We are always on the lookout for alternative investments because of our concerns about inflation and stock market volatility. So far, our portfolio includes real estate, gold, and cryptocurrency, but we are open to investing in collectibles. We came across a bunch of articles insisting that designer handbags are good investments, and decided to research the claim ourselves.
Theoretically, you can buy a bag and resell it for a higher price, but is it really that simple? No.
In reality, very few purses go up in value over time — and the truly collectible ones are hard to buy. You cannot just walk into a boutique. Rather, you will need to make an appointment to go in and pre-order your bag. Once you have submitted your order and paid, you should expect to wait months (or even years) before receiving your purse. In some cases, even this tedious process is impossible. Certain handbag designers such as Hermès only sell to celebrities or other “worthy clients.”
If you think it sounds hard to purchase collectible handbags, please note that they are even harder to sell.
First, your bag would need to be considered investment-grade:
- In perfect condition (unused, with all original tags, packaging, and receipts)
- Made by an iconic luxury brand such as Hermès, Chanel, or Louis Vuitton
- Rare (a limited edition model or exclusive style)
- Timeless (still fashionable when you try to sell it)
Moreover, you would need to find the right buyer: Wealthy enough to splurge on luxury items, willing to buy something pre-owned, and shopping for purses at the time you are ready to sell. Often, in order to find the perfect buyer you will need to enlist the help of professional dealers or auction houses, and they will take a hefty commission.
Assuming you meet all the above criteria, let’s explore whether handbags are a good financial investment.
To illustrate, we will focus on the Hermès Birkin bag. It is the product of a legendary French fashion house, handcrafted from the finest materials, and is still fashionable because of its timeless, elegant design.
Let’s start with the positive:
- The price of an Hermès Birkin bag has increased significantly over time. For example, in the year 2000, you could buy a standard leather Birkin for €3,680. Now, in 2024, you will have to shell out €9,250.
- Birkin bags are scarce. Hermès limits the number of luxury bags produced each season. Additionally, the company will not allow a customer to purchase more than two Birkin bags a year. If Hermès lovers want to purchase more than two purses a year, they will have to pay high prices for pre-owned ones.
So, ideal scenario: you have a Birkin bag from 2000 in perfect condition, and you find a buyer willing to pay full price for it – you could make a profit of €5,570.00 (ROI of 151.36%).
At first, that sounds like a great return, but look closer and you will be disappointed. When you break it down over the 24 years you have patiently waited/stored the purse, you are looking at an annualized ROI of only 3.92%. Arguably, you could have earned more by simply leaving your money in a savings account! You also need to think about opportunity cost. By trapping your money in that one item for all those years, you have missed the opportunity to buy assets that pay interest, generate income, or issue dividends.
For example, you likely would have seen higher returns if you put money into the stock market. In fact, if you had purchased a comparable amount of Hermès stock in the year 2000 (70 shares at 50 euros/share) instead of an Hermès bag, you would have earned a profit of €106,550 (ROI of 3,044.29%). You could have been enjoying annual returns of 15.45%.
Conclusion: Unless you have a true passion for fashion, we recommend that you consider more lucrative wealth building strategies.
If you are interested in other alternative investments, please read our articles: Masterpiece Profits: Investing In Art, Crypto Miners – An Investment Case Study, and Harvesting Wealth: Invest In Agriculture.