Are Designer Bags a good investment?
30 Mar 2022
Hi I'm Hala, an associate at Kestrl: Muslim Money App. When it comes to personal finance and investing, a question i've always had has been around designer labels, and whether I could justify the spend as a "investment". Here's what I found...
Growing up in the 2010s with the onset of YouTube and Instagram, has meant being immersed in the world of fashion vloggers/bloggers/influencers for over a decade. As a teenage girl trailing through this new, mystifying world of clothing hauls, room tours and designer unboxings, I learnt one thing: people spend a LOT of money on handbags. And they justify it by referring to these handbags as an “investment”.
These were actually my earliest memories of the word “investment”; always in relation to clothing or handbags that carried a luxury price tag. Of course, I eventually grew up and learnt about financial literacy, money management, asset classes, stocks, bonds etc. - the more typical use of the word in this context. But the question continued to linger on in my mind for a while. Are designer handbags a real investment? Can they be considered on a par with stocks or gold or art?
Designer bags as an investment
In 2020, Forbes reported that designer bags “now outperform art, classic cars and rare whiskies in terms of investment potential”. The article continues to say that some bags have shown an increase of valuation by an average of 83% over the past ten years.
Examples of bags that appreciate in value like this are those produced by companies such as Hermes, Chanel and Louis Vuitton. For example, a study by online luxury bag retailer ‘Baghunter’ found that the Hermes Birkin bag has consistently outperformed the S&P 500 and the price of gold for the past 35 years, with an annual return of 14.2% compared to the S&P 500’s average of 8.7% and gold’s 1.9% return. The Chanel medium flap handbag has shown similar promise, with returns of 206% over a decade, significantly greater than the S&P 500 returns of 49% (not adjusted for inflation).
While this may seem like it solidifies the status of designer bags as fashionable investment pieces, the reality is that there are many caveats to these bags really being worthwhile investments.
Crucially, not all designer bags are equal. Designer bags range from limited editions, to permanent collection pieces, and different brands have varying reputations and levels of prestige. This affects the resale value of these bags, which in turn affects the return on investment for the purchaser.
Which bags hold their value?
Whether or not a bag holds its value depends on a range of factors. While I will not be discussing all of them in this piece, it most often boils down to exclusivity.
Exclusivity refers to how accessible a bag is. The most exclusive designer bags are highly coveted pieces which can be difficult to get a hold of. Most purchasers of such pieces spend time on various resale and pre-owned sights, or even on waiting lists if looking to purchase a brand new piece. Essentially, many designer brands use scarcity as a means of creating demand for their products; the more scarce a product is, the greater the demand, hence higher returns on the investment as the items become more scarce over time. If a bag is easily accessible through the brand’s website, it’s therefore more likely to depreciate in value than yield any worthwhile return.
Though not a replacement for traditional stock market or property investments, designer bags have been considered a fashionable investment for a while. It is important to note that not all designer bags are equal in the fashion sphere. Not all brands are equally as upmarket, scarce and therefore, valuable, as others. Like any investment, for a luxury handbag to be worthwhile, its value, and resale vs retail price must be researched thoroughly before purchase.
This is why we believe the key to any good investment decision is a thorough understanding of your own personal financial goals, your budget, and if you’re already a seasoned investor, your existing portfolio.
Thanks for checking out this blog post! Download Kestrl: The Muslim Money App to start achieving your financial goals without compromise today!
Don’t forget to check out Kestrl PLUS, our shariah stock screening tool and access your free trial here.