A good investment?
Knight Frank estimates that the Hermès Birkin bag gained 17% last year, compared to 4% for Paris real estate.
How can this price surge be explained?
By a strategy of scarcity. When a bag becomes popular - in the industry, we say "iconic" - the brand decides to produce it in small quantities to, it says, "increase desire". And therefore lengthen the waiting lists. It goes from a few months to... several years.
This method is very much in place at Hermès, where each customer can only buy certain models once or twice a year. Chanel and Louis Vuitton are following suit.
Except that this "desire" is mainly a good way to increase prices without anyone complaining. At the beginning of the year, Chanel, for example, increased its prices by 5 to 17%. At Vuitton, the increase was even up to 30%!
How do the brands justify these increases?
In an investigation by L'Obs, the brands blame it on the increase in raw materials, import duties and exchange rates. But that doesn't justify everything.
In reality, there is first a financial mechanism. In times of crisis, raising prices is a good way to maintain profits even if sales decline.
Then there is an image issue. Brands want to become even more exclusive to ensure that suburban influencers no longer have access to their bags. Because they are accused of, and I quote an industry specialist, "vulgarizing" the models...
In any case, these strategies have become crucial for luxury groups. Because handbags now represent at least 50% of their sales. At Kering, it is even 75%!
Can rich buyers keep up?
They turn to the second hand. In the big cities, specialized stores are multiplying. But, as a result of rarity, some used models are sold for more than new ones.
Last month, a man spent 4,000 euros on a Hermès travel bag, even though it cost 1,500 euros. Even better, a few days ago, a rare version of the Birkin sold for over 176,000 euros at Christie's.
Clearly, this is not a crisis for everyone.
Original article by Radio France , May 2022.