I’m pretty sure the majority of us include possessing a Birkin bag in our bucket list. Why is it so? Perhaps because these bags are the embodiment of luxury and are thus, not very pocket friendly. Their price ranges anywhere between $9000 to half a million dollars.
The question is, what is in this bag that makes it command such eye-popping prices? The story begins with Jane Birkin, who used to carry a basket everywhere she went. However, one day on a flight when she tried to fit her basket in the overhead compartment, the lid came off and all the contents fell off. Jane sulked and discussed with her seatmate how it was impossible to find a perfect bag, customized for all uses. Then the pair spent their time on the flight by sketching all possible designs for the handbag.
After a year, Dumas (Jane’s seatmate) presented before Jane, a Birkin Bag, a spacious yet stylish bag for everyday use. The bag seals all the contents and prevents them from spilling. From that day till now, Birkin bags now have become an ultimate status symbol. So much so, that one can’t expect to walk into Hermes and buy one. There exists a proper waitlist and you can only hope to be offered one, and even if you are offered a Birkin Bag, you are not given the authority to choose the colour or size.
Kelly and Birkin bags have such stratospherically high prices because of several reasons. Apart from inflating the bags of the prices every year by 5-10% themselves, another major reason is craftsmanship in every single Birkin bag. Each bag is assigned a professional craftsman who’s responsible for manufacturing that bag from start to finish.
Also, these bags are said to be built to ‘stand the test of time’. They pass down through generations, and there are various spa treatments and reconditioning services available to maintain these bags and help them look like new even if they are 15-20 years old.
The dedication to preserving the exclusive nature of the bag has ultimately paid off the brand. Let’s prove this with figures. A standard Birkin bag costing $2000 in 1980, $2750 in 1990, $4000 in 2000 and today the same bag sells for $10,000 to $12,000.
With the consistent decline in the stock market worldwide, due to environmental degradation, or political protests and now Covid-19, investors have been avidly researching for ‘an alternative asset class’ to put their excess cash in.
According to a recent study by the alternative investment data provider, Preqin, the alternative investment industry is expected to grow by 59% in 2023, with the ever-growing number of investors (retail and institutional) constantly increasing their appetite for safe-haven alternatives, where it is certain that market fluctuations won’t dent their returns.
According to data collected between 1980 and 2015, it was noticed that while the stock market or gold’s value can fluctuate, Birkin bags never fall victim to such fluctuations. Birkin bags increased in value by over 14.2% annual average growth rate in these 35 years, with a total 500% increase.
Thus, these luxury bags are considered to be the safest and least volatile asset. Luxury assets as a whole in fact, is an asset class which doesn’t depreciate over time, and ends up being more expensive with time. And not to forget, this class serves as a great way for the investors to diversify their portfolio.
BagHunter serves as an online secondary market for Hermes bag, and they claim that if a bag is maintained in a good to a very good condition, then it can easily fetch up to 80% of its value, while a bag excellently maintained usually fetch more than 100-120% of their initial purchase price.
It is only because of this price rise feature that these luxury goods as an alternative investment idea are supplementing or rather becoming more popular than conventional investment tools. That is the precise reason for the sudden emergence of young companies which offer a chance to investors to buy such inaccessible goods and reclaim a higher value in return after some time by selling it, without having to engage much in the efforts necessary to ensure that the asset’s value does grow.
Now it’s time to compare the three main assets for investing idle funds- stock exchange, gold and luxury bags. During those 35 years when Birkin bags’ value increased by average 14.2% annually, the stock exchange gave a return of 8.65% annually and gold gave a real return of -1.5%.
This data demonstrates the risk involved in investing in S&P or gold markets. While economic factors and a bullish or bearish attitude determine the return which you’ll be getting from these investment tools, positive returns in case of reselling Birkin bags are more or less guaranteed since 1980, as their value has constantly risen after that.
Interestingly, luxury apparel and accessories companies have given spectacular returns on their stocks to the shareholders. Meanwhile, many rich investors have latched themselves to the idea of physically buying the items and earning even higher returns along with maintaining a status symbol.
So the next time, when an amateur investor asks you about the best tools to mobilize their funds in, don’t forget to pitch them the idea about Birkin bags!