Thursday , March 23 2023

Why Hermes Birkin bags are a good investment

The iconic Hermes Birkin bag saw returns of 38% on average in 2020, the highest on the luxury bag market, and their prices have continued to increase each year since.

A Hermes Birkin 25 has a retail price of $10,000 and can be resold for over double or more.

The rarity of the Birkin, and also the brand’s Kelly bags, is one of the reasons they are so widely coveted.

In early 2023, prices have increased 8-10% across Birkin and Kelly bags, which means they are naturally good long-term investments.

Luxury handbag expert Claudia Ricco, founder of pre-owned goods brand Rewind Vintage, told the South China Morning Post: “Consumers increasingly think about a bag’s second-life potential through resale and also the longevity of an item.”

The average Chanel or Hermès bag increases in price by around 12 per cent per year, she added, making investing in them more lucrative than other assets.

Luxury handbags are a viable alternative bucket for investors with well-rounded portfolios, said Phoebe Chamier, senior investment manager at Brooks Macdonald, at a 2022 discussion hosted by the firm’s subsidiary, Female Folio.

A June 2022 report from Credit Suisse stated that among collectible investments, jewelry, handbags and watches were the most stable options.

Collectibles are a category typically reserved for the super wealthy. Collecting requires that the investor has extensive personal knowledge of the collectible to judge if it is a safe investment.

Deloitte and Credit Suisse reported that the Hermès Birkin saw returns of 38% on average in 2020, the highest of all luxury bag collectibles.

Business of Fashion reported that in 2022, 40% of US consumers bought or were planning to buy a designer leather item. The report predicted that the value of the industry would rise from $72 billion in 2022 to $100 billion by 2027.

Hermes is such a well-established fashion house that they don’t need to churn out new styles to meet growing demand.

Hermes said last week that wealthy Chinese clients had snapped up its products in the fourth quarter, helping it beat sales and margin forecasts.

The increasing value of the Birkin bags aligns with the basic economics of supply and demand. By limiting supply, Hermes has increased demand.

Reports of shoppers being required to join slow waiting lists and purchase other items to access key styles have circulated for years. The brand plays off basic psychology: if you can’t have something, you want it even more.

Volkan Yilmaz, known by his moniker Tanner Leatherstein, is the internet’s favorite leatherworker. He is known for purchasing luxury items with his own money and taking them apart to assess their quality and estimate their real worth.

“Hermes have their own tanneries and the leathers they sell and use cost more than the average comparable leathers in the market,” Yilmaz said.

Yilmaz estimated that at around 6,000 euros and around eight bags per month, the labor cost per Hermès Birkin or Kelly bag is roughly 800 euros.

Regardless, Hermes bags are designed to stand the test of time, meaning handbags that are decades old, if cared for, can look brand new, he said.

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