Dubai: We are often told to look at stocks, bonds, and property as possible investments, but there have long been alternatives that may not seem like the most obvious way to invest at first. A case in point being designer handbags.
In recent years, the investment potential of handbags outpaced rare artwork and cars, according to AMR, a UK-based art market researcher, when compiling ten years’ of global data. By 2027, the market is expected to reach $100 billion (Dh367 billion), compared to today's $72 billion (Dh264 billion).
“Luxury handbags were considered an expensive gift until a series of crocodile skinned Hermès handbags started to break auction records around ten years ago,” the analysts at ARM revealed.
When buyers start to talk about luxury designer handbags as wardrobe investments or ‘investment bags’, they often don’t, however, compare the risks and returns against traditional investments
Value of Hermès, Chanel, Louis Vuitton bags spike
Bags, from the likes of Hermès, Chanel and Louis Vuitton, saw its valuation spike by an average 80 per cent in the last ten years, according to the report. To put that into context, coins have increased by 20 per cent in value, first-edition books by 40 per cent and watches by 72 per cent.
According to the report, more than 3,500 designer handbags were auctioned in a year alone, which raked in 26.4 million pounds (Dh115.9 million) and was the highest sales recorded over the last decade.
“Today, the market attracts collectors, resellers, dealers and the ultra-wealthy in an ever increasingly popular collecting category,” the ARM analysts further noted. “Luxury handbags are the tip of the iceberg of a reselling market for luxury which threatens to redefine the auction landscape.”
But are luxury handbags truly worth an investment?
While buying a luxury handbag may be expensive at first, retail experts agree that you generally save money in the long term, while citing that as designer purses like Valentino Garavani, Dior or other high-quality brands often hold their value, they are therefore, a good investment.
“When buyers start to talk about luxury designer handbags as wardrobe investments or ‘investment bags’, they often don’t, however, compare the risks and returns against traditional investments,” wrote Andrew Bailey, a UK-based luxury retail analyst. “It’s definitely high risk-high return.
“These designer handbags may have a good return on investment, especially if the item is rare or unavailable. But it’s not always the case, as it’s not easy guaranteeing whether these bags will be in demand in the future when you buy them, given the number of options available in the market.”
When designer handbags are not great investments
As with any fashion investment, the chances that designer handbags will hold anything close to its original value are very minimal. Also, the designer handbag you bought directly from the brand's store can't be sold back to the brand, which puts the investment at a disadvantage.
“While there are brands, like Hermes, Chanel, Goyard, and Louis Vuitton, and classic handbag styles that may hold their value, who's to say that particular classic bag style or bag size will still be as strongly desired a decade from now?” added Bailey.
“The reason why these bags maintain value boils down to taking a chance on exclusivity and desirability. Also, you need to keep your handbag in near-perfect condition if you want to sell it to make a good amount of money in the future and get a return on your investment.”
While there are brands, like Hermes, Chanel, Goyard, and Louis Vuitton, and classic handbag styles that may hold their value, who's to say that particular classic bag style or bag size will still be as strongly desired a decade from now?
Why investment bags are not easy to sell
Selling designer bags are a hard sell specifically due to handbag authenticity, among other factors. While many online consignment stores will authenticate your bag for you, this service is typically built into the price they'll offer to purchase the bag from you.
“The condition of your handbag very much dictates what designer consignment stores, resellers, or individuals will pay for it,” explained Layla Fatima, head of sales at a UAE-based marketplace app for buying and selling pre-owned designer fashion.
“That's why it's so hard to make money on your investment bags if they are used heavily or not properly stored. Unless you don't use them, more than likely they will show signs of wear. You will have to prove your bag's authenticity by keeping all your paperwork and receipts intact.”
Reseller fees, insurance costs can get exorbitant
If you go to an online luxury consignment store to have your designer bag sold on your behalf, you will probably pay them high commission fees off the selling price.
Globally, consignment services charge you anywhere from 15 per cent to 40 per cent of the sales price of your handbag. As a result, at the end of the day, you'll be making less money on your sale, making this another instance when investment bags are not the best way to invest your money.
For designer bags that have a significant price point, it may also make sense to insure your handbags, noted Fatima. “However, the cost of insurance can add up over time and can be a pretty significant expense. And this insurance cost is an indirect loss on the value of your bag,” she added.
Often times, designer handbags are primarily viewed a passion product. If it goes up in value, consider that a bonus, but in case the value goes down, you still have something you love
Why the renewed interest in designer handbags?
The interest in designer handbags as an investment was renewed after Hong Kong billionaire Joseph Lau recently sold 76 Hermes bags and one Chanel bag for HK$25.2 million (Dh11.79 million). Lau has reportedly bought over 1,500 Hermès bags as gifts over the years.
It was sold in an auction by Sotheby’s, one of the world's largest brokers of fine and decorative art, jewellery, and collectibles and the event was the largest single-owner handbag sale in Asia’s auction market. This drew worldwide attention back to the viabilities of making it a potential investment.
Collections of luxury handbags like Lau's could be a smart investment, as their volatility is low and returns could reach mid-single-digits, according to a 2022 Credit Suisse study, but there are risks to consider, be it ensuring future demand, verifying authenticity, high reseller fees and insurance costs.
Despite the above-mentioned risks, investing in designer bags like Chanel, Louis Vuitton bags, and Hermès can be a prudent decision, as they retain their value well in the resale market. The Birkin bag, for example, is expected to double in value in the next decade, recent research shows.
“Often times, designer handbags are primarily viewed a passion product. If it goes up in value, consider that a bonus, but in case the value goes down, you still have something you love,” added Fatima.
“So if you’re buying a luxury bag as a true investment piece, it’s worth it to research and invest in a used one that holds its value or has provenance. This will ensure that your handbag will at least hold its value, and if you’re lucky, become more valuable over time.”