They say money can’t buy happiness, but I truly believe those that say that have never held a Chanel quilted handbag in their hands. The feeling you get from owning luxury is a feeling that cannot simply be put into words. However, owning luxury is only the tip of the iceberg; making money off of owning luxury is the cherry on top!
If you’ve been keeping up with our blogs, here at Lux Second Chance, then you’ve read about our go-to investment bags for turning profit on your luxury purchases. This month, we dig deeper into the specifics of how something as “frivolous” as a handbag can be a smarter investment than gold or stocks (Yes, you read that correctly!).
Ina Bernstein, unofficially the godmother of luxury consignment, once stated, “Chanel and Hermès—those are the two brands that I can always reliably sell.” She went on to further explain that, like anything else in fashion and the world at large, handbags go through trends. If you pick what’s hot, you’ll have a good investment on your hands. But as with picking stocks, you’ll have to get lucky—unless you know what you can rely on.
Decades of record-breaking buying and selling, endless studies, and fashionistas across the globe will all tell you the same thing: you can always count on an investment return with a classic Chanel or a coveted Birkin.
First, Let’s Get Familiar with Our Subject Matter
To give you a breakdown, here are some quick facts about the types of investments we will be comparing.
1. THE S&P 500: This is a stock market index that tracks the stocks of the 500 large-cap U.S. companies. Large-cap stocks are shares of a company with a market capitalization of more than $5 billion USD. The S&P 500 represents the stock market’s performance by reporting the risks and returns of the biggest companies. Investors use this as a benchmark of the overall market, to which all other investments are compared. Over the last 10 years, it has returned 9.49% per year.
2. GOLD: The reasons for gold's importance in the modern economy centers on the fact that it has successfully preserved wealth throughout thousands of generations. The same, however, cannot be said about paper-denominated currencies. In general, gold is viewed as a diversifying investment. Regardless of whether you are worried about inflation, a declining U.S. dollar, or even protecting your wealth, gold seems to stand the test of time. It can be considered a good investment if your focus is simply diversification as gold is not correlated to stocks, bonds, or real estate.
3. HERMÈS BIRKIN BAG: Named after Jane Birkin, this bag is the gold standard of a status symbol among wealthy, sophisticated women. Over the years, many studies have solidified the fact that the value of the bag has increased over 500% in the last 35 years (since its inception). This insane increase in value can be attributed to the fact that there is much less supply than demand for the bag, which fuels the price growth. Historically speaking, it is a safer investment than the stock market (more on that later). Even with this mad increase, the value of Birkin bags is expected to double again in the next 10 years (whhaatttt!?!?).
4. CHANEL: If you don’t know the name right away, we suggest you look back at our first ever blog post and educate yourself from there. Famous for many things, such as the little black dress, No.5 perfume, the feminized suit and, of course, that quilted little purse with the chain shoulder strap. Most recently, the French luxury powerhouse is the fastest-growing name in terms of brand value. Over the past year, its value jumped 95.1%, sending the brand to no. 149 in the rankings from no. 299 in 2018. With Karl Lagerfeld’s passing earlier this year, researchers believe the brand will see an even larger spike in interest, especially among the resale of his surviving—now vintage—designs.
Second, Let’s Start Crunching the Numbers
Thanks to a study conducted by Baghunter in 2016, we have the evidence and numbers don’t lie! The study compared the performance of the S&P 500 versus gold investments versus the Hermès Birkin bag to see which one resulted in the better investment over time. The period of 35 years was selected for analyzing the data because that is how long the Birkin bag has been in production for.
Between 1980 and 2015, the S&P 500 had returned a nominal average of 11.66%, which equates to a real return average of 8.65% annually. During the same period of time, gold had offered an average annual return of 1.9%, which equates to a real return average of -1.5%. At the same time, Hermès Birkin bags have increased in value, year on year, offering an average annual increase in value of 14.2%. While keeping in mind that over the years, stocks and gold fluctuate with the ups and downs in the economy, the value of the Hermès Birkin bag has never fluctuated downwards and has steadily and consistently increased. The bags experienced a peak surge in value in 2001, increasing in value by 25%, and with the lowest increase in 1986 when the value went up by only 2.1%.
The report goes on to further explain how the historical data is essential for several reasons. First, it serves as an indicator for future fluctuations in the market. Based on the figures above, you can see that both the S&P 500 and gold markets are subject to both positive and negative fluctuations. On the other hand, Hermès Birkin bags have only experienced various levels of positive fluctuation since their introduction in 1980. It also demonstrates the risk involved when investing in the S&P 500 and gold markets. Contrarily, an investor who purchased a Birkin bag (at any given time) would enjoy a profitable return regardless of when they decided to cash in, as the value has only risen since 1980. This makes the Birkin by far the least risky investment of the three. While economic factors affect the value of the S&P 500 and gold, the exclusivity of Hermès Birkin bags has helped them maintain and increase their value, even during times of recession.
