Over the last few decades, one asset has quietly surpassed the housing market, the stock market and the price of gold in terms of appreciation (Unusual Investments, n.d.). The asset in question? Designer handbags. This essay aims to examine how some of the most coveted and desirable designer handbags, such as the iconic Hermès Birkin or timeless Chanel Classic Flap, can not only be considered a worthwhile investment, but have in fact become amongst the most lucrative physical investments one could make in the 21st century.
The term ‘investment’ broadly refers to an asset or item acquired with the goal of generating further income via appreciation (Chen, 2020). In economic terms, any good that is purchased with the intent of creating wealth in the future can be considered an investment. Generally, investments can be thought of as falling into one of two broad categories: traditional investments, such as stocks, shares and bonds, and alternative investments, such as real estate or art. An alternative asset is one which would not be found in a traditional investment portfolio and can thus be considered a form of diversification (Chen, 2019), meaning designer handbags fall under this category. The value of alternative investments can only be realised upon sale of the item, with price also being difficult to estimate beforehand due to the fact that it rests on subjective enjoyment (Anson, 2008). Piironien (2014) found evidence of a positive association between the inclusion of alternative investments in an investment portfolio and the return of said portfolio, with such returns outperforming those of portfolios without any form of alternative investment.
Furthermore, a seminal report by Art Market Research (2020) labelled designer handbags as the most worthwhile investment in the category of alternative investments, exceeding fine wines, jewellery, whiskey, classic cars and art. Their research represented the world’s first group of indexes tracking collectible handbags, using pricing information gathered from the world’s leading auction houses such as Sotheby’s and Christie’s to measure the performance of certain handbags over time.
Not only did the designer items resale for prices well past their original retail price, but the returns were substantial – one type of Hermès Birkin, for example, appreciated by 42% in a single year, compared to Banksy’s artworks, which on average appreciated by only 23% in the same time period. When viewed from a more long-term lens, further research has showed that Birkin bags appreciated in value by over 500% during the last 35 years, an increase which is expected to double in the next decade (Chapin, 2016). The CEO of Art Market Research, Sebastian Duthy, stated, ‘The secondary market for handbags has become so popular that some new bags sourced in store are being sold at auction for up to two and a half times retail price’ (Cormack and Report, 2020).
But what makes the Hermès Birkin such a lucrative investment? Part of the reason is the scarcity of the item. From a classical economic perspective, demand far exceeds supply, thus driving up the price. The bag, which ranges in size from 25-45 cm and is available in an array of different finishes, leather types and colours, cannot be bought directly off the shelf. It requires good contacts, years of brand loyalty, an indiscretion towards price and a lot of patience – the waiting list is reported to be as long as six years (Newsom, 2016). Prospective buyers are unable to specify the colour or size they want, as it simply depends on whichever styles their local Hermès boutique happens to sporadically receive. As a result, this has created a vast reselling market, which has been described as ‘the only way for 99% of [women and investors] to [buy the bag]’ (Newsom, 2016). Indeed, a Himalayan diamond-studded Birkin was considered the most expensive handbag ever sold, after reselling for $300,168 (Newsom, 2016) – an approximate 300% mark-up of its first-sale price. The Hermès Birkin is not the only designer handbag with vast appreciation levels though, with the Chanel 2.55 handbag having risen 132% in price over the last decade alone (Eldridge, 2016; London, 2020). Selling a Chanel 2.55 bought at the start of the decade on a resale platform now, at a price just undercutting the current market price of the bag, would generate thousands of dollars in profit. Keeping such a bag in pristine condition would garner profits in excess of 100% (Piironien, 2014).
Additionally, another factor that has contributed to the success of designer handbags as an investment good, is their relative safety when compared to other forms of investment, both traditional and alternative. Unlike art, watches or jewellery, which weave in and out of fashion, classic designer handbags from the most prestigious fashion houses like Chanel, Dior, Louis Vuitton and Hermès have remained iconic pieces throughout many centuries, and are still coveted by many women today. In fact, it could even be argued that demand is set to increase in the 21st century, partly because of the emergence of new markets as well as the emergence of social media. Social media has facilitated the growth of demand, with a wider audience being exposed to luxury
goods than traditional marketing methods would typically allow. In addition, the luxury goods market has tripled in less than 20 years, in part due to the growth of emerging economies such as the ‘East Asian tigers’ – China, Japan, Singapore and so on, whose consumers are willing to spend significant sums on designer items, especially those deemed exclusive like the majority of the aforementioned handbags (Piironien, 2014). According to one avid investor from Hong Kong, who owns over 50 Hermès Birkin bags, ‘Birkin bags are like currency: you [can] cash them out at any time’ (Newsom, 2016). As a result, they are incredibly low-risk investments, as demand appears to not only be pervasive but also increasing over time.
