Can luxury bags be smart investments?

When Meg Randell began her career as an auctioneer a decade ago, many clients she met were accustomed to selling traditional assets like antique paintings or old ceramics, and never thought bags that were in their closets could prove to be just as valuable.

Yet today the auction house regularly sells Hermès and Louis Vuitton bags for thousands of pounds at auction. Rare editions can fetch even more: in July, Bonhams sold a well-used Hermes Birkin 35 that belonged to Jane Birkin herself for £119,000 ($143,334), almost eight times the original estimate of 15,000 £ from Bonhams.

“I would see couples come in, and the guy would be like, ‘Well, she thinks her handbag is worth something,'” said Randell, now head of designer handbags and fashion at the auction house. at Bonhams London auction.

“What’s interesting is that I hardly ever have those conversations anymore,” Randell said. “Almost everyone understands that these bags have value. While it may not be the intrinsic value of jewelry…it is finally truly appreciated as having the extended lifespan of very beautiful objects.

Previously, luxury bags from brands other than Hermès were not seen as something that could increase in value over time, or even as an asset class. That’s usually still the case: beyond Birkins and Kelly’s, whose supply shortages have long fueled margins in the secondary market, most bags continue to depreciate after purchase. Yet, as primary market prices rise and major luxury brands tighten distribution, bags are fetching higher resale prices, with some designs from coveted brands retaining a significant portion of their retail value, both at auctions than on online resale sites.

On luxury consignment site The RealReal, average prices for designer bags are up 26% year-to-date compared to 2019, roughly mirroring broader increases in the primary market. (In the United States, the average price of a designer bag has increased by 27% since 2019, according to a study by BoF Insights.) Yet among the three most popular brands – Hermès as well as Louis Vuitton and Chanel – the prices have risen as much as 55 percent. In the case of Chanel, a classic medium double-flap bag in mint condition can sell for above current retail value, according to the resale site. Even with signs of wear, the style averages 74% of its current sale price.

Peak price

Much of this change is related to rising prices more broadly in the primary market. For example, Chanel’s classic medium flap bag, which sold for $4,400 in 2012, now costs nearly $9,000 in stores.

“This kind of appreciation is usually faster than inflation and faster than some other assets,” said Cynthia Houlton, global head of fashion and accessories at Sotheby’s.

The more exclusive brands have helped make designer bags a category for auction houses, such as Sotheby’s and Christie’s selling such bags for significant sums. Soaring popularity prompted the research arm of real estate firm Knight Frank to introduce bags as a tracked investment class in its annual luxury investment index in 2020, joining vintage watches and wines. , among other categories.

Hermès bags have long had the highest prices on the secondary market, but more and more other big brands are catching up.

“While you could buy a Hermès bag and resell it a few years later, and make a profit, there are other brands like Chanel and Louis Vuitton, where you might not make a profit, but in fact you have the bag for years and you still realize 80% of the original value in the secondary market,” said Randell of Bonhams, “which is pretty amazing – especially for people who may have bought the bag a while ago. was 10 years old without ever considering that one day they could sell it for real money.”

Resale sites have seen similar changes. Before the Covid-19 pandemic, the online resale market was growing rapidly, thanks to the rise of specialist luxury resale sites like The RealReal, Hardly Ever Worn It (HEWI) and Rebag, while buying second-hand luxury goods started to get rid of the stigma of diminishing quality or specialness of a purchase.

During the pandemic, demand has intensified for the most exclusive brands in the resale market, as many shoppers have shifted their discretionary spending from restaurants and vacations to items like designer bags, prioritizing to big luxury brands and classic styles that they believe would remain culturally relevant over a long period of time. of time.

With primary market accessibility and availability disrupted by supply chain constraints, shipping delays, travel bans and store closures, an influx of new customers have turned to the market resale to get their handbag. For brands that already tightly controlled distribution, resale was the only way for many first-time buyers to access their products. A Saint Louis tote by Goyard, for example, retains on average more than 90% of its retail value on The RealReal, even when used well, according to the platform.

“With the few brands that are resistant to e-commerce, they don’t have the same accessibility in the primary market if you don’t shop in-store or have your business associate that you work with,” said said Kelly. McSweeney, head of merchandising at The RealReal. “It unwittingly paves the way for resale, where people can … get that immediate gratification.”

Now, handbag prices in the secondary market are starting to level off as many shoppers revert to pre-Covid shopping habits, McSweeney said. But demand for the bags “continues to be very strong”, she said. “Demand for handbags shows no signs of slowing anytime soon.”

Trendy vs Classic Styles

The accessibility and affordability of a bag will determine how much of its retail value it holds on resale. But what happens in stores — and what products the most desirable brands carry — can change the dynamic pretty quickly.

About six months before Dior relaunched its saddle bag in the summer of 2018, Bonham’s Randall had a vintage style purple ostrich saddle up for auction, priced around £300. He received no offers. However, after Dior reissued the style, Randall put the vintage bag back on sale and it sold for nearly £2,000.

Dior’s resale price rose 40% last year compared to 2019, according to Bernstein’s analysis of data from luxury bag resale platform Rebag.

On luxury resale site HEWI, average selling prices for Prada and Fendi bags this year are up 48% and 78%, respectively, from 2019 levels. Sales director Natalie Kurukgy attributes the surge to the reboot of vintage styles like the Fendi baguette and Prada’s nylon range, as well as increased interest in Fendi’s Peekaboo bag.

That said, the average sale price of a Fendi baguette or Peekaboo bag at HEWI remains around the £1,000 mark, compared to around £2,000 for a baguette or £4,000 for a Peekaboo in Fendi stores. . By comparison, “in the case of Chanel and Hermès, customers are willing to pay close to market price for the right bag,” she noted. Ultimately, the most exclusive brands – in terms of price and rarity – are those with the highest levels of desirability.

“If we think of Chanel and Louis Vuitton, I think most of the reasons why their most classic bags retain and gain value is that it takes a long time for a brand to establish that trust, to create that provenance for create this iconic image of these bags,” Sotheby’s Houlton said. “You just can’t do this overnight.”

About Michael Brafford

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