a limited release; either way, it is the apple of an investor’s eye.

Waitlists are common where investors are willing to pay three times the retail price for an item once it hits the secondary market. In December 2018, a rare and exceptional Matte Himalaya Niloticus crocodile diamond Birkin 35 with 18k white gold and diamond hardware made by Hermès in 2010, fetched £236,750 at a Christie’s auction in London.

What Are the Pros and Cons of Investing in Handbags vs. Stocks?

If your passion is fashion, and stocks bore the socks off you, the advantages of buying a high-end accessory that will not only stand the test of time and make you look fantastic go without saying. Personal indulgence aside, here are the pros and cons from a more objective and financial perspective.

Pros

Tangible value—Investing in luxury handbags satisfies the hunger for fashion that some people have. Handbags, cars, fine wine, art, and rare whiskies all satisfy a taste for the finer things in life.

Supply and demand—Fashion houses are aiding and abetting the market for investors by raising their prices on classic bags and limiting supply.

Sustainable market—The high-end market for handbags will always be buoyant. The wealthy are inflation and recession-proof to a large extent. This part of society will continue to buy and show off luxury goods. It’s in their DNA.

Cons

Fickle trends – Unless you are the ultimate fashionista, it’s difficult to predict which styles will remain iconic and valuable in five or ten years.

To wear or not to wear—While top brands will weather significant wear and tear, the better a bag’s condition, the more it will be worth in the future. So, bear in mind the effect of wear on your investment.

Illiquidity—Designer bags are not so easy to sell. It can take time to find the right buyer at the right price. While your money is tied up, you are missing out on other investment opportunities.

Fakes—There are lots of fakes on the market, which makes buyers wary. You also may have to pay reseller commission fees to authenticate your bag for potential buyers.

How Can Novice Investors Start Investing in Handbags?

You cannot seriously invest in handbags without having some knowledge of the fashion industry and the brand powerhouses within it. Without knowledge, you will be buying blind. To find the right pieces, read fashion magazines to understand the latest trends and which brands are so admired their bags will always have value.

To be safe as you come up to speed in the frenetic fashion world, stick to the leading brands and classic styles and shapes. Their popularity is already proven, so they will stand the test of time. If you can get your hands on limited editions or designs that have a waiting list, that’s a surefire investment that will produce returns.

Harpers Bazaar gives some advice on where to buy bags so that you are less likely to purchase a fake. Many resale sites will authenticate a bag for you, but at a cost. Rebag is one recommendation, and the platform also tracks the resale value of a bag for you. Other sites include 1stdibs, Fashionpile, Vivrelle, The RealReal, and Vestiaire Collective.

Immediate loss of value

When it comes to price, bags are a lot like cars. As soon as you drive them off the lot, or sport them as an accessory in this case, they lose value. Therefore, buying a bag on the secondary market or from a reseller that is close to brand new is preferable from buying retail.

If you decide to wear the bag, take care of it. Also, know that if you keep the original packaging—dustbag, box, receipt, and tags—the item will sell for more when you eventually part with it.

Of course, quick returns are nice, if elusive. If you get a good offer right away, take advantage of it because that will free up cash for another investment (if you can find one). When you are ready to sell, Fashionphile and The RealReal are recommended by The Collector.

However, these marketplaces charge fees in the range of 30 percent to 40 percent of the sale and they determine the price for you. Ebay and Trades have much lower fees, but with lower fees comes the risk that a pseudo buyer may scam you.

What Are the Risks Involved With Investment Handbags?

Much of the demand for luxury items comes from Russia and the Middle East. These are areas seen as vulnerable to geopolitical risk. Sanctions imposed by other countries could lead to a drop in demand. This could impact the valuation of handbags.

Along with political risk comes inflation. Inflation puts upward pressure on prices because it costs more to produce a luxury handbag. Consider whether your asset can maintain its value if faced with rising inflation.

Handbags by the top “Houses” were and still are handmade. This ensures a level of quality and ensures they last for decades. Some more modern brands charge the same price, but the products are made by less skilled workers or by machines. (yet you still pay a similar price). It pays to thoroughly research the business models of brands to understand their operations and attitude toward quality.

There are many counterfeit Chanels and Pradas on the market. It is easy for a buyer to fall prey to scams and to buy an item they can never sell. Resellers are a good place to buy, but they will include the cost of authenticating items in the price. Similarly, you will most likely have to pay reseller commission fees to authenticate your bag for potential buyers. This can be anywhere from 15 percent to 40 percent of the sale price, taking a big bite out of your returns.

What Is the Criticism With Investment Handbags?

The main criticisms aimed at handbags as wise investments are that fashion is fickle. What is trending today may not be trending tomorrow, depending on the news on social media and the antics of leading influencers.

Another criticism is that investment bags are not easy to sell, and to overcome the problems associated with authenticity, resellers charge high fees, which can negate any appreciation and eat into your return. Worse, fakes are easy to buy!

Time is another factor. A bag may take years to appreciate in value. Meanwhile, it’s condition can deteriorate depending on whether it is worn, further limiting short-term returns.

5 Tips for Profiting from Investment Handbags

Spend Only What You Can Afford to Lose

Only spend what you can afford to lose. Certainly don’t take out debt to buy handbags. Compounding interest on credit cards can totally eliminate any profit you hope to make on a future sale.

Buy on the Secondary Market

If you buy retail, your bag will lose value straight away, just like a brand-new car. Seek realistically priced luxury bags on the secondary market to give you a head start on any appreciation.

Avoid Buying a Fake

Only the most seasoned professionals can spot a fake. As a novice, buy from a reputable reseller who will guarantee the authenticity of a bag. You will also have an easier time selling the bag later.

Educate Yourself

Commit to following fashion. Read magazines, and troll fashion discussion forums like Reddit: Fashion and Style, The Fashion Spot Forum, and Styleforum. These sites, and similar ones, will give you insights into which brands are trending and which are losing popularity, and why.

Don’t Go Rogue

Buy the top brands and choose classic styles if you are most concerned about returns. The more you steer toward an extreme design or less established brand, the more risk you assume.

Investment Handbags: General Terminology

B##/K## (ie B25 or K32) – A a term usually seen on social media channels. It refers to either a Birkin (B) or Kelly (K) followed by its size in centimeters. For example, a Kelly 25cm is a K25.

BB – Short for Bébé Bandouliere, French for “baby strap.” It indicates the mini version of a given size range. The bag will often have a shoulder strap.

Birkin – Probably the most well-known luxury handbag known as “The Birkin Bag,” introduced in 1984 by the French luxury goods maker Hermès and named after the English actress and singer Jane Birkin.

Consignment – Selling or buying through a third party.

Crocodile – One of the most expensive leathers for handbags because its use comes with strict ethical standards. This type of leather takes decades to reach maturity.

GHW – An abbreviation for gold hardware.

It Factor – When a fashion item suddenly skyrockets in demand and value, often due to exposure by a celebrity or influencer on social media.

Limited Edition – Short-term collections championed by fashion editors and influencers prior to their release. They are limited in supply and, thus, likely to be in high demand.

Paillettes – A term for sequins used by French designers.

PHW – An abbreviation for palladium hardware

Pochette – A detachable pouch on a handbag.

Poignet – An extra strap that wraps around two handles to hold them together. These straps are common on travel bags.

SHW – An abbreviation for silver hardware

Tote – A style of handbag.

Veblen Good – A luxury good for which the demand increases as the price increases in contradiction of the law of demand. The Birkin bag is considered a Veblen good.

Conclusion

If you choose to buy luxury bags, choose the best brands because they stand the test of time both physically in terms of quality materials and psychologically in the minds of buyers. Iconic style is timeless.

The biggest pitfalls to investing in luxury handbags are avoiding “it” bags and fakes. “It” bags are items that suddenly become hugely popular because a celebrity is seen toting one, and the bag becomes the shiny object that everyone wants to find. An “it” bag will sell out quickly, skyrocketing demand and the price. However, the mass hysteria won’t last long because these bags tend to be trendy rather than classic, and they begin to look out of date quickly.

Bottom line, unless you are passionate about fashion, choosing high-end luxury handbags as an investment vehicle is a risk. It’s difficult to find the safest asset, and it can be difficult to offload it when you need to. That said, it’s always better to diversify, and the right piece will complement a well-chosen stock portfolio and your wardrobe, providing years of enjoyment as an exquisite yet practical accessory.

FAQs

Which brands of handbags hold their value?

Chanel, Louis Vuitton, and Hermès are the brands most likely to hold their value. According to The Collectory, specific bags are the Chanel 2.55 bag or the Louis Vuitton Neverfull. And, of course, the Hermès Birkin.

Which brands have the highest resale value?

The most coveted bags command the highest resale value. The crocodile skin Himalayan Birkin by Hermès is the noncontested winner and has long been considered the most collectible handbag in the world. A white gold and diamond hardwared Birkin fetched a record-breaking 2.8 million Hong Kong Dollars (roughly $372,600) in 2016. Chanel is another brand with high resale value. According to Forbes, Chanel flap bags have risen by 132 percent over the last decade.

Are there any brands you should be wary of?

It’s not so much brands that you be wary of as “It” bags. “It” bags are those that suddenly become hugely popular because a celebrity is seen toting one. Examples are the Chloe Paddington bag, which retailed for $1,300 around the early 2000, but some years later it was on the market for $300. Miu Miu bags with glazed leather would retail for around $1,700, but now cost around $500. The glazed leather look is dated, but Miu Miu continues to sell bags made of this material.

What materials should you be wary of when it comes to investment handbags?

Glazed leather, or shiny leather, will not wear as well as regular leather. If the quality and brand is not of the highest level, the leather may crack over time. So, if you are more into longevity than shine, avoid this material. Nylon is another material to watch out for. Prada makes a variety of nylon handbags at a very high price, but there is no exquisite leather or other adornments to justify such a high price of over $1,000 for nylon tote bag.

What is cost per wear?

To justify buying a luxury handbag, some investors, or fashion-lovers, use the cost-per-wear calculation. Basically, by dividing the total cost of the bag by the number of times you’re likely to wear it, you can judge if it makes financial sense to buy the bag. You can include the cost of time and money that you would spend on maintaining the appearance of the bag.

For example, if you bought a bag for $3,000, and your cost-per-wear is down to $3, you are making good use of the bag’s lifespan. However, if your cost-per-wear is $300, you might want to rethink buying the bag, unless it is a high-end piece that you are preserving because you know it will appreciate in value.