WHAT IS A GOOD INVESTMENT?
No matter what kind of investment you make, an investment is fundamentally just the process of buying anything that will increase in value over time and will give you a return. What this means is that you spend money to generate more money, the goal is to earn more than your initial investment to make profit and not just break even.
A good investment is one that not only gives you a profit, but also tolerates the risks and aligns with your personal goals. You have to assess the risks and know if your investment is sustainable, if there are too many risks then maybe the investment needs reconsideration.What makes a good investment is rather subjective but the main aim of any investment is to make a return. The goal is to get your money's worth.
LUXURY BAGS AS INVESTMENTS
When it comes to designer handbags, they have been a hot commodity for decades which has driven consistent supply and demand. From the Dior Saddle, Balenciaga City bag, Classic Chanel flap to the Hermes classic Birkin, the designer handbag is more than just a fashion statement, it's become an investment. Much like art, watches and antiques, the designer handbag has become what feels like an exclusive collectible asset, but does this make them a good investment? Well, let’s assess the pro’s and con’s and we’ll let you make a decision.
THE PROS:
1. POTENTIAL FOR PROFIT THROUGH RESALE
When buying a designer bag, depending on the rarity, the designer and market value, there is potential to resell the bag for much more than you bought it for. The resale market only favours particular designers, like Hermes, Chanel and Louis Vuitton. Popular resale websites like Ebay, Vestiaire and Grailed are great platforms to use. Handbags there sometimes sell for 40% over the retail price based on how rare they are and how good the condition is. Auctions are also great places to resell, research shows that over 3,500 designer handbags were sold at auction in 2019 alone, raking in a huge £26.4 million ($32.9 million)
2. PURCHASING A PIECE OF HISTORY
Depending on the rarity of the handbag, you can become one of the few owners of rare pieces of fashion history. If you’re someone that adores fashion and fashion history, purchasing handbags that are vintage or one off exclusives means you become one of the few owners in the world. Hermes for example, only made a handful of Himalayan Birkins which very few people own, one of which is even exhibited at Sothebys.
3. LONGEVITY
Depending on the materials of these bags, they have a lot of potential to last almost a lifetime, which is why so many people purchase luxury handbags. Chanel, for example, uses leather for their classic flap bags which is very durable and can withstand a lot without much damage to its hardware. With the right preservation and care, these bags can last for years and can be passed down to your children or friends like an heirloom. You can even purchase leather cleaning supplies and go to bag specialists to repair your luxury handbags and help preserve their condition.
THE CONS
1. DEPENDING ON THE BAG, YOU'RE NOT ALWAYS GUARANTEED A RETURN
The key to any good investment is managing your expectations. When it comes to getting a return on a luxury purchase, finding a buyer can be very challenging as the luxury resale market is not only niche but also has its obstacles. You have to prove authenticity and go through extensive checks to ensure your bag meets the resale standards, even after then, finding a buyer can take years.
Luxury handbags as investments are unique in and of the fact that they differ from the usual business investment. With business investments, you can develop strategies and techniques to increase your sales like marketing or product development. With luxury handbags however, the chances of your profit are external, meaning there isn't much you can do to increase your chances of profit. Depending on what bag you’ve invested in, its condition, the marketing of that bag, the brand's reputation, the market value and rarity all contribute to how likely you are to resell for a profit.
Fashion trends change all the time, which is why the resale market is tumultuous. One day your bag could be on everyone’s wishlist and the next day it’s replaced by a different designer bag.This goes without saying, luxury handbags and any luxury investment for that matter, requires you to have collateral. This means you need to have enough money to withstand a loss and be able to sustain yourself after that purchase.
2. OBTAINING THE BAGS ARE DIFFICULT
If you have your eyes set on a rare or exclusive handbag, you have to be prepared to wait a while before you can purchase it. Depending on the exclusivity of the item, there is usually a waiting list for the bag, these waiting lists can span up to 4-10 years. To increase your chances of getting ahead of the waiting list, you need some kind of celebrity status or some nepotistic clout to get ahead. Hermes Birkins are notorious for having waiting lists as long as 10 years, even celebrities find it difficult to get ahead of these lists too.
3. PRESERVATION AND MAINTENANCE
If you’re one of the lucky few that gets to purchase a rare luxury handbag, then the hard work has only just begun. If you’re looking to resell the bag in the future, you have to ensure the bag is very well preserved, any hardware damage or weakening of the structure can drastically affect its resale value by thousands. This is why places like Sothebys and handbag collectors store their bags in safes and vaults to prevent any damage and theft. This does mean however, that you won’t be able to use the bag for its intended purpose, you won't be able to use it every day or even use it as a bag, instead it’ll become like a piece of visual art to be observed and not used.
Clearly, there are many risks associated with purchasing luxury handbags as investments, but any investment you make will include risks. The key thing to takeaway is that if the risks of the investment outweigh your potential for profit, then you may want to reconsider the investment. Any investment you make, has to be well researched because we don't play around with our money, especially when it comes to £40,000 handbags.