Like the Hermès Birkin, every resale site points to Chanel as one of its top-tier investment bags. Often enough it turns a profit and it’s not uncommon that even standard Chanel can be resold for as much as 1.3x its original retail value. But it’s important to buy smart and store smart! When in doubt, buy in black and stick with classic designs. Also, know how to properly care for and store your luxury items as selling them at “Like New” status will obviously get you the best return on your investment.
An article from Marketwatch spoke to Karl Lagerfeld’s secret money lessons and the importance of Chanel in terms of dollar bills. The article mentioned the golden rule of luxury goods and designer brands, which often goes ignored by those who overlook the fashion industry. In short, you don’t get rich by wearing designer labels; you get rich by selling them.
What drives the investment rates of something like a classic Chanel handbag is the rate of inflation in which Chanel retailers are raising their prices, which is much more than general inflation over the years. Even with resale consignors selling their handbags at an average of 1.3x the original retail cost, customers are still willing to pay it given the inflation rates for the same product at a Chanel store.
So what could be a hybrid of all of these types of investments? Investing in stocks of luxury brands! Statistically speaking, luxury apparel and accessory companies have produced spectacular returns for stockholders, far in excess of the rest of the market. The average annual return of those stocks in the past five years was 6.9% (take a look at the numbers below!). Meanwhile, big-shot investors are catching on to the idea of how substantial investment returns can actually come from owning classic designer items themselves, not just buying/selling their stock.
Third, Let’s Point Out Some Conclusive Facts
Fortune Magazine listed Hermès as a brand that “holds its value the best and longest” over time. The waiting list implemented by Hermès for a Birkin bag, sometimes as long as six years, has also contributed to the driving resale value of the Birkin; bags often sell on the secondary market for way more than their original price!
Numbers don’t lie. Historical data along with current indicators show that investing in the S&P 500 or in gold commodities brings with it a huge amount of risk. Returns rely heavily on external factors that are out of the investor’s control.
To recap our findings, skip the gold and steer away from the fickle stock market. Multiple studies and sources can reiterate the best option for long-term investments is the Hermès Birkin bag. Conclusively, the average annual return on a Birkin is 14.2%, compared to the S&P average of 8.65% a year and gold’s -1.5%. An investment in a Hermès Birkin bag has shown to be safe and steady over the last 35 years, with all current indicators showing that this trend is set to continue. A secondary choice, for those that may not have a cool $15,000 to drop on new Birkin, is a classic Chanel, which will always stand the test of time.
So what do we do with this information now? Well, a good start would be to check out our inventory of Hermès Birkins and Chanel handbags right here! Buying a second-hand luxury item may be the way to secure your investment at a favourable cost while you wait for the demand to grow. Sometimes finding a one-of-kind piece or a design from the Lagerfeld-era (while supplies last!) is the best way to start growing your investments in order to make a return that can be used towards a larger one in the future!
Investing and talking about investments is something dear to me (not only because of my background in finance but also because it's smart ;). I hope you enjoyed reading this piece as much as I enjoyed writing about it!
Founder and CEO
1. Kimberly Amadeo, “The S&P 500 and How it Works”, The Balance, June 25, 2019. https://www.thebalance.com/what-is-the-sandp-500-3305888
2. Brett Arends, “The secret money lesson of fashion icon Karl Lagerfeld”, MarketWatch, February 23, 2019. https://www.marketwatch.com/story/how-to-become-rich-like-karl-lagerfeld-2019-02-21
3. “Hermes Birkin Values Research Study”, BagHunter, January 8, 2016. https://baghunter.com/pages/hermes-birkin-values-research-study
4. Tara John, “Why the Hermes Birkin Bag is a Better Investment Than Gold”, TIME Magazine, January 15, 2016. https://time.com/4182246/hermes-birkin-bag-investment-gold/
5. Nick K. Lioudis, “Does It Still Pay to Invest in Gold?”, Investopedia, May 18, 2019. https://www.investopedia.com/articles/basics/08/invest-in-gold.asp
6. Yiling Pan, “In 2018, Brand Value for Chanel, Dior, Hermes Climbed on China Buying”, JingDaily, February 6, 2019. https://jingdaily.com/luxury-brand-values/
7. “Why Handbags are the Penny Stock of Your Closet”, Wealthsimple, November 24, 2016. https://www.wealthsimple.com/en-ca/magazine/how-to-invest-in-handbags