Moreover, designer handbags have also proven to be superior to some traditional forms of investment. A study by BagHunter (a popular handbag reselling platform) in 2016 found that between 1980 and 2015 the S&P 500 index returned a real average of 8.65%, with a peak in 1995 of 37.2% and a low of -36.55% in 2008. Over the same time period, gold offered an annual average return rate of 1.9%, which in real terms equated to -1.5%. So how do these values measure against the performance of the Hermès Birkin? The data found that since the inception of the Birkin in the 1980s, it has never decreased in value. Compared to the average annual return of 8.65% for the S&P 500 index and -1.5% for gold, the Birkin has faced an astounding return of 14.2% per year (Table 1), a figure that the more recent Art Market Research study showed as having since tripled in 2020. The study concludes with the assertion that designer handbags are a ‘historically safer investment than the stock market’ (Schlossberg, 2016).
Table 1 - Comparison between average rates of return for the S&P 500, gold and Hermès Birkin handbags across the period 1980-2015. Source: Newsom, 2016.
Ultimately, a designer handbag such as the Hermès Birkin is a worthwhile investment for any prudent investor looking for a fast return. One of these bags could be sold virtually a week after purchase for a favourable return. Of course, as demonstrated throughout this essay, the main difficulty in utilising an exclusive designer bag as an investment asset is difficulties in sourcing it in the first place. However, overcoming this barrier would enable designer handbags to be a good form of alternative investment in any successful, diversified portfolio.
Anson, M. J. (2008) Alternative Asset Classes. Handbook of Finance, 1.
Art Market Research (2020) Luxury Handbag Report 2020. Available at: https://www.artmarketresearch.com/luxury-handbag-report/ (Accessed: 10 January 2021)
BagHunter. (2016) Hermes Birkin Values Research Study. Available at: https://baghunter.com/pages/hermes-birkin-values-research-study (Accessed: 5 January 2021)
Chapin, A. (2016) Study Says Birkin Bag Is a Better Investment Than Stocks and Gold. Available at: https://www.racked.com/2016/1/12/10756136/hermes-birkin-value (Accessed: 12 January 2021)
Chen, J. (2019) Alternative Assets. Available at: https://www.investopedia.com/terms/a/alternativeassets.asp (Accessed: 8 January 2021)
Chen, J. (2020) Investment. Available at: https://www.investopedia.com/terms/i/investment.asp (Accessed: 8 January 2021)
Cormack, R. and Report, R. (2020) Luxury handbags are the best 'investment of passion,' bringing better returns than fine art, classic cars, and even rare whiskey. Available at: https://www.businessinsider.com/luxury-handbags-are-best-performing-investment-asset-class-2020-7?r=US&IR=T (Accessed: 7 January 2021)
Eldridge, A. (2016) Should I Invest in Art? M.A. Thesis. Sotheby’s Institute of Art. Available at: https://digitalcommons.sia.edu/cgi/viewcontent.cgi?article=1010&context=stu_proj (Accessed: 12 January 2021)
London, L. (2020) Designer Handbags Are Now A Better Investment Than Art. Available at: https://www.forbes.com/sites/lelalondon/2020/07/01/designer-handbags-are-now-a-better-investment-than-art/?sh=6791f8da64c5 (Accessed: 11 January 2021)
Newsom, B. (2016) Birkin Demand: A Sage & Stylish Investment. M.A. Thesis. Sotheby’s Institute of Art. Available at: https://digitalcommons.sia.edu/cgi/viewcontent.cgi?article=1007&context=stu_proj (Accessed: 11 January 2021)
Piironien, R. (2014) Luxury handbags as an alternative investment? International Business Administration Thesis. Arcada. Available at: https://www.theseus.fi/bitstream/handle/10024/85821/Piiroinen_Riikka.pdf?sequence=1&isAllowed=y (Accessed: 12 January 2021)
Schlossberg, M. (2016) Buying this fashion status symbol is 'historically safer' than investing in the stock market. Available at: https://www.businessinsider.com/birkin-bags-value-keeps-increasing-2016-1?r=US&IR=T (Accessed: 11 January 2021)
Unusual Investments (n.d.) Are Designer Handbags A Good Investment? Available at: https://unusualinvestments.com/designer-handbags-good-investment/ (Accessed: 13 January 2021)