How much is that old handbag worth?
Move over stocks, bonds, gold, and crypto. There may a better investment to consider in 2023. At least one brokerage firm believes that handbags of a certain ilk will outshine some tried and true collectibles like art and jewelry.
Before you rush out and sell all your investments, however, understand that the kind of handbags I am talking about is in the category of alternative investments, usually reserved for the ultra-rich. Brands that fit that category are Hermes' Birkin and Kelly brands, some select bags from Chanel, and maybe Kate Spade. Over the decade spanning 2010-2020, the market value of Birkin bags, for example, climbed 5.7% annually.
There is an index that tracks the value of handbags along with what is sometimes called 'passion assets.' The Knight Frank Luxury Investment Index (KLFII) measures the performance of luxury assets such as jewelry, art, watches, wine, whiskey, autos, as well as handbags. Over the past decade, whiskey had the highest return (402%), while handbags notched a 92% gain ahead of both jewelry (53%) and art (84%).
Over the last 12 months watches performed the best (24%) followed by handbags with a 16% return. Credit Suisse, a global broker, is predicting that handbags will outstrip all other luxury assets in 2023. The broker argues that handbags are one of the least volatile collectibles with only a 2%-5% price movement per year and have proven to be a good hedge against inflation and have the lowest correlation with stocks.
Be assured that these are no $200 pocketbooks. Many of the truly valuable bags are sold in auction houses like Sotheby's and Christie's and fetch hundreds of thousands of dollars each.
As is the case of many collectibles, a genuine love of the item is usually the initial impetus for collecting. For many women, handbags are much more than something to carry around a few possessions.
For those who are attracted to luxury bags; style, craftsmanship, color, and something else—social status, combine to make owning a brand-name high-end bag a visible definition of who you are or want to be. It is a status symbol that one can carry over the arm or hand that says 'this is who I am."
However, some collectors who become investors, have gradually begun to study and then prioritize the resale value of designer bags, rather than just the materials, size, or style in favor of the scarcity value of a handbag. Some designers such as Hermes actively limit the production of their bags in a bid to drive up prices and demand.
Who are these collectors? Studies indicate that handbag collectors are mostly female, worldwide in origin, and of all ages. Some buyers are purchasing their first luxury handbag to celebrate a personal achievement, usually in the professional world. Others are simply building their collection by buying smaller bags of neutral colors. There are also long-time collectors with more than 50 bags, and then there are those seeking handbags that have the highest payoffs.
Hermes' Kelly and Birkin bags lead the pact in the luxury handbag market. Kelly bags are less expensive, but their values have risen faster than Birken bags. Exotic skin, rare, and unique bags have consistently higher resale prices. Special order bags that are customized by brand VIPs are also on the collector's wish list. The Hermes special order bags (HSS) such as the Birkin Faubourg bag in black and white was introduced at $30,000 and now command more than $250,000.
Other sought-after collectibles are The Himalaya Birkin and the Picnic Kelly with diamond studded hardware, as is the Dalmatian series, and the Jean Paul Gaultier SO BLACK series to name a few.
Luxury brand Chanel has also followed Hermes' strategy and has been raising prices and cutting production on their most popular bags. It has been paying off in both rising revenues and resale values. The Boy bag and Karl Lagerfeld's Classic Flap are deemed must-haves by most collectors and have experienced almost a 25% investment return since 2019.
Collectors know that maintaining their handbags in pristine condition is paramount to reaping the greatest investment returns. Some investors store their bags in climate-controlled rooms, wrapped in their original packages. Proof of authenticity is also of primary importance, for obvious reasons given the thriving global business in knockoffs.
Luxury collecting is most likely out of the reach of most of my readers, so I asked my daughter, a 40-something professional in the retail business in New York City. While she isn't in the market for a Birkin bag, she does recognize the value of investment pieces.
"Fast fashion and seasonal trends aren't something I pay attention to anymore. I'm more willing to put down the extra cash for a bag, a trench coat, or a pair of shoes that will hold their value and utility for the long term. Plus, well-made, class pieces can be repaired and touched up year after year, giving me a better ROI than a tote from a mid-price brand that starts falling apart after a year of use. And from a sustainability perspective, an investment piece won't end up in a landfill."
Bill Schmick is registered as an investment advisor representative of Onota Partners, Inc., in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners, Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or e-mail him at bill@schmicksretiredinvestor.com .Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.