The Market for Luxury Handbags is Mind-Boggling

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I wrote this over a year ago, when only around 5% of you were subscribed to this newsletter. I was looking back in the archives and figured it’d be cool to resend — it’s one of my favorite pieces I’ve written & one I think anyone can enjoy.

When you reach a certain upper echelon of the tax bracket (a phenomenon I personally am sorely lacking in experience), your consumption preferences shift drastically from the pragmatic toward a more status-driven approach.

Nowhere is that more easily observable than in the luxury handbag industry, specifically the famed Hermès Birkin Bag. The massive popularity for Birkins, which operates more like a $200K+ flex than a utilitarian handbag, is driven largely by immense scarcity as well as the well-known track record for price appreciation.

Celebrities from Kim Kardashian to Jennifer Lopez have all been known to proudly display their Birkin collections.

As an admittedly fashion-deficient observer, the paparazzi shots aren't the thing that intrigued me about the exclusive world of Birkins.

Rather, it's the statistics surrounding these bags as an investment and the unique ecosystem of resellers like Privé Porter which make for a fascinating glimpse into a roped-off world of clout, wealth, and exclusivity.

Birkins as an Investment

A 2016 report published by Bag Hunter sheds some light on the remarkable returns of the asset class, claiming that Birkins have returned an average annual return of 14.2% from 1980 to 2015.

Over that same period, they beat out the S&P 500 and Gold.

In addition to premium branding and a rich history dating back to actress Jane Birkin for whom the bag is named, Hermès is incredibly disciplined in constraining their supply to ensure their production never approaches anywhere near the level of demand.

This can be chalked up to the intense manufacturing process, relying on hand-sewn craftsmen and highly-curated sourcing of raw materials, though nobody would claim this to be anything other than an elegant strategy to limit supply whilst imbuing each product with added allure.

With so few Birkins available for purchase, the waiting list has been reported to be as long as six years simply for the privilege of dishing out a few $100K.

But not everyone is willing to wait in line with the plebians (in this case, plebians refers to multi-millionaires).

The Fast-Pass: Privé Porter

Second-hand is normally a four-letter word for true luxury fashionistas. But in the tipsy-topsy world of Birkins, it's become the best way to flex even harder.

Since 2008, Privé Porter has been allowing Birkin lovers to skip the wait and walk out of the store with their bag of choice just like a regular shopping trip.

The catch?

Buyers pay a markup of anywhere from 50-100% over retail.

According to Privé Porter Managing Director Jeffrey Berk, "our unique selling proposition is that’s what they’re worth as they’re so hard to get”

As a rare cross-section of glamour for glamour's sake & a legitimate investment vehicle, Birkins are one of the best case studies into the oft-counterintuitive psychology of high-end luxury goods.

The limited supply serves as an impenetrable moat for the Hermès brand, compounding endless FOMO and earned media in the form of unwitting influencers. As I discussed previously in my piece on the role of counterfeit goods in the luxury industry:

Hermès generates untold brand equity in the minds of the millions of people who will never afford one of their bags as they see their favorite celebrities walk the red carpet with a Birkin on their arm. It doesn't matter that Hermès will never see their cash, because as long as the public remains enamored by these bags, ownership for the wealthy will continue to act as a status symbol.