Hermès knows secret to bagging the rich’s money
In June, an Hermès Himalayan Nilo Crocodile Birkin handbag sold at auction in Hong Kong for just more than $300,000.
Prices, particularly for the rarest Birkin bags, have reached fever pitch, in large part due to the French luxury goods manufacturer’s policy of restricting supply.
"The reality is that the top brand names have a very high retail price and the opportunity to buy them at auction represents a chance to buy them at a discount," says Stephen Whittaker, MD of Fellows Auctioneers.
"It is not just a case of having a waiting list — it’s the ability to get on that waiting list that is challenging."
Handbags have become big business. The JustCollecting Rare Handbag index, which tracks investment-grade bags, increased by just under 8% a year between 2004 and 2016.
During the course of that 12-year period, the standout star — the Chanel 2.55 Medium Classic Flap Bag — has risen in value by more than 230%.
The Chanel bag at auction nowadays would set you back roughly $5,000, up from $1,500 in 2004.
"That’s due to a surge in appreciation for the bag’s timeless style, which, as its name alludes to, was first produced in February 1955," says Dan Wade, head writer at JustCollecting, the online auction house.
"If you’re looking to invest in a 2.55, avoid the 2005 reissue, which has value but not as much as the original classic."
Retailing for about £6,000, the Birkin — named after the sixties actress Jane Birkin — is not easily obtainable. The waiting list can be as long as six years, says Whittaker.
"Hermès is without a doubt the most established collectable brand," says Tammy Smulders, global MD of Havas LuxHub.
"You need only to look at the handbag auctions at Christie’s and Sotheby’s to prove that point," the Havas MD says.
Christie’s reports selling between 10 and 20 such bags a year, many of which easily fetch more than $100,000.
At the lower end of the scale, bags produced by Christian Dior and Louis Vuitton remain strong investments.
Between 2014 and 2016, JustCollecting reports that the Christian Dior Lady Dior Cannage has increased in value by just more than 14% to $4,000, while Louis Vuitton’s Classic 25 Monogram Speedy has gone up 10% to $550.
But not every bag is deemed "investment grade". Certain brands have longevity, but others either suffer the vicissitudes of fashion or the ubiquity of overproduction.
Susie Ambrose, founder of match-making company Seventy Thirty and a collector, says: "While the value of luxury handbags can vary due to styles and rarity, Hermès, Chanel and Louis Vuitton in certain styles have the highest resale price.
"Particular styles are issued in limited numbers, demand tends to outshine supply and values will always remain strong."
Potential investors or collectors should look for three main factors: brand, rarity and exotic skins, such as crocodile.
Aside from the classic brands, Smulders says, there are also specialist labels, such as Judith Leiber, which use artistic themes and can provide investment opportunities.
Conspicuous consumption is becoming less and less appealing. And for this reason alone, we are convinced that investing in mainstream luxury brands will not be a good long-term investmentAnders Ojgaard
MD of Waremakers
She advises budding investors to seek out limited editions and special collections.
Exotic skins, special materials on clasps and buckles, gemstones and embroidery can add to value.
"The artistic merit of the bag, and associations with fashion icons, is also a key factor — materials are only one part of the formula," she adds.
But with rarity comes the question of supply and demand.
Handbags remain a niche investment prospect — hence their auction prices — but, they are also quite prone to devaluing pretty rapidly.
"Condition is everything," explains Whittaker. "It’s not just a question of reducing the price, but whether anyone would want it at all."
The solution, of course, is to treat handbags like you might any other valuable asset class — deposit it in the bank, never to be used.
True aficionados will invest in leather milk and dust covers, ensuring the bag is stuffed with scarves or tissue paper and kept out of the sunlight.
But while even the most scuffed of bags might retain some appeal if they are the right label, investors should also be aware that the market is awash with fakes, both in terms of buying the latest bag in the street and at the auction house.
"The ubiquity of luxury brands, together with the increasing sophistication of counterfeit items flooding the market, means the investment case for standout fashion items is being undermined," says Dawn Cavanagh-Hobbs, founder of Appassionata Boutique, an Italian luxury handbag company.
"Although the genuine article will always hold its value, if consumers feel that their handbag is no longer a rare find, the incentive to purchase may be diminished."
Not everyone is convinced handbags offer a reliable alternative to more mainstream assets such as gold or property.
"[We] believe that investing in luxury brand bags will yield negative returns going forward," says Anders Ojgaard, MD of Waremakers, a luxury marketplace and online magazine.
Ojgaard argues there is a move under way towards "honest luxury", by which he means an emphasis on quality rather than a preoccupation with branding.
"Conspicuous consumption is becoming less and less appealing," he says. "And for this reason alone, we are convinced that investing in mainstream luxury brands will not be a good long-term investment."
Whether investors are right to look to handbags for a decent return, for many, the appeal of wearing a designer label, tossed casually over one arm, remains paramount — whoever you are.
"I do sell to princesses," says Nicola Robinson, founder of Bags of Luxury.
"But otherwise, it’s just normal people with a wealth of money, and handbags are something they like to collect.
"Men have their watches, and women like to collect bags — something that’s going to last and either can be handed down or sold."
Financial Times Limited 2016 